October 13, 2016
HCA’s North Gulch move frees up 300,000 square feet of office space
Space becoming vacant on Nashville’s West End and in Williamson County expected to be filled with new tenants paying higher rates.
HCA’s moving of headquarters of two subsidiaries to the North Gulch’s Capitol View mixed-use campus could spell some relief by putting more than 300,000 square feet of space back on Nashville’s tight office market.
But the owners of the buildings that the hospital chain’s two business units are exiting probably will seek higher rents for the locations becoming available, reflecting overall record low office vacancy rates and high demand for space.
HCA’s Sarah Cannon Research Institute is leaving 103,000 square feet of space spread across four floors at the Highwoods Properties-owned 3322 West End office building in Nashville for the new building at the northwest corner of 11th and Charlotte avenues.
Meanwhile, HCA’s health care business solutions company Parallon is leaving more than 100,000 square feet of space at a pair of J.P. Morgan-owned Corporate Centre office buildings in Cool Springs for that same 1100 Charlotte Ave. address. And the Parallon-affiliated HealthTrust Purchasing Group is leaving 102,000 square feet of space at The Ramparts of Brentwood office building at Maryland Farms, which Highwoods Properties also owns.
“They’re a big user,” David Wells, a vice president at Spectrum | Emery handling leasing for Eight and Nine Corporate Centre, said about HCA. “It’s part of the inventory correction that’s getting ready to occur.”
Add the bulk of the 282,100-square-foot airport-area Highland Ridge Tower that will become vacant after tiremaker Bridgestone Americas relocates its headquarters to downtown by the end of next summer and roughly 600,000 square feet of Nashville-area office space would need to be back-filled with new tenants.
“In this market, that’s good news because the lack of inventory is hindering our growth,” Wells said.
Normally, any such increase in vacancy generates concern among real estate market players — but not as much here, with only 4.6 percent of office space in the Nashville area vacant. There’s also single-digit vacancies in all submarkets, including first-class vacancy in Cool Springs standing at 1.3 percent, according to commercial real estate firm Avison Young’s third-quarter Nashville office market report.
Another boost to inventory should come from more than 3.7 million square feet of new office space under construction across the Nashville-area market, but Avison Young’s report said that 75 percent of that space is already pre-leased. “With no signs of a slowdown in demand expected in the immediate horizon in this active office market, record low vacancy rates and historically high rental rates will be posted throughout the Nashville market for the remainder of 2016,” the report concluded.
Reflecting how a declining vacancy rate and high demand for space are pushing office rents up, Avison Young’s third-quarter report said Nashville’s overall Class A asking rate broke the $30-a-square-foot threshold for the first time in the city’s history. That’s the market rate that Spectrum | Emery’s Wells expects to charge for the spaces Parallon would be exiting at Eight and Nine Corporate Centre.
In its third-quarter report, Avison Young also said that the direct asking lease rates for the overall Nashville office market rose to $25.65 a square foot, a 23 percent increase from the previous year.
Meanwhile, Raleigh, N.C.-based Highwoods is expected next month to start interior renovations at the building at 3322 West End Ave. as part of efforts to attract tenants. Roughly 50,000 square feet of the space that Sarah Cannon is leaving in that building near Murphy Road is contiguous, said Jimmy Miller, director of leasing with Highwoods, the Nashville area’s largest office landlord.
Eventually, Sarah Cannon and Parallon are expected to have up to 2,000 employees at the new building at Capitol View, to which employees have begun to move.
Meanwhile, more office relocations could be ahead for HCA. Operations including HCA Physician Services occupy nearly all of the three-building, 192,000-square-foot Eastpark office campus in Brentwood’s Maryland Farms office park. That building is half a mile away from insurer AIG’s campus off Old Hickory Boulevard near Brentwood, which the hospital chain bought more than two years ago with plans to relocate some offices.
Originally Published in the Tennessean
By Getahn Ward