According to JLL’s Q2 2016 U.S. Office Outlook, Nashville will soon be home to quite a bit more office space. The downtown Nashville development pipeline will add 1.8 million square feet, or 22.8 percent, of new supply to the market, which currently has a CBD vacancy rate of 9.8 percent. Although that may seem like a lot of new space for a secondary market, 72 percent of that new space is already preleased.
As investors take a closer look at this growing market, they should be thoughtful about who they choose for on-the-ground partners.
“To optimize building value in Nashville, it’s critical for an owner to partner with a management firm that not only understands national and global trends but also has local expertise,” explained JLL Regional Manager Randy Fink.
“There are nuances to the Nashville market that out-of-town investors may not realize,” Fink explained. “The cost of technical labor like engineering has increased dramatically in recent years, forcing owners to limit costs in other areas like construction and energy, which JLL can do by leveraging its national platform.”
In addition, a lot of buildings in Nashville use modified gross lease structures, which can make it difficult for employers considering a move to Nashville to compare Nashville lease rates with those in neighboring cities. “At JLL, our managers partner closely with our leasing colleagues to help owners transition to traditional gross leases. We provide accurate costs for underwriting, which gives confidence to national occupiers that Nashville is the right place for them.”
In addition to understanding the local market, Fink says managers should follow three simple rules:
- Treat the asset as if it were your own. Property managers should view themselves as an extension of the owner’s team. They should work to understand the owner’s goals for the asset and then align their own performance targets with those goals.” Then every decision for the asset should be made with those goals in mind. The owner’s desired hold period, for example, can influence everything from lease negotiations to capital improvements to preventative maintenance.
- Remain completely committed to superior client service. The most impactful way property managers can increase asset value is through tenant satisfaction. If the property team works tirelessly to make building tenants happy in their space, those tenants will be more likely to renew their leases, which directly drives asset value on behalf of the owner.
- Operate flawlessly. It goes without saying that the property team must execute building operations perfectly day in and day out. That’s why our managers are absolute experts at creating safe, comfortable and productive work environments for our tenants.
With the right partners in place on the ground, investors can position themselves to get the most value out of a growing Nashville market.