Friday, September 5, 2008 by Turner Hutchens
Nashville Business Journal
Re-tooled office condo project aimed at tight West End market

A dormant condominium project off West End is being retooled for office space.

Graymont Group is now building a 36,000-square-foot office condo building on 30th Avenue North, a few blocks west of West End.

The building had originally been slated as a residential development, but in late 2006, the developers worried that the market might be becoming saturated, says Joohn Hays, Graymont's general manager.

Within weeks of launching marketing efforts for the 38 luxury condos in the develpment, more than 400 additional residential condos were announced for Nashville, Hays says.

"We decided we were going in the wrong direction, and it would be worth it for us to go back and re-evaluate," he says.

Hays says that after studying the market and the area for a while, his firm decided office condos offered the best opportunity.

The change set the project back about a year, but Hays says that the softening of the residential market in the past year has validated their choice.

"In retrospect, it was definitely worth it," he says.

Construction on the office condos, named 30 North, is set to be completed by April 2009 and is being brokered for sale or lease by Robby Davis and Whit McCrary of Colliers Turley Martin Tucker. The property will be priced between $265 and $290 per square foot.

Davis says that a third of the available space in the building has been sold to a single tenant, though he declined to identify the business.

Chris Grear, a broker with NAI Nashville, says a tight West End office market could help the new project be successful.

The West End sub-market has an overall office vacancy rate of 2.3 percent, according to Colliers Turley Martin Tucker second quarter 2008 market research report. By comparison, the overall Nashville market had a vacancy rate of 9.7 percent for the same period.

Grear says the office condo model will likely be repeated in the area.

"It allows people to purchase in an area that has a lot of barriers to entry," he says.

Grear says many of the properties in the area are older homes which require retrofitting to become commercial space.

John Keller, senior vice president with ProVenture, says that if the project is well-funded, it will likely be a success - though he's doubtful that many others would be able to pull off such a project in the current economy.

"To the extent that they have a project that's a go, they're going to have a real jump on the marketplace," he says.

Given the rocky economic climate, it is very difficult for entirely speculative projects to get off the ground, he says. These days, most projects will require a large amount of pre-leasing or pre-sales in order to attract a lender, he says.

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