Colliers: Real estate market ripe for entrepreneurs

Nashville Business Journal - by Eric Snyder Staff Writer

A preview of the year ahead in commercial real estate, released this week by the Nashville office of Colliers Turley Martin Tucker, suggests that some bright spots lie ahead on the path toward complete recovery, but some problem areas remain.

The report, written by Nick Minadeo, research director at the Nashville office, cites an outlook survey conducted in November by the National Association for Business Economics. In it, NABE panelists agreed that the recent recession is over, and while they expect consumer spending to remain lackluster in 2010, they expect a “sizable housing rebound, low inflation and further rise in stock prices,” according to the Colliers report.

Though NABE panelists are “extremely” concerned about high federal deficits, they are optimistic that the Federal Reserve’s policies will not lead to higher inflation.

Nashville fares better than most

The Colliers report often reiterates that the Nashville area’s varied industries allowed it to weather the recession better than most, and should recover earlier as a result. Commercial real-estate in Nashville, meanwhile, “remains focused on small space activity.”

“Decreased consumer spending and high unemployment rates make expansions by most existing tenants an improbability in the near-term,” according to the report. The solution, then, is to draw new companies to Nashville, and while Nashville remains attractive for relocations, the report says hurdles remain: “(E)conomic conditions have prevented corporate decision makers from ‘pulling the trigger’ on possible relocations.”

Office leasing expected to grow

In the office sector, the report forecasts “moderate growth and improvement” through the year. This is expected to first be visible in the suburban markets, especially Brentwood and Cool Springs/Franklin. Speculative construction, meanwhile, may begin tward the end of 2010 or early 2011.

Retail space may not recover in 2010

On the retail front, the report doesn’t expect significant new construction until 2011, with retail rents continuing to decline through 2011 and into 2012. “If you are an entrepreneur, this is the perfect time to start a company,” according to the report. “Rental rates are more reasonable now and staffing costs are less than previous years.”

Don't expect fire sales locally

The report expects that distressed sales in several sectors may increase, though not dramatically.

“(B)ecause the vast majority of Nashville real estate has maintained decent operating fundamentals and a limited number of properties have had loan maturities, the distressed sales that have driven the supply in the market nationwide have not been as prevalent in Nashville over the last year,” according to the report. That is expected to continue this year, though a “slight uptick” in distressed selling is expected, particularly in the retail and multi-family sectors.

“However, for the opportunistic buyer anticipating a significant glut of supply pouring into the market and buying opportunities to be plentiful in the coming months, 2010 may prove to be as disappointing as 2009 in terms of overall transaction volume,” reads the report.