Ryan: Be flexible on location for more office space options

Friday, March 6, 2015, Vol. 39, No. 10
By Joe Morris


-- Michelle Morrow | The Ledger

After 22 years heading up the Metro Housing and Development Authority for Nashville, Phil Ryan certainly knows the Middle Tennessee housing market.

He left MDHA in 2013, and in his current role as an affiliate broker with Cherry & Associates, he’s taking a look at the local real-estate mix from the corporate side.

There are plenty of differences, certainly, but the commercial market here has the same benefits and pain points as the residential side these days, not the least of which is a lack of affordable, configurable space in the areas everybody wants to be in.

Does that make it a buyer’s market or a seller’s market? As Ryan sees it, a bit of both.

Q: Is what you’re doing now completely different than your prior experience, or does your experience inform what you’re up to these days?

A: “I was with MDHA since 1991, but before that I was with a bank doing small-business lending, so I’ve had contact with the business community around real estate other than my Metro experience.

“I also have worked for the Tennessee Department of Economic and Community Development, and also have done some planning commission work, so I’ve spent a lot of time looking at real estate from a lot of angles.

“Working in commercial real estate is a definite challenge, because when I’ve been around it before it was with large organizations with lots of people involved in different aspects of whatever deal was being shaped.

“I’m doing a lot more marketing and prospecting now, which is very invigorating. There’s a lot more hands on, but it also gives me a lot of control.’’

Q: On the residential side, what are your thoughts on Metro and Middle Tennessee’s housing-stock situation, construction boom and other issues?

A: “After the Great Recession, when housing took such a severe and long-lasting beating, it’s been nice to see it come back. Housing here can be constrained by supply and production issues, as well as regulation or location, just like any other market.

“There’s a lot of job growth here, and the massive millennial generation is just starting to leave home and look at permanent housing. Boomers are also downsizing. All those things are coming together to demand more and more housing, especially rental property.

“We’re fortunate that a lot of people want to live in our city, but growth creates issues around affordability, not to mention public transit and green space. Then add in the issues of taking care of senior citizens and the issue of rising taxes as their homes appreciate in value, and the issue of housing for lower- and moderate-income people, and you can see a lot of challenges.’’

Q: Now to commercial: How bad is the office space shortage in Davidson County? What kind of inquiries are you getting, and what are you telling people? Is there a certain size company, say 50 people or less, that can find Class A space, or is everybody looking for that just out of luck until new or renovated buildings come online?

“There are a lot of distinctions to be made between A, B and C space, in terms of the age of the property, its various attributes, the size of the floor plan and about 50 different items in all.

“So some people may find A space in terms of its location, but B or C in terms of size or amenities. But overall things are very tight here. Vacancies dipped in 2013, when there was 11 percent [available] throughout Middle Tennessee, to about 8.5 percent now. It really depends on the business, and what they need.

“The first question I have for folks is, ‘Do you have to be in that particular location?’ Often they’ll say they want downtown, but I encourage them to look at the whole Metro area.

“That opens up quite a bit more choice, and much more range in terms of prices. People usually prefer downtown, midtown, Music Row, West End, Green Hills, 100 Oaks, Brentwood, Cool Springs and Franklin, and all of those areas are very, very tight. You get a little outside each of them, however, and we can still find a wide variety of space.

“I tell my clients that they have to be flexible in this market; you cannot expect landowners to be giving away very much. They don’t have to, especially in some of the tightest areas. We always work to get people the best deal we can, but they need to be prepared to perhaps pay more than they did in their last lease.’’

Q: In addition to that dream site downtown with a low per-foot price, tons of amenities and plentiful free parking, what requests do you get the most?

A: “Flex space is very popular now. Large and small companies alike are looking for office and production space under one roof, so they can combine the various aspects of their business. If it’s a band, they want office space for fan-base mailings and all that, with storage for equipment and some rehearsal room.

“From lawyers and dentists to retail, flex floor plans are very hot right now in Nashville, because a lot of people want them and sites go quickly when they become available.

“I also am spending a lot of time focusing on seeking land for apartments. People want to build smaller buildings, three-story midrises with anywhere from 100 to 300 apartments. We’re looking for land in town as well as in the suburbs for those.’’

Q: If you have to send someone out of Davidson County, where do you send them – and why?

A: “I show people what’s available, and they make their own decision. They know their business, and if what we’ve got here won’t work, it just won’t work.

"If they need to look in the larger Middle Tennessee area, we talk about who their customers are, and how those people are best serviced. We also look at their employees, and where those people live. In either case, you need a central location to that base. ‘’

“There are hot pockets all over the area, and they change very quickly. Donelson is a hot area right now with a lot going on in terms of jobs announcements, but Gallatin is also busy for the same reason.

“It all comes down to jobs. Who’s hiring, who’s growing and where their customers and employees are. A big, new employer means a lot of residential real estate sales nearby, and a lot of ancillary businesses starting up in the service economy, everything from restaurant and retail to suppliers.

“Those factors determine the hot spots, whether that’s downtown or well out into the suburban and even rural areas.’’