From the Tennessean Business
Sunday, October 10, 2010
DEVELOPER READY TO BUILD BUCHANAN POINT
Mathews Co. project near airport aims for corporate headquarters, other offices
By Getwan Ward
Call it May Town Center light.
Office developer Bert Mathews says he is finally ready to move ahead with a 180-acre commercial real estate project that could attract corporate headquarters and other high-rise offices once the economy gathers steam. It is 7 miles from downtown and 1 mile from the airport.
If everything clicks, the so-called Buchanan Point project has the potential to hold about 2.7 million square feet of offices – everything from multistory luxury space to one-story office/warehouses.
It would be about half the size of the controversial May Town project at Bells Bend that was scuttled – at least for the time being - by neighborhood protests and Metro government questions about allowing a second downtown - like campus to spring up far from Davidson County’s core.
The catch for Mathews, whose family bought up the Buchanan point site piece by piece over nearly 28 years, is whether the economy is on the verge of bouncing back enough that big tenants hungry for 75,000 square feet of space and up are ready to commit to leases or erect new buildings that they would own.
Floyd Shechter, whose SmartSpace, LLC owns and operate office buildings mostly in the airport area, said of Mathews’ project: “I don’t think it’s an outrageous concept, but I don’t think it’ll get built in the next year.”
Success of the development would depend in part on how competitively priced its land and leasing rates are, compared with those of other projects in downtown Nashville and in neighboring counties.
“If they can offer to the market the land at a price that’s competitive to other submarkets, then you’ll be in the competitive mix of options for potential relocations,” said Mark Woolwine, an office broker with CB Richard Ellis.
The Mathews Co. has been offering the land to others who might want to build for roughly $7 to $8 a square foot, including improvements such as utilities. That’s a price that commercial brokers say would be competitive.
Prime, or “Class A”, office space that Mathews might build in the eventual development – off Interstate 40 near Elm Hill Pike - might go for $22 a foot, or a bit less than the area’s priciest markets, such as West End in Nashville and Cool Springs in Williamson County.
Mathews says there are fewer than a dozen office buildings in the general area – from downtown to Williamson County – with 100,000 square feet and up of available space that big users could gobble up.
He predicts it will take seven to 10 years to build out Buchanan Point, but he expects an office building to rise by 2012 from the property, which is now sprinkled with a few residences, roaming wild turkey and sometimes a few deer.
“The economy isn’t robust right now, but it’s a lot better than it was a year ago,” said Mathews, who describes himself as an optimist. “The site is properly zoned (for commercial building)....and we’ve worked with the neighbors on all sorts of issues from traffic to light pollution.”
Mathews sees today as a smart time to start the ball rolling and says some potential corporate tenants with national stature are already snooping around Nashville (and competing cities) with an eye toward leasing major space.
“To build a new building, it takes 12 to 24 months,” said Mathews, also the chairman of the Nashville Area Chamber of Commerce. “When you look out in the economy, even if it heals slowly....we’re going to be in a better spot.”
Brian Reames, senior vice president and regional manager with Highwoods Properties, owner of five multitenant office buildings near Nashville International Airport, agrees.
“Right now, it’s tough time to be building, but a good time to be planning for the next cycle, which we hope will begin to emerge soon,” Reames said.
A year ago, Mathews got the land south of McCrory Creek Road between Elm Hill Pike and Stewarts Ferry Pike rezoned for McCrory Creek Business Park.
He delayed any real marketing push, though, as the local and national recession made many businesses pull in their horns.
Now, dirt finally will be moved at an Oct 22 ground breaking signaling that the site is ready to go forward, Mathews said.
Tentative plans call for a maximum of 2.7 million square feet of office space in several buildings, plus 120,000 square feet of retail and restaurant space.
Mathews said he is ready to work with whatever corporate interests come along as potential buyers or tenants, adding that building a hotel on a portion of the land is a possibility.
No significant opposition
Mathews and his company have been involved in real estate development in the Donelson-Hermitage area before.
They were involved in the Metropolitan Airport Center business park, for example, and have a track record with developments such as Grassmere Business Park and others.
Mathews’ argument for why Buchanan Point is needed carries a familiar ring.
Like other developers who had sought to build May Town Center west of the city over the past two years, he cites only a few available sites that could be attractive for big corporate relocations and accommodate tenants that demand 100,000 square feet or more.
Unlike May Town, which was planned to be twice as large, developers of Buchanan Point haven’t faced any significant opposition from the community near the project.
Mathews said he moved early to talk with residents, engage them in the project and make changes as a result of those discussions.
In the past, the Buchanan Point land has been quietly pitched as a potential site for companies that considered relocating to be Nashville area – such as Harley-Davidson Inc., which eventually decided to keep its main motorcycle plant in York, PA.
Now, Mathews said he expects 70 percent of the site to be used for companies already here that eventually will expand and 30 percent of it to attract out-of-market and out-of-state companies landing in Nashville for the first time.
“What’s good in a city of Nashville’s size is to have a lot of different kinds of choices to fit different corporate needs,” said Janet Miller, the chief economic development officer with the Nashville Area Chamber of Commerce.
That should include office space downtown, in the suburbs, near the airport and close to places where a firm’s top executive officers might live, Miller said.
Success not guaranteed
Not everyone thinks the Buchanan Point site is a sure-fire winner.
"It’s just a tough hurdle to overcome when the demographics (are) such that most of the decision-makers live in south Davidson or Williamson counties,” said Tom Frye, Nashville office managing director for the commercial real estate firm CB Richard Ellis.
Also, companies seeking to move here easily understand Cool Springs and Maryland Farm as destinations. Those offer campus-style business parks similar to those that dot the landscape from Atlanta to Orlando, Fla.
“It takes a little bit more thinking to wrap your brain around” Buchanan Point, Frye said, adding that companies interested in being closer to a base of midlevel wage earners might find the airport submarket an appealing option.
Mathews says that more than 500,000 people live within a 15- minute drive of the Buchanan Point site- more than twice the number of residents within a similar radius of Cool Springs in Williamson County.
And, if gas prices spike higher, more companies will value Buchanan Point’s central location about a 15-minute drive from downtown Nashville, the developer contends.
Office market ‘doing better’
At this point, everyone agrees that the office vacancy rate in Nashville isn’t as bad as some competing cities, but it could be better.
“We’re doing better on the office side this year than we expected, but it’s still a below-average year. It’s coming back slowly, Frye said.
Overall, CB Richard Ellis cites a third-quarter office vacancy rate of 13.9 percent for the broad Nashville-area market, while downtown Class A, or premium, space is closer to 25 percent.
Adding 2.7 million square feet at Buchanan Point, though, would roughly double the office space in the so-called Airport North market area, where there’s at least an 11.1 percent overall vacancy rate.
Class A vacancy numbers appear to be roughly 9.5 percent to 13.3 percent, though, and that’s primarily the sort of buildings that Mathews wants to erect.
Mathews says total development costs for his project could hit $540 million.
That includes some $14 million for site improvements such as extending sewer lines and putting in an access road from Elm Hill Pike to McCrory Creek Road.
When completed, the development is estimated to generate $7.7 million a year in property taxes for Davidson County, Mathews said.
His most recent land purchase occurred in August: a 45 acre chunk off McCrory Creek Road for which Mathews’ company paid $439,420.
Roughly 27 acres of nearby land remains under contract, part of the project’s overall 180 acres. Initial plans for Buchanan Point had included condos and townhome, but those were dropped.
Neighbors, for the most part seem to have accepted Mathews’ plans.
“I’m trying to look at it as a positive thing until something comes up and makes a hardship for me,” said Judy Maloney, who has lived in the area for 30 years. She served on a neighborhood steering committee that worked closely with Mathews and his associates.
The potential for more traffic remains a concern for some neighbors, and Maloney fears a big office development in her backyard could somehow hurt the value of her residential property.
On the other hand, Frances Ruth McGee, 75, hopes that her property would be worth more because of Mathews’ big plans. She has received one purchase offer from Mathews, which she turned down, saying it wasn’t anywhere near the price she wanted.
She adds she is not ready to move.
Overall, most real estate observers see Buchanan Point a positive for the local office market.
Fred Kane, vice president of land services with Cassidy Turley in Brentwood, sees the development as having a decent shot at attracting corporate prospects.
“Within the next three to five years, we’ll see some or most of the properties developed,” he said.
Getahn Ward can be reached at 615-726-5968 or at firstname.lastname@example.org