Southeast Real Estate Business - Chattanooga, Tennessee Office Market
Consistently ranked as one of the America’s best mid-sized cities, Chattanooga once again proved its resilience throughout the Great Recession. While the nation was mired in considerable economic turmoil, Chattanooga not only weathered the storm but built on its strong foundation. The city’s growth has been bolstered by a $120 million downtown waterfront transformation, affordable housing options, cutting-edge environmental stewardship, and a downtown revitalization program that has been studied by civic leaders from around the world.
The growth of the well-publicized Volkswagen North America Assembly Plant and Amazon’s new distribution center coupled with heavy reinvestment into the community by Alstom and BlueCross BlueShield of Tennessee have positioned Chattanooga well as we move toward 2013 and beyond.
Long known as the Scenic City, Chattanooga has recently received the moniker “The Gig City,” a reference to becoming the first city in the western hemisphere to offer 1 gigabitper-second fiber optic Internet service to every one of its businesses and residents. The speed is 20 to 200 times faster than Internet found in other cities. Regardless of location or income level, literally every person in a 600- mile radius has the opportunity to use America’s fastest Internet.
Chattanooga’s office market is strong. Activity has remained consistent and demand for top quality product in both the CBD and suburban market has remained high.
BlueCross BlueShield constructed a corporate campus on Cameron Hill overlooking downtown, and the insurance giant created a void in the CBD after vacating space in ten different buildings in June 2009.The company tapped NAI Charter with the disposition of the owned CBD properties. In the first quarter of 2012, NAI Charter completed the assignment with the sale of the 132,673-square-foot historic Miller Brothers Building to Mesa Associates, a Huntsville, Alabamabased engineering firm. This transaction was preceded by the notable sales of the 177,020-square-foot Gold Building and the 33,000-square-foot Hub Building. A 426-space parking garage that is connected to the Hub Building by an underground tunnel was also sold. A major hotel project is being rumored as the end use for the Gold Building.
Chattanooga-based Berry & Hunt is making a huge investment in the downtown skyline. The newly dubbed Liberty Tower, recently acquired by Berry & Hunt, is undergoing a $20 million renovation. The ownership is attempting to position the 192,228-square-foot tower as downtown’s most premier office building. A lofty goal, but with its ownership of 775,000 square feet of the roughly 3 million square feet of active CBD office space, it’s hard to argue with the company’s successful track record. Liberty Tower is ready for custom tenant build-out immediately with delivery by the end of 2012. The project got off to a quick start with commitments from powerhouses: law firm Chambliss, Bahner & Stophel PC for 45,000 square feet and accounting firm Lattimore, Black, Morgan & Cain PC for 11,000 square feet.
Another success story is Warehouse Row. In the 1980s, Warehouse Row transitioned from its industrial past into a thriving national retail outlet. But, for a myriad of reasons, the project deteriorated and retail tenants fled downtown. Jamestown Properties purchased Warehouse Row in 2006. While retail has come back to Warehouse Row, it’s the office leasing that has helped turn the property around. Bolstered by roughly $8 million in recent renovations and aggressive leasing by Sperry Van Ness/Elder Healy, Warehouse Row has filled nearly 100,000 square feet of office space over the past year. The success is headlined by a 30,000-square-foot lease with Propex, which will take occupancy in the fourth quarter of 2012.
Occupancy in the SunTrust Tower took off following a $500,000 facelift to the common areas of the the property. The iconic structure is located in the heart of the CBD and recently landed multi-floor tenants Tract Manager and the Chattanooga Area Convention & Visitors Bureau. The 18-story, 150,996- square-foot tower, owned by the Simpson Organization and leased by NAI Charter, has no current vacancy larger than 4,020 square feet.
Even with a strong CBD, the suburban office market has thrived. The Pointe Corporate Centre has only a 3 percent vacancy across its campus of seven buildings, which total 241,000 square feet. Occupancy was recently strengthened by HomeServe USA’s lease and subsequent March 2012 expansion into a total of 29,410 square feet. The Pointe Corporate Centre owner Ryan Allen attributes the development’s success to its campuslike atmosphere, easy interstate access, quality co-tenants and professional management.
The Chattanooga office market is strong. The overall real estate market and community vibe are bursting with enthusiasm. It’s no wonder Chattanooga is consistently ranked as one of America’s best mid-sized cities.
— Jeff Jennings, CCIM, is a broker with Chattanooga-based NAI Charter Real Estate Corp.