Knoxville's Newest Office Building
There is a PR saying that goes “All publicity is good publicity”. Some believe it, some don’t. I like to pick and choose the times to like it.
Certainly anytime one of your brand new buildings is a lead in the Knoxville News Sentinel it can be a good thing…unless the topic is how empty it is. That is what happened last Friday.
Center Court at Lonas is a 40,000sft Class-A office building near the intersection of Lonas and Weisgarber in West Knoxville. It has everything going for it…
Location: two minutes to I-40, 8 minutes to Pellissippi Parkway, 10 minutes to downtown.
Construction: Brick with floor to ceiling windows and ample parking.
Lease Rate: $19.00psf (full service net of tenant utilities). You will not find a lower lease rate for a new building in Knoxville.
Neighbors: Bush Brother’s Beans and Pilot Oil corporate headquarters, two of Knoxville’s most successful businesses (this area breed’s success).
What it doesn’t have are tenants. The building was completed last summer and has had lots of activity but we haven’t closed any deals.
Much of this is due to the recession. The economy has done lots of things to the office market. For one it has forced businesses to table expansion plans; but another factor is many corporations have downsized and looked to sublease their left over space. If you could find sublease space for your company in a Class-A building for $11.00psf you would jump at it. This is happening all over Knoxville and the nation.
Commercial & Investment Properties has developed many of the buildings in the Papermill/Weisgarber corridor; Bush Beans Headquarters (originally called Wimbledon Park), Pilot Oil HQ (named Central Park West) and the Atrium. That is five buildings within a mile of each other and there is currently no space available in any of the five.
Center Court will soon join them. As a glass half-full type guy I like to think the building is 100% available instead of 0% occupied. It gives us lots of possibilities.
If you read the article below you will see my quote about the wave and the ebb. Ask any one in commercial real estate and they will tell you it is a real thing. A good example is our development Century Park at Pellissippi.
100% leased prior to completion.
When built in 2004, Century Park I was 100% leased prior to completion. That never happens in multi-tenant buildings in Knoxville. In fact, it’s the first time we had done it in 35 years of business. A year later we built our second building in the development. It took 11 months before it was even 40% leased. The wave and the ebb.
Is there pain in commercial real estate? Yep. With the proper planning, experience and insight can you get through it? Absolutely.
Feel free to contact me if you have any questions jcazana@ciprop.com.
Enjoy Josh Flory’s article.
http://www.knoxnews.com/news/2010/feb/18/pain-seen-local-commercial-real-estate/
If you’re looking for new office space, Center Court at Lonas has plenty of it.
Located in West Knoxville’s Weisgarber Road corridor, the two-floor, 40,000-square-foot building was completed last June — but so far it has no tenants.
That’s bad news for the developer but a good example of the pain that’s afflicting the commercial real estate industry locally and nationally.
As the economy continues to struggle, the pinch is being felt by owners of commercial property and the banks who gave them loans. Some observers are worried that the commercial mortgage industry is headed for a collapse similar to the residential meltdown, which sparked the recent recession.
The Center Court office building was launched by veteran development firm Commercial & Investment Properties, and leasing director Justin Cazana said Thursday that the company builds in contingencies to make sure it’s protected. “It’s a cycle that sometimes you catch the wave and sometimes you catch the ebb,” he said. “And we caught the ebb.”
Across the country, though, there is growing concern that some landlords are headed for a wipeout. Earlier this month, the Congressional Oversight Panel issued a report saying it was deeply concerned that commercial loan losses could jeopardize the stability of many banks, “and that as the damage spreads beyond individual banks … it will contribute to prolonged weakness throughout the economy.”
As the report noted, the financing strategy for commercial property owners is different than that used by the typical homeowner. Once a building is leased, for example, the amortization schedule on the commercial mortgage may stretch over 30 years, but the mortgage term is much shorter, meaning it must be refinanced anywhere from three to 10 years after it goes into effect.
The report said that between 2010 and 2014, about $1.4 trillion in commercial real estate loans will reach the end of their terms and nearly half are currently underwater, meaning the borrower owes more than the underlying property is worth. That means it could be very difficult for many of those property owners to get new financing.
“A significant wave of commercial mortgage defaults would trigger economic damage that could touch the lives of nearly every American,” the report said. “Empty office complexes, hotels and retail stores could lead directly to lost jobs. Foreclosures on apartment complexes could push families out of their residences, even if they had never missed a rent payment.”
East Tennessee won’t necessarily be spared from that impact. At a roundtable discussion Thursday, commercial broker Roger Moore, the president of Sperry Van Ness R.M. Moore, said that historically Knoxville has been more immune to recessions. “I think everybody understands we’re really part of this one,” said Moore.
Maribel Koella, principal of brokerage firm NAI Knoxville, said in an interview that asking prices for property are going down and that lease rates are going way down. “Landlords have figured it out,” she said. “In order to compete with the property down the street, they have got to lower rents.”
At Thursday’s forum, Koella also echoed Moore’s point about pain being felt in the local market. According to NAI’s numbers, the total volume of commercial.
