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REA
November 06, 2019  

Nashville Office Listing Poised to Set Record

The office component of a trophy building in downtown Nashville is on the block, setting the stage for the market’s largest-ever trade.

The listing is for the 362,000 square feet of office space in the two-year-old building, at 222 Second Avenue South. It’s expected to fetch bids of about $250 million, or $691/sf — a price that would indicate a 5.5% initial annual yield. The developer, a joint venture between J.P. Morgan Asset Management and Houston-based Hines, has given Eastdil Secured the marketing assignment.

The estimated price would blow away the record for Nashville-area office trades and be the first to surpass $200 million. The largest sale to date came in 2016, when Stockbridge Capital of San Francisco paid $164.5 million, or $235/sf, for the 699,000-sf Corporate Center in Franklin, Tenn.

The 25-story building at 222 Second Avenue totals 391,000 sf, including 29,000 sf of separately owned retail space that isn’t part of the offering. The property is designated LEED gold.

The valuation of the office component rests on its recent vintage and long-term rent roll. It’s 98% occupied, with a weighted average remaining lease term of 10 years. Tenants include Bank of America, law firm Burr & Forman, Ernst & Young, architectural firm Gresham Smith and Universal Music Group. Rents average 15% below the market’s asking rate for new, trophy space. Class-A space downtown is 91% leased.

An amenity level on the 12th floor includes a fitness center, conference space and a 5,000-sf rooftop terrace with a bar. The offering also includes the building’s garage. The separately owned retail space includes three restaurants, one of which is still under construction.

The glass-clad building is across from West River Front Park, which includes an outdoor amphitheater alongside the Cumberland River. The surrounding area is dense with shops, restaurants, hotels and new residences.

Offices in downtown Nashville are currently benefiting from a wave of company relocations. AllianceBernstein and Amazon, for instance, each plans to establish a major presence in the city. That influx has drawn comparisons to other growing markets such as Austin and Denver, and has attracted the interest of a wide range of institutional buyers.

The property at 222 Second Avenue is one of the newest to come to market recently. More new offices are on the way — some 4 million sf is under construction in the Nashville area, equal to 10% of current inventory.