Louise R. Frazier, CCIM and Jay Cobble of Blue Ridge Realty, Inc. and Don Brewer, CCIM of Cornerstone CRES| Cushman Wakefield Alliance earned "Deal of the Year" accolades from the East Tennessee Chapter of CCIM, which confers the Certified Commercial and Investment Member designation, for the 85,000 square foot, South College lease.
The year in commercial real estate? That giant office building looming over Interstate 40 in West Knoxville provides a pretty good summary.
The former Goody's Family Clothing headquarters may have seemed like a sure bet when a San Jose, Calif.-based investor bought it for $47.6 million in 2007, but when Goody's went belly-up in 2009 — victimized by an economic downturn that battered retailers — it left building owner SJW Land Co. scrambling to find a new tenant.
Enter South College. In early 2010, the private institution inked a lease for nearly 85,000 square feet of offices in the building to expand its education and health care programs.
South College's move represented the latest evidence of a higher-education cluster along the Pellissippi Parkway corridor — also home to the University of Phoenix, Strayer University, Tusculum College and Pellissippi State Community College — and of increased academic demand during the economic downturn.
Matt Fentress, a broker with NAI Knoxville, said that in general, 'with a lot of people unemployed and businesses not actively hiring … it was a good time for people to go and increase their knowledge and increase their ability to get jobs by getting education.'
There's still plenty of space to fill in the Goody's campus, but the South College lease helped bring the prominent building back to life — and earned 'Deal of the Year' accolades from the East Tennessee chapter of CCIM, which confers the Certified Commercial and Investment Member designation, as the largest single commerical real estate transaction in Knoxville.
Three brokers helped put the transaction together: Don Brewer, now with Cornerstone CRES | Cushman & Wakefield Alliance, and Louise Frazier and Jay Cobble, of Blue Ridge Companies.
Brewer said that prior to Goody's bankruptcy, he had worked with the building's owner in an effort to sell some excess land on the site, while Frazier said Blue Ridge had worked previously with the growing South College. She said the brokers spoke with the college about the building, and 'from a long-term growth standpoint it was a great fit for what they were looking for in a new location.'
Not that the job is done. The property still has 50,000 square feet of Class A office space available, while an adjacent warehouse — which is being marketed by Philadelphia-based Binswanger — has 350,000 square feet available.
All that vacancy is indicative of a commercial property market that remains slow, in Knoxville and across the country.
Roger Moore, president of Sperry Van Ness/R.M. Moore, said his firm's sales and lease volume was up about 22 percent in 2010 — but with a significant twist.
Traditionally, Moore said, sales would make up about 75 percent of his firm's year-end transaction volume, while lease deals would account for about a quarter. In 2009, though, leases accounted for nearly 70 percent of volume, while last year it was a 50-50 split.
But Moore did find a reason for optimism as 2011 kicks into gear.
I guess a difference for us this year, as opposed to this time last year, (is that) this time last year … it felt like we had no pipeline,' he said. 'I mean we were pretty much deal to deal, and there was not a tremendous amount of opportunities coming in the future. And this year, going into this year, we have considerably more in our pipeline than we had a year ago.'
Some data back up Moore's intuition.
According to New York-based firm Reis Inc., office properties nationwide absorbed 2.5 million square feet of space in fourth quarter 2010, the first time since 2007 that the trend ticked up.
Victor Calanog, the firm's vice president of research and economics, analyzed the data to mean that improvements in the office sector won't proceed at 'breakneck pace,' but the sector will likely stabilize and post solid improvements in 2011.
According to Reis, the Knoxville office market had a vacancy rate of 17.5 percent in the fourth quarter, compared to 17.6 percent nationally.
The key to bringing that number down, of course, is putting people back to work — as Fentress, of NAI Knoxville, put it, 'in order to get people inside offices, you've got to have jobs.'
University of Tennessee-prepared 2011 Economic Report to the Governor, released in late January, predicts job growth this year and next, lead by increases in the professional and business services sector, the unemployment rate will remain relatively high at 9.1 percent this year before dipping to 8.8 percent in 2012.
From Nashville to Washington, D.C., politicians and policymakers — including former Knoxville mayor and Gov. Bill Haslam — are working frenetically to find solutions to that stubborn unemployment problem.
But while they wait, local brokers are focusing on the positive — with a fair dose of caution. Brewer, who helped ink the South College deal, cited a pickup in activity as a good sign.
'It feels like it's going to be better than the middle of last year,' the broker said of 2011. 'But I'm not making any prognostications.'
Business writer Josh Flory may be reached at 865-342-6994.