If you live in the Gulch you may be acutely aware of the new and proposed activity, but for the rest of Nashvillians, it may be difficult to see just how much is happening. Since the beginning of the year, 3 new retailers have opened their doors and 2 more are planning on opening by Spring of next year. While that may not amaze the skeptics, one must realize that the lower Gulch is no larger than 3 square blocks. Additionally, these new tenants are paying well over $20/square foot, putting the Gulch on par with rents in Green Hills. Retail is not the only hot property type in the Gulch, multifamily apartment activity is crackling. There is a 302 unit multifamily project under construction, a 305 unit development announced and 2 others in some phase of their due diligence. All of this combined activity has led the two condo projects in the Gulch to sell more condos this year than any other area of downtown. Despite the Velocity converting to apartments, the Terrazzo and Icon have outsold everyone else.
Gulch Retail Space
The newest retailers are Two Old Hippies who have taken over the old Provence space in MarketStreet’s redevelopment project on 12th Avenue, Sweet CeCe’s frozen yogurt who has taken space in front of the Turnip Truck and Apricot Lane who has done the same. Both Two Old Hippies and Apricot lane are rather high end stores attracting many in Nashville’s music scene. Bar Louie, a 50 location operation, has just announced plans to take 8,000 square feet in the bottom of the Velocity and a 24 hour diner concept from New Orleans will be announced in the Icon on the Division Street side. There are several rumors of prospective retail tenants swirling through the chatterbox about the remaining space in the Velocity and Terrazzo, but no concrete details just yet. It appears to be only a matter of time before these remaining spaces fill up.
Gulch Multifamily Apartments
For the last decade, the 32 unit Mercury View Lofts enjoyed the benefits of being the only market rate for rent product in the Gulch. This fact led to 100% occupancy rates for the Gulch and never gave us a true indication of demand. In March of this year, Pollack Partners of Atlanta purchased and converted 220 units in the struggling Velocity condominium project to apartments. Pollack began their leasing effort in April and have already leased 85% of their units at a stabilized rent of $2/foot. This unprecedented absorption of 40 rental units per month has amazed even the biggest Gulch advocates.
Eleven North is now under construction on the far north end of the Gulch, appropriately enough, at the intersection of 11th Avenue North and Charlotte. This 302 unit multifamily development is the result of a partnership between TriBridge Residential and Stonehenge DCM, both of Atlanta. If you recognize the name TriBridge, you should, they partnered with Tony Giarratana in 1997 to build the 24 story Cumberland apartment high-rise. Eleven North will be a 4 story elevated building served by 445+/- surface parking spaces hidden from the street. This project is being built in two phases, the first will deliver in Spring 2012 and the second in Fall 2012.
Newly announced Pine Street Flats is a 305 apartment development located between The Icon and Velocity in the heart of the lower Gulch. This project will be developed by MarketStreet who already owns the land. A 6 story wrap style project, Pine Street Flats will feature structured parking, pool, fitness center, grilling area, cabana and club room. At the moment debt financing has not been identified, but it is likely that construction will begin in Fall 2011 and finish in Spring 2013. These 1 and 2 bedroom apartments are expected to rent between $1,000 and $2,000/mo.
Looking forward, Ray Hensler, developer of the ultra successful Adelicia high-rise, has been tweaking his proposed “renter by choice” high-rise that may be ultimately located on Eakin’s Universal Tire site on the corner of 12th Avenue and Laurel Street. This would be the first high-rise rental project constructed in Nashville since Tony Giarratana completed The Cumberland in 1999. Hensler’s project would soar 20 stories and offer up to 250 luxury condo-style apartments at rents that begin in the lower $1,000’s and reach as high as $5,000. Before the skeptics begin clearing their throats, let me remind you that private owners in the Adelicia, West End, Icon, Terrazzo, Encore and Viridian have been achieving similar rents over the past half decade. Hensler’s high-rise will be highly amenitized and set a new rental standard in Nashville.
There also seems to be activity on the failed Griffin Plaza site in the heart of the lower Gulch. While no details are available, it appears as though several out of state developers are taking a hard look at constructing a high-rise rental project in this location. The Griffin site is located directly across the street from the Turnip Truck, the Gulch’s own organic grocery store and would seem to be perfectly located.
Gulch Office Space
Let me start by saying that currently there is not a plethora of office space in the Gulch, but there’s also not much vacant either. Offering approximately 80,000 square feet, the Terrazzo is the largest office building as well as the newest. Signing 4 leases in 2011, this building is now essentially full, which amazes me given the fact that this Class A space delivered during the recession and is not cheap. It should also be mentioned that the Terrazzo is a mixed use building that houses 117 luxury condos, 4 of which remain available for sale.
The Bohan Building is a 60,000 square foot building with one 8,000 square foot vacancy on Demonbreun Street (Old Lyric Street space) and the McGavock building is a 52,000 square foot development with one 9,000 square foot vacancy (currently being negotiated). Both office buildings are considered Class B office redevelopments.
Looking to the future, Eakin Partners have a conceptual 350,000 to 400,000 square foot Class A high-rise located on the corner of 12th Avenue and Demonbreun. This is the location of the old Universal Tire, a site that Eakin purchased in February 2006 for $6.25 million. According to my sources, it would take 50-60% of the building being preleased in order to begin construction. Rumor has it that this site has made the coveted Waller Lansden Law firm relocation top 3 list, but I have no way of confirming this intel. I will say this though, it makes a ton of sense for Waller Lansden to choose this location. Once the Music City Center is completed, Demonbreun Street will become a new gateway boulevard into downtown Nashville. Highly visible, this site offers unparalleled walkability and livability, a combination not yet found in Nashville. This site makes more sense than either Alex Palmer’s site or Lionstone’s site. Of course, I am assuming the price tags are all the same.
Condos in the Gulch
Where once there was a “glut of Gulch condos for sale” (thank you Tennessean for that rather calamitous phrase) now there are few. The 419 unit Icon is down to 65 unsold condos and the 117 unit Terrazzo is down to just 5. During 2011, both buildings have averaged a combined 10.3 closings per month. This gives the Gulch 7 months of unsold developer inventory remaining. Add this 7 months of inventory to the 1 month of resale inventory plus an unknown shadow inventory and you’ll most likely arrive at a net aggregate of one year’s worth of inventory. In other words, it will not be a buyer’s market by this time next year. Buyers waiting for the bottom of the market better start making moves now, least ye be left out in the cold. Sellers, your wait is almost over. Calculations show that prices will begin to rise in earnest as soon as January 2012 and likely will continue for the next several years. The Gulch is poised for quite a good run.
As the broker who has sold more condos than any other broker in Nashville, I look forward to the opportunity of aiding you in either purchasing or selling. Contact me for a private consultation.
