Nashville’s commercial real estate industry is beginning to consider a question that no one dared to even ask during the depths of the recession – when will the next large office building be built?

“We could see a new building this year, either start or be announced,” says Richard Fleming, principal with Cushman & Wakefield/Cornerstone. “Any given month, 40 or 50 companies are looking at Nashville for relocation,” but the city has few places available for a business that needs several hundred thousand square feet of office space all in one place.

There are many smaller spaces available but the city has little to offer an employer than needs a full floor in a building or an even larger space, says Tom Frye, managing director for CB Richard Ellis Commercial Real Estate. Some of those spaces are in older downtown buildings and may never be occupied.

“It’s time somebody built something in the (southern) quadrant,” which includes the Maryland Farms and Cool Springs markets, he says.

Only one large building came on the market during the recession, downtown’s Pinnacle at Symphony Place. That kept the city from having a dramatic oversupply of new Class A office space, but as the economy continues to improve, demand could exceed supply.

“It’s a double-edged sword,” says Fleming. The good news is we don’t have a lot of vacancies. The bad news is we don’t have a lot of vacancies.”

One of Pinnacle’s premier tenants, the Bass Berry & Sims law firm, moved from another downtown building, the Regions Center, where it had occupied about a quarter of that 591,000-square-foot building. Frye refers to that kind of move as a “reshuffling” that fills space in one building but leaves vacant space behind.

That explains why, despite leasing activity, total net absorption of office space last year was about 400,000 square feet when normally it is about 700,000 to 750,000 square feet. Absorption measures the amount of leasable space that is filled and taken off the market. Empty space left behind is subtracted from that.

Even so, last year’s absorption was about 77 percent greater than in 2009 at the bottom of the recession.

“It was positive absorption,” Frye says of 2010, He expects about the same market performance this year.

The industry is watching a couple of potential reshufflings that could occur in the next few years – or perhaps never. The Waller Lansden law firm is considering a move from downtown’s Nashville City Center, and Regions Bank is said to be considering a move from its namesake building, located at Third Avenue North and Deaderick Street, which is part of a foreclosure lawsuit against an affiliate of the owner, FRI Investors. Waller would leave behind about 170,000 square feet of space.

Despite the reshuffling, there was still a lot of what Henry Menge, affiliate broker at XMI Commercial Real Estate, refers to as “new activity.” These are leases that didn’t leave space behind.

In of the year’s larger transactions, ServiceSource leased about 73,000 square feet in downtown’s Fourth and Church Building, where it has about 400 employees, according to the Downtown Nashville Partnership. ServiceSource provides revenue performance services for technology, healthcare, and life sciences companies.

Loews Hotels leased 40,000 square feet in the Fifth Third Bank building at 424 Church St. for a back-office operation.

“A lot of businesses are attracted to downtown because it’s centrally located,” Menge says. “And you can get a deal on rent.”

According to CB Richard Ellis’ market report, other significant move-ins in 2010 included:

• Vanderbilt University Medical Center, 70,000 square feet in Green Hills

• Renal Advantage, 54,000 square feet in the McEwen Building in Cool Springs

• Cummins Inc., 40,000 square feet in the Two Rivers Corporate Centre in the Airport North market

Annual rents were mostly flat at the end of last year, with a marketwide asking rate of $18.62 per square foot. Rates were higher in the Green Hills, 21st Avenue and Music Row market at $22.04. In Cool Springs-Brentwood the annual rate was $21.39 per foot, according to CB Richard Ellis.

The Nashville market had 32.4 million square feet of office space and an overall vacancy rate of 13.9 percent, according to the firm’s market report. Vacancy rates varied depending on the part of town, according to CB Richard Ellis.

“We’re very optimistic,” Fleming says of market’s prospects. “I was concerned about 2011, (but) this could be a great year.”