Lighting up Broadway

Recent headlines are just the beginning for city’s signature street

Friday, September 9, 2016, Vol. 40, No. 37
By Kathy Carlson

If you see a lot of construction cranes in Nashville now, just wait. More are on the way, and they’re heading to Broadway.

The Tennessean’s parent company is selling its 10 acres in and around 1100 Broadway, home to the daily since the 1930s. One block east, a Hyatt Regency Hotel is in the works for the corner of 10th and Broadway, part of nearly 15 acres that LifeWay Christian Resources sold to developers last year for $125 million.

With these announcements last month, it’s clear Broadway, like Nashville, ain’t what it used to be. Imagine, 10 or so years from now, mid-rise to high-rise buildings housing offices, hotels and apartments and an assortment of retail options along Broadway both east and just west of Interstate 40, all considered part of downtown.

“You’ve got things that will not change – (such as) the Frist and the federal courthouse – with lots of potential for change elsewhere,” says Stephen Kulinski, managing director of the full-service real estate firm CBRE’s Nashville office. “…It won’t be so dense that it will be high-rise city. There will be architectural and visual relief and then such nice jewels as the Frist and Union Station.

“There’s a lot of potential development in play.”

In addition to the Tennessean and LifeWay, the Endeavor Real Estate Group of Austin, Texas, plans a mixed-use project that includes a Whole Foods grocery on the former Nelson Mazda car dealership site, just across 12th Avenue from the Tennessean building.

“There’s no question that the West End corridor is going to change dramatically,” adds Mark Bloom, longtime Nashville real estate investor. The stretch from LifeWay to the 1600 block, where Broadway becomes West End, could see upwards of a billion dollars in development.

“In the next five years, after the pedestrian bridge is finished and there’s a true walkable connection between SoBro and the Gulch,” Bloom says, “all of these will be considered ‘downtown.’”

Development just west of the interstate to 16th will provide a transition between downtown and Midtown, developer Alex Palmer explains.

His firm built one of Midtown Nashville’s first high-rise buildings at 1801 West End in 1984, and he has been working in recent years to develop West End Summit, a full block of property at 1600 West End Avenue that could bring additional residential, office and hotel development to the area.

That site is now facetiously known as “Lake Palmer,” an 80-foot-deep hole that Google Maps shows as a body of water. The proposed mixed-use development has had many planned and scrapped launches since 2005.

“This area has not experienced the degree of rapid development that SoBro and The Gulch have over the last couple of years, but will be an extension of it in the years to come,” Palmer said in an email.

“At the same time it is likely to become the connection between the CBD [core business district] and what we call Midtown today.”

Whatever happens along Broadway has the potential to knit together not only the business core and parts west, but also a host of downtown neighborhoods including SoBro, The Gulch, the central business core, Bicentennial Mall area and the Capitol View project along Charlotte just east of I-40.

The Tennessean site offers great opportunity for connection, says Tamara Dickson, vice president, economic development with the Nashville Downtown Partnership. The property offers entry points on both Broadway and 11th Avenue North and can be used for hotel, office, residential or a combination of all those uses, she points out.

“That location is a crossroads, a critical link between north and south and east and west. It’s a critical location.” Dickson says. “We hope that whoever purchases it thinks about those connections and comes up with something that really works.”

The Tennessean property holds additional possibilities. There’s a tract that’s shaped like a long, skinny triangle and runs north and south along the east side of 11th Avenue next to the railroad tracks that is currently used for parking.

“That potentially could be park land,” Kulinski says. “It could be donated (to Metro) for some sort of tax or building credit, so more can be built on the west side of 11th.” CBRE is representing Gannett [The Tennessean’s parent company] in the sale of the property.

But wait, there’s more

The mixed-use project planned right next to the Tennessean on the west will connect north and south parts of The Gulch, adds Jamil Alam, managing principal of Endeavor Real Estate Group. A Whole Foods store will anchor the project.

“Generally, we’ve seen Whole Foods act as a catalyst for development in a radius of two to three blocks around the store,” Alam says. He sees the north and south Gulch areas connecting with the Whole Foods store along north-south walkways.

He sees similarities between Endeavor’s Nashville project and past work on Whole Foods’ headquarters and accompanying store.

The Austin, Texas, site was an area of car dealerships along a route into downtown, a place people commuted through, he explains. Whole Foods’ flagship store is in that area, and the company built its headquarters above the store.

“It completely changed our downtown” over a 12-15 year span,” Alam adds.

“It pulled our downtown west by several blocks, residential (development) in particular. It’s highly, highly valued. We’re finding more and more people willing to live downtown because there’s a full-service grocery.”

That’s music to the ears of many downtown residents, including Metro Councilman Freddie O’Connell. His district includes downtown, The Gulch, Germantown and his own neighborhood, Salemtown.

“For a truly urban residential development, we want two things: more residents and more urban amenities,” like drugstores and grocery options, he says.

“I really do think we’re about to reach critical mass for urban living,” he adds.

If all three possible sites for mixed-use development on the north side of Broadway incorporate residential components and/or a grocery, more people will want to live in and around downtown.

The downtown residential population is projected to reach 9,619 by the end of this year and exceed 12,400 in 2017, the Downtown Partnership states. The partnership projects there will be more than 6,000 housing units downtown by the end of this year, with another 1,700 added the following year. Another 13 previously announced residential projects could deliver more than 3,700 downtown residential units by the end of 2019, the partnership said in its 2016 residential report.

Greater Nashville – Metro and surrounding counties – is projected to reach 3 million residents over the next 20 years. As population explodes, so have real estate prices.

Buildings in the Lower Broadway tourist destination have sold recently in the range of $800-$1,000 per square foot, Bloom says, and prime sites in SoBro and The Gulch are trading at $250-$350 a square foot just for the raw land.

As most of these sites in SoBro and downtown are gobbled up for multifamily housing and hotels, development starts to move outward (from) downtown and down West End, he adds.

“What happens to values away from these main, prime locations – SoBro, The Gulch and Midtown? A rising tide lifts all boats,” Bloom says.

With nearby land going for $250 per square foot, adjacent areas with land prices of 50, 60, 80, 90 dollars will become attractive to developers. These areas could include along Charlotte Pike, behind and to the north of the Palmer property at 1600 Broadway, and also in East Nashville, including Inglewood, Five Points and property along the East Bank near Nissan Field.

Another East Nashville site is across the Cumberland River from Germantown, he says.

Kulinski of CBRE sees potential for additional development along Church Street and all around the perimeter of The Gulch.

Nashville’s diversified economy – entertainment, music, health care – plus its attractiveness to growing numbers of millennials and creative types are putting Music City on top-tier investors’ radar.

Land prices like Nashville has commanded recently are seen in few cities outside of gateway cities like New York, Chicago and Miami, Bloom says.

With star status, there’s also a crowded commercial real estate market, Bloom notes, and that creates a more challenging financing environment. “You really have to have deep pockets and major finance experience to pull off development here,” he says.

The high cost of land and high construction costs have made it very expensive to execute these projects, he says. Lenders are becoming more cautious and some proposed projects won’t get financed, he continues.

“All the low-hanging fruit has been picked. The projects that do get financed and come on line, if they’re not executed perfectly, they won’t meet their (financial objectives). You’ve got to have a great location, best-in-class amenities, access to easy transportation to get there and not be stuck in a bottleneck for 20-30 minutes. (Traffic is) a very big issue, obviously. It’s up to the city to try to solve that.”

Regardless, the move to Nashville continues. People tell Kulinski they’re moving to Nashville, period, and now they have to find a job.

He credits former Nashville Mayor (1991-99) and Tennessee Governor (2003-11) Phil Bredesen for placing Nashville on a fast track for growth. These days, Kulinski says, “Nashville has everything a big city has, but not a whole lot of it. We’re starting to get some traffic, but there’s still a small-town feel.”

Kulinski also offers a bit of perspective.

“I was in Toronto last summer, all gung ho about Nashville and its 25 tower cranes,” he recalls. “Someone said to me, ‘Steve, we have 210 currently in Toronto.’”