Developers cashing in on office condo trend

Monday, May 5, 2008 at 1:12am

Developer and real estate investor Bill Hostettler has built condominiums and bought apartments as well as shopping centers.

Now he’s taking on flex-office condos, defined as showroom offices with docks on the back. Hostettler bought the former Burgess Used Autos lot at 2195 Nolensville Road for $1.65 million and plans to build 86,000 square feet of those condos.

Ronnie Wenzler and Holly Buchanan, both with Colliers Turley Martin Tucker, represented the seller, the estate of Raymond Waller.

Hostettler is picking up on the trend of building more office condos in Nashville’s urban area. Most of the new office condos in the Nashville area have been built in the suburbs, the bulk in Cool Springs.

The developer, however, isn’t hitting the trend for office condos as much as the favorable lending environment.

“The reason why we are doing it is a lot of the banks are offering fixed-rate loans for owner-occupied buildings,” Hostettler said.

He said a buyer right now can get a 20-year loan for under a 7 percent annual interest rate.

Still, for the past few years, developers have been building the condos to give business owners the option of owning their space versus leasing.

Last year, Harvest Construction moved into a space in the 13,000-square-foot office-condo project it built along Southgate Avenue off Wedgewood Avenue. Tim Farley, Harvest’s founder and president, said all the spaces have been sold.

“You don’t have to be in a high-rise or on West End Avenue,” Farley said.

The buyers of Harvest’s product are others in the construction business such as designers, architects and engineers.

“I’ve looked at trying to buy more property to do more because we were so successful,” Farley said.

He said, however, he would leave that to the developers and he’ll just build the building for them.

“This is big in other markets,” Farley noted. “It’s good infill type of product.”

Midtown Millworks is one of the latest office condo projects to come online in the urban area.

A year ago, XMi Commercial bought the former record storage building on Charlotte Avenue, which had been a Duck Head clothing plant a century ago, and converted it into 56,000 square feet of office condos.

The Oasis Center took the top floor The Midtown Millworks. Stan Snipes, president of XMi Commercial, said 2,300 square feet is left to sell and construction finished on the shell building two weeks ago.

“I feel like that was a pretty successful project,” Snipes said.

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