Middle of nowhere is somewhere now

Tuesday, February 26, 2008 at 1:43am

A decade ago, Atlanta developer Robert Pattillo Properties built a warehouse seemingly in the middle of nowhere in Wilson County.

It sat empty waiting for a tenant while real estate brokers groused whether that was a good idea. Pattillo was among the first to build close to where State Route 840 was connecting into Interstate 40.

Then came Dell. The computer giant not only took that space but expanded it by some 100,000 square feet.

Since then, there has been wave after wave of warehouse development in the area.

Wilson County again is poised for a new thrust of manufacturing and warehouse jobs but again with warehouse space that could sit empty for a while. Over the next few months, developers will have nearly 3 million square feet of warehouse space under construction in Wilson County — more than anywhere else in Middle Tennessee.

“We are getting a fair amount of inventory,” said G.C. Hixson, executive director of the Joint Economic and Community Development Board of Wilson County.

The Nashville area is coming off sluggish year for industrial leasing.

Absorption last year was 1 million to 2 million, depending on who is measuring. In 2006, there was about 6 million square feet absorbed, twice the normal rate, said Terry Smith, the broker with Nashville Commercial/Cushman & Wakefield who carted around Dell in its hunt for space.

“That was pressing developers to get ahead of the cycle,” Smith said.

Industrial real estate tends to be a leading indicator for an economy. When leasing slows and buildings empty, brokers say that usually is a signal the economy is about to slowdown as companies reduce inventory.

Developers, however, have to think several years ahead of any cycle, buying land and building the infrastructure then warehouses hoping they have timed the market well. Sometimes, the developers build the pad, or foundation, just tilt up the walls when they see the timing is right.

Open raw land near an interstate and other improved road access (Couchville Pike and Highway 109) attracted Minneapolis-based Opus Group, Rosemon, Ill.-based Verus Partners and Atlanta’s Industrial Developments International.

They are getting the feel for the Nashville market but also have deep pockets to hold, observers said.

“It’s like giving an artist a pure canvas to paint,” Smith said.

Chicago-based First Industrial Realty, which is building in Wilson County, has been in the Nashville market for years and has staying power as well. The same is true of Sacramento-based Panattoni Development.

Brokers say prospects are thin right now for tenants to fill space. Nissan is looking to consolidate some functions and Hill’s Pet Nutrition, now in LaVergne, is looking for new space, brokers say.

Those tenants, however, aren’t necessarily new to the area.

While the developers may not like empty space, economic development professionals like having the supply.

“If you don’t have those 300,000-500,000-square-foot buildings, it’s very easy to lose out on projects,” said Janet Miller, the Nashville-area chamber’s economic development chief.

Miller said tenants for industrial space are opportunistic; they like to be able to move in fairly quickly when they chose a space.

“You can’t sell out of an empty bucket,” Smith said, adding that Dell didn’t have many options when it was looking.

Despite the development, Wilson County is still a small submarket with 10 million square of warehouse space. The Southeast corridor of LaVergne and Smyrna has more than 46 million square feet.

“Some day that interchange will look like LaVergne,” Hixson said.

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