News Summary
Wheelock Street Capital has sold two office buildings in downtown Nashville at a significant financial loss, reflecting troubling trends in the U.S. office market. Philips Plaza and Parkway Towers sold for a total of $115 million less than their combined purchase price from five years ago. The decline is attributed to low occupancy rates and rising vacancies exacerbated by the COVID-19 pandemic. Stakeholders in Nashville’s real estate sector are now faced with the challenge of adapting to decreased demand for traditional office space.
Tennessee – Wheelock Street Capital, a real estate investment firm based on the East Coast, has sold two office buildings in downtown Nashville at a significant financial loss. The sales, which took place in late December, reflect wider trends in the U.S. office market as it grapples with declining occupancy rates and rising vacancy levels from the long-lasting effects of the COVID-19 pandemic.
Wheelock Street Capital sold Philips Plaza and Parkway Towers for a total of $115 million less than the combined purchase price of approximately $145 million five years prior. Philips Plaza, located at 414 Union Street, was sold for $17 million on December 26, a stark contrast to its 2017 purchase price of $111.5 million. Currently, this 20-story building, which opened in 1975, is only 45% leased, with several floors available for rent.
Parkway Towers, found at 404 James Robertson Parkway, was sold for just $12.5 million on December 31. This marked a notable drop from the $33.5 million acquisition price in 2019. Built in 1968 and containing 11 floors of office space, Parkway Towers was originally intended to be converted into apartments, but plans were halted due to challenging market conditions.
The reasons for the drastic drops in sales prices were not publicly disclosed, but several factors indicate a troubling trend in the office market. Office occupancy rates in Nashville have reached alarming lows, with approximately one in five downtown office spaces currently vacant, particularly older buildings that struggle to attract tenants.
Moreover, the overall availability rate in Downtown Nashville stands at nearly 24%, exacerbated by high-profile companies like AT&T relocating their offices. A broader analysis reveals that national office vacancy rates have hit record highs approaching 14%. Since early 2020, tenants have relinquished over 65 million square feet of office space. In the last year, only $200 million worth of office deals were finalized in Downtown Nashville, about 26% less than the decade-long annual average.
In a notable related transaction, the Westpark Building in Brentwood, a suburb of Nashville, was recently sold at auction for $6.3 million after remaining vacant since late 2024. It had previously been acquired for $24.81 million in 2013. The building features nearly 100,000 square feet of office space and sits on a 5.14-acre lot. Despite its significant size, the property was appraised in 2023 for just $17.253 million. The auction attracted interest from 29 bidders, illustrating the continuing struggles of office landlords in a shifting market.
The substantial losses incurred by Wheelock Street Capital in its Nashville transactions highlight the ongoing challenges that office property owners are facing amidst rising interest rates and a sluggish office market. This situation is a symptom of broader economic shifts, with the pandemic irreversibly altering office space demands and causing landlords to reassess their strategies in the wake of changing workplace dynamics.
As market conditions continue to evolve, stakeholders in the Nashville real estate sector will need to adapt to the new reality of decreased demand for traditional office space and find innovative solutions to fill vacant properties before the market can stabilize.
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