From Mt. Juliet to Smyrna, suburban areas near Nashville have seen a boom in construction of medical office buildings in recent years, a trend fueled largely by doctors and hospitals hoping to set up shop closer to where patients live.
Now, the nation's economic downturn and higher building costs have slowed demand among doctors for new digs. That has left pockets of available space in parts of Middle Tennessee, prompting some property owners to offer sweeter incentives to attract medical tenants.
The slowdown in leasing activity hasn't affected overall rental rates, said Rob Gage, a broker with Colliers Turley Martin Tucker, a commercial real estate firm. But some developers say doctors are increasingly timid about making a move, and they want a building's owner to shoulder more of the costs of finishing space to suit their needs.
Some would-be tenants are reluctant to sign leases because of what they see as high costs.
"It comes down to: There's a need for my specialty services, but am I willing to gamble with my personal possessions in a volatile economic situation?" said Dr. David J. Sables, owner of the Hickory Hollow Foot & Ankle Center in Antioch.
For two years, the podiatrist has hunted for space in the faster-growing areas around Nashville where he could expand. But he has held off striking a deal, in part because he'd have to spend as much as $100,000 in move-in costs, he said.
In the past three years, 40 buildings with a total of more than 1.3 million square feet have been added or are under construction, mostly in Nashville's suburbs, Gage estimated. That doesn't count the redevelopment of about 400,000 square feet of space inside 100 Oaks Mall for use as Vanderbilt University Medical Center offices.
"Typically, we see rooftops first, then retail, then medical offices typically follow," Gage said, adding that providers such as primary care doctors and dentists generally tag along after residential development to stay close to patients.
Other medical offices have followed construction or expansion of hospitals in cities such as Murfreesboro and Clarksville.
Many developers offer doctors part ownership in their buildings to give the physicians another source of income in addition to what they earn from medical practices. Rental rates have been rising 3 percent to 5 percent annually by Gage's estimate.Doubts linger on leasing
In Smyrna, where several medical office buildings were built amid a wave of construction linked to the opening of StoneCrest Medical Center, one building has 45 percent of its space available, officials said.
Some new buildings are in the works, even though leasing activity is a mixed bag overall.
In Mt. Juliet, Commercial Realty Services recently started building a second medical office building at Providence West, a multi-use development across the street from Providence Marketplace.
That 15,000-square-foot building is about 80 percent leased, said Kenneth Powers, the local company's manager.
The Stanton Group of Brentwood and Centennial Pediatrics of Nashville plan a development for Bellevue that they hope to have ready by next summer.
"We think that's a great spot, being right there in the middle of this booming population with a lot of retail growth around that," said Debra Viol, president of Stanton Group, a commercial real estate and property management company.
In Williamson County, pediatrics group practice Brentwood Children's Clinic moved late last year into half of the space in a new 22,000-square-foot building that it built
with partner Solomon Development LLC, a Nashville-based developer of medical properties.
Gregg Turner, president of Solomon, said that in the last four weeks four new leases were signed for doctors or group practices to take up space in its medical properties, a sign that while some markets here may be overbuilt, others such as Cool Springs and Brentwood remain strong.
"Bottom line, it is taking a little longer to make a deal, but the deals are still there," Turner said, citing Hendersonville and Nolensville among the markets targeted by doctors.
Longer-term, developers say the outlook for their business remains strong.
They expect demand for medical offices to continue to increase as the nation's aging population requires more care, including in nontraditional locations.
"When grandma gets sick, she's going to go to the doctor whether the economy is good or bad," said Gage, of Colliers Turley Martin Tucker.
Downtown tower sold for $84M
Nissan leaves behind a big hole
Investor Report: Student Housing Performing