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The states from the South region—listed as Arkansas, Alabama, Kentucky, Louisiana and Mississippi—have diverse economies with a strong footprint in manufacturing. At the same time, the health-care and technology sectors experienced sustained expansion both prior to and following the pandemic. According to CommercialEdge data, a total of 5.1 million square feet of office space was underway in the region at the end of March, accounting for 3.1 percent of the nation’s total office inventory.
While the South region has historically been a popular destination for retirees, younger people have become increasingly attracted to the area for its lower cost of living and growing job opportunities. According to the latest estimates from the U.S. Census Bureau, the population of these states has been growing since the start of the pandemic, albeit at varying rates. Tennessee and Alabama were popular destinations for people and businesses moving from other states, while Louisiana and Arkansas saw more modest growth.
The demand for office space in these states also varied by location; Nashville, Tenn., experienced significant growth in the sector, with several large projects currently underway. Meanwhile, some other areas in these states—such as Chattanooga or Knoxville—saw little to no activity in office construction due to factors such as changing workplace trends and economic conditions. Using CommercialEdge data, the table below highlights the top five markets in the region by total under-construction volume as of the end of March.
1. Nashville, Tenn.
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Thanks to its thriving entertainment industry and growing health-care sector, Nashville is the South region’s hottest spot for office development. The market tops the list with nearly 3.9 million square feet of office space under construction as of March, spread across 17 properties. This accounts for 6 percent of the total office stock in the metro. Meanwhile, office deliveries year-to-date in March totaled a little over 125,000 square feet.
The largest property underway in the metro was the Amazon Tower, a 566,000-square-foot office building developed by Southwest Value Partners for the e-commerce giant. The asset will be located within Nashville Yards, an 18-acre mixed-use project rising in the heart of downtown Nashville which will also include the upcoming Pinnacle Tower.
2. Huntsville, Ala.
Despite being a relatively smaller market, the Alabama market is witnessing a steady increase in office construction activity. Two properties totaling 238,000 square feet of office space came online in Huntsville in the first three months of the year.
The city’s growing technology and defense sectors are fueling demand for new office space, making it an attractive market for developers. A total of 616,000 square feet of office space was under construction in the metro at the end of March, accounting for 3.8 percent of the total office stock. The largest office project underway was the Northrop Grumman Buildings, a 262,000-square-foot, two-building complex in Redstone Gateway office park for defense contractor Northrop Grumman.
3. Louisville, Ky.
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Louisville’s central location within the South region and diverse economy make it an attractive destination for businesses, further driving demand for new office space. Some 368,000 square feet of office space was under construction as of March, accounting for 1.2 percent of the market’s total office stock. Another 50,000 square feet was added to the market’s total inventory year-to-date in March.
The McMahan Group is currently working on Baptist Healthcare Outpatient Care Center, a 126,800-square-foot primary care hub at 2800 Breckenridge Lane. Construction on the asset broke ground in September 2021, while completion is scheduled for July 2023. Old National Bank financed construction with a $47.9 million loan, CommercialEdge data shows.
4. Jackson, Miss.
The smallest office market on our list is experiencing a notable uptick in office construction activity, largely driven by the expanding health-care and education sectors. Two office properties totaling 182,000 square feet of space were under construction as of March, representing 1.8 percent of the total office stock.
The largest project underway was the Baptist Memorial Healthcare, a 97,000-square-foot physician office in Madison, Miss., developed by Baptist Health Systems and The Boldt Cos. The joint venture started work on the property in January 2023 and estimates it will reach completion in the first quarter of 2024.
5. Memphis, Tenn.
Memphis, a growing city with a strong economy and thriving business community, rounds out the list with 61,200 square feet of office space underway as of March. What’s more, a 38,000-square-foot office project was completed year-to-date in March, according to CommercialEdge.
In downtown Memphis, Lennox Cos. is converting a former retail center at 421 Monroe Avenue into a 34,200-square-foot, four-story office building. The roster of tenants will include Spaces, which will provide coworking spaces and meeting rooms for hybrid workers, small businesses and entrepreneurs.
