Later this year, Kroll Inc. will move its background screening division out of the Midtown area.
But it’s not leaving town.
Instead of following the lead of other companies by leasing a large chunk of space in Williamson County, Kroll is keeping the division in Nashville.
Real estate industry sources say Kroll last month signed a lease for 90,000 square feet in Commerce Center East, the former CNA office building off Interstate 40 at Stewart’s Ferry Pike, east of Nashville International Airport. The new space will house 360 employees.
Rob Lowe, a Colliers Turley Martin Tucker broker who leases the building with Colliers broker Whit McCrary, deferred comment on the lease to Kroll.
Nor would Terry Smith and Drew Robinson, brokers with Cushman & Wakefield/Nashville Commercial representing Kroll.
“Davidson County has been our home for nearly 13 years and has actively promoted economic development and retention of corporate facilities,” Michael Rosen, the Kroll division’s president said in a prepared statement Friday. “This move will provide us with enough space to meet our expected growth and reflects our parent company’s commitment to its Background Screening and Fraud Solutions businesses.”
Kroll is the world’s leading risk consulting company. For more than 30 years, Kroll has helped companies, government agencies and individuals reduce their exposure to risk and capitalize on business opportunities.
The lease popped up on year-end market reports, though not by name, because it was one of the top five leases last year. Kroll, at 1900 Church St. and spread out among a couple of neighboring buildings, has been looking for a larger space for a while.
Brokers said Kroll’s decision became an open secret within real estate circles in the past few weeks.
With the addition of Kroll, the 240,000-square-foot Commerce Center East will see its leasing rate jump to 88 percent occupied.
An additional tenant is close to announcing a lease of about 30,000 square feet but Lowe wouldn’t disclose the name.
New York-based Sterling American Properties bought the property with local investors, including Lowe and McCrary, in April 2006. It was 90 percent empty.
The Kroll lease capped a strong year for office leasing in Nashville. Net absorption — the difference between what emptied and what filled — will come in at more 1.2 million to 1.9 million square feet, depending on the industry report.
Verizon Wireless, Mars Petcare, Pinnacle Financial Services and Bass, Berry & Sims were among the top leases with Kroll.
The year finished higher than 2006 and there have been a handful of years where net absorption exceeded 1 million square feet. New construction and opening of new office buildings around Nashville helped drive leasing. Close to 1 million square feet of office space opened last year.
Lease rates are trending up. “It’s driven mostly by low vacancy and the new buildings,” Lowe said.
Overall average occupancy is about 92 percent, with top end at about 94 percent.
Tom Harwell, a broker with Eakin Partners, said the new construction helped push up lease rates on existing buildings. “The more successful the new product is the faster the rates in secondary buildings come up,” Harwell said.
This year is expected to be a good year but leasing likely won’t be as high as last year. “Organically, we’ll stay relatively strong,” said Billy Lyell, a broker with Cushman & Wakefield/Nashville Commercial, adding that recruitment of new companies to Nashville could drive the market higher this year.
But if the companies come in, space could be tougher to find. “For `08, you’re not going to have a big lump of space come on line,” Harwell said.
Many of the buildings in the pipeline won’t open until next year or the next.
Downtown may be the biggest option with the reshuffling of office tenants into The Pinnacle at Symphony Place and SunTrust Plaza. Nissan Americas will open a large amount of space in the AT&T Tower when it moves to Cool Springs.
Bass, Berry & Sims moving to Pinnacle will open a big chunk of space in the Regions Tower. Sources said CIGNA Government Services is considering leasing a portion of that space.