The Covid-19 pandemic reduced demand for office space in town and in many other U.S. cities as well. All the vacancies caused a big drop in office demand, causing prices for such space to plummet. As people returned to work and supply chains improved, the idea of office-to-hotel conversions emerged. Several former office buildings are being renovated, with plans for others in various stages.
Dolly Parton’s SongTeller Hotel, slated to open in June, is one such story. After purchasing the former office building at 211 Commerce Street for a reported $75M, investors poured in an additional $45M to renovate the 12-story building. Several other buildings are in various stages of conversion as well, including Philips Plaza Tower and Parkways Towers. Nearly two million square feet of former office space is now in some stage of conversion to hotel usage. More than one such renovation project exceeds 500,000 square feet. Brochure printing and other graphic design products promote opportunities for contractors.
Developers proceed cautiously, as the mid-century construction methods and materials sometimes fall short of more current needs. However, buildings that pass those infrastructure benchmarks can be purchased at 20%-40% below replacement cost.
Tucker Herndon, a partner of lender firm Burr & Forman, had this to say:
“If you know how to do it and you are successful, there is a great return.”