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A Chattanooga-based hotel development company is building a new, four-story mixed-use office building in the heart of downtown.
The first new corporate office space to be developed in downtown Chattanooga in four years, Vision Hospitality Group Inc.'s new corporate headquarters will go up on Broad Street between Fifth and Fourth avenues, across from Jack's Alley.
"I've always had an eye on moving our corporate offices down to Chattanooga downtown," said Mitch Patel, Vision Hospitality Group's president and CEO. "Being over at Hamilton Place has been great, but the team is really excited about being a part of the vibrant downtown community."
Vision Hospitality Group is spending $4.2 million to create the 28,000 square-foot building. The company will use the top two floors for its headquarters, lease the second floor office space to an outside company and lease the ground floor to retail shops or restaurants.
Construction is scheduled to start within a month and the building -- which will include brick, glass and metal as a nod to Chattanooga's industrial roots -- should be finished by spring 2014.
"We're developers, so it only made sense for us to own our own building at some point as we grow," Patel said.
The headquarters will include a Starbucks-style breakroom and rooftop patio for Vision Hospitality's 30 corporate employees, a two-story staircase, custom chandeliers and a training room that Patel calls "Vision University" where future employees will learn the ropes.
Building in an urban setting is often more difficult than building in a suburban or rural area. Patel is squeezing a 28,000 square foot building into a 7,500 square foot lot.
"No question, anytime you're building in a downtown area there will be more challenges than a suburban area," he said. "Just like in many urban areas, we're building pretty much 100 percent of the space that we have. When you have a site like that, you have to be mindful of your neighbors."
But he added that he believes a downtown location is an important step as the company grows -- they're developing hotels everywhere from Chicago to Houston this year -- and he expects the rewards to outweigh the extra hassle.
That hassle is a big part of why developers have been slow to build new office buildings downtown, said David DeVaney, president of NAI Charter Real Estate Corp.
"It's been at least seven or eight years since anybody has built new office space in the central business district in Chattanooga," DeVaney said. "That's mainly due to the cost of construction, cost of land and what the building owners can charge in rent."
Patel is adding offices to a downtown market that already has more than a half million square feet of empty office space. When BlueCross BlueShield made the move to Cameron Hill in 2009, the company left a handful of empty office buildings downtown that the city is still working to refill. A healthy office market usually maintains a 7 to 10 percent vacancy rate, while Chattanooga is at 18 percent.
The value of downtown office space has also dropped dramatically. In 2011, the Tennessee Valley Authority purchased its offices on Market Street for $22 million, down from the $158 million the building sold for in 1986. And BlueCross BlueShield initially listed the Gold building for $22 million, but sold it for $6.2 million.
Still, since Vision Hospitality is occupying half of the new building on Broad Street and leasing another floor to retail shops, it won't have a large impact on the office space market, DeVaney said.
"In reality, he's not bringing a lot of office space online, and he's offering something that hasn't been offered in the market -- Class A, new construction office space," he said.
Kim White, head of the River City Company, said she's thrilled to see Vision Hospitality make the move to downtown Chattanooga.
"We're excited he's moving from Hamilton Place to take a major place in the heart of our city," she said. "It speaks volumes when someone actually lives here and invests in downtown."
She added that she thinks the Scenic City's empty office space is an opportunity to attract other company headquarters to downtown Chattanooga.
"Sometimes having space, in the long term, really isn't a bad thing," she said. " It's not like we have a lot of sprawl going on. I think as a city we will be able to absorb that office space, even though it may not happen as quickly as some of the property owners would like it to."
Putting retail on the first floor of Vision Hospitality's headquarters on Broad Street will fill a hole and add needed retail density to the block, she added.
"I think [Patel's] vision will help finish off that street," she said. "It's had that gap in it. This completes that street and gives us the opportunity for retail space."
Patel said putting retail on the first floor just made sense.
"We really want to create a vibrant sidewalk atmosphere," he said. "Our corporate offices will always remain in Chattanooga. This is our community, I live here, and so there's just a lot of pride for all of our associates."
Contact staff writer Shelly Bradbury at firstname.lastname@example.org or 423-757-6525.