Downtown Chattanooga is losing some of its biggest buildings as thousands of office workers who once came to centrally-located offices every day are now working from home, at least some of the time.
The Tennessee Valley Authority (TVA), America's biggest public utility, is preparing to abandon Chattanooga's biggest office complex and relocate its power headquarters to another smaller office facility after shifting most of its 2,600 employees who worked there to other sites or at-home work. BlueCross BlueShield of Tennessee (BCBS), the city's biggest private employer, is selling 185,000 square feet of office space in its Gateway property that it no longer needs after shifting 86% of its 4,800 Chattanooga workers to remote work. And Unum, the world's biggest disability insurer, has leased its 150,000-square-foot West Tower building after shifting much of its 2,800-employee headquarters staff to a hybrid schedule, working in the office only three days a week.
But as some of the city's largest employers shift away from daily staffing in downtown offices, Chattanooga's central city is attracting potentially billions of dollars of new types of investment to draw residents, tourists and shoppers along with different types of office developments.
Emily Mack, president of the downtown promotion agency River City Co., says such changes create challenges for downtown but also opportunities for new developments. While some offices are downsized or only occupied some of the time, new hotels, more housing, a new downtown school, a new federal courthouse and the first major downtown supermarket in decades are under development downtown.
On the Westside, the Chattanooga Housing Authority is looking to rebuild and expand housing in and around the city's oldest public housing project. And developers of The Bend, a project on the former Alstom manufacturing site, are working on a mixed-use development of housing, retail, office and manufacturing projects expected to generate more than $1 billion in new investment for downtown.
Mack says such projects "breathe new life" into downtown and create opportunities to convert properties into new uses as the core of the city continues to adapt and grow.
"The proposed new federal courthouse will be one of the largest investments to take place in our downtown," Mack says, calling plans for the $200 million-plus federal courthouse a "transformational development." TVA hopes to sell the site of its Chattanooga Office Complex to the U.S. General Service Administration, the federal agency that is seeking a new site for a federal courthouse to replace the aging Joel Solomon building.
Plans have been announced for a half dozen new downtown hotels, including three already under construction, which Mack said "are turning asphalt into activity." Other hotel proposals would reactivate and reuse such sites as the Chattanooga Bank building, the former downtown Sportsbarn and a Main Street storefront, among others.
Plans for new housing, offices, stores and a new school on the Westside and The Bend could bring up to $2 billion in new development over time, according to city leaders.
"This project essentially adds a whole new neighborhood to Chattanooga and transforms another, so it's not a stretch to call this a generational opportunity," Chattanooga Mayor Tim Kelly says.
Office shuffling & growth
A recent study by the consulting firm, McKinsey Global Institute, says in the world's largest cities, office attendance is down 30% from pre-pandemic levels, pushing up office vacancies in most cities.
But Chattanooga landlords and downtown developers insist the city has fared far better, with most workers now back in the office and some new companies that are expanding.
"We're probably not back to pre-pandemic levels and some workers are coming downtown less frequently, but our overall market has remained relatively healthy," says Steve Hunt, a commercial real estate broker who has developed and leased downtown properties for more than four decades.
Collectively, BCBS, TVA and Unum have nearly 10,000 employees assigned to downtown offices but most no longer come to the office to work on any given day. In the next two years, downtown will also lose one of its top sports draws when the Chattanooga Lookouts abandon their stadium on Hawk Hill downtown and move to the former Wheland Foundry site on the Southside.
But Hunt says such declines have been offset, at least to some extent, by the growth in the market among many smaller, growing companies.
Downtown remains the biggest office market in the Chattanooga area and continues to be home to a number of new and growing businesses. Noon Development, a Chattanooga real estate development firm that has built numerous medical office buildings across the Southeast, bought a pair of empty buildings during the pandemic and began renovating the structures for new use.
The former John Ross building along 4th Street, once a downtown car dealership, was revamped to become the corporate headquarters for international freight broker Steam Logistics. When Noon Development needed more space for its own staff, company president John Foy says he decided to buy the former headquarters of the Tennessee Valley Federal Credit Union on Market Street.
"We bought this building because we were out of space where we were before and we've been able to attract other tenants that were growing like we were to fill up most of the rest of the building," Foy says. "People who want an office in Chattanooga typically want to be downtown because it is close to other businesses and centrally located to Lookout and Signal Mountain and North Chattanooga. I think we're probably doing better in our downtown than many major metro markets right now."
Steam Logistics moved more than 400 employees into the renovated John Ross building earlier this year while both Cadence Bank and Chase Bank have decided to open downtown offices since the pandemic.
As offices shift in size and makeup, overall demand for downtown office space is still projected to grow by 1.1 million square feet by 2035, according to a market study conducted for River City Co. by RCLCO.
In their downtown assessment released earlier this year for River City Co., the RCLCO consultants noted that Chattanooga "has experienced something of an urban renaissance over the last decade" with above-average job growth and strong demand for housing in and around downtown. The consultants did note that the office market has shifted since the pandemic emptied many offices and workers adapted to new ways to work remotely.
"While office space in downtown Chattanooga is mostly well-leased, large spaces are underutilized -- the enduring impact of work-from-home on companies such as TVA or BlueCross BlueShield," RCLCO says in its 69-page report released in February. "At the same time, there are bright spots, including the relative strengths of creative office spaces."
RCLCO cites the success of such reimagined offices as the Gold Building, which was converted to the Westin Hotel, and the Maclellan, which now houses residential condominiums. The former Yesterday's bar at Patten Parkway was converted to the Tomorrow Building for co-working space. And the former Loveman's department store downtown now houses both offices and residential condos.
"There is a compelling opportunity to embrace adaptive reuse, particularly conversions of older office buildings to residential product," the RCLCO study reads.
Photo Gallery
Remote work emptied Chattanooga office buildings. Now, housing is reinventing the scenic city’s core.
Downtown downsizing
* The Tennessee Valley Authority is looking to demolish its biggest office complex and replace it with a smaller facility downtown.
* BlueCross BlueShield of Tennessee, which shifted 86% of its staff to remote work, sold its 185,000-square-foot building in the Golden Gateway.
* Unum Corp has shifted most workers to only three days a week in the office and leased out 150,000 square feet it no longer needs in its downtown headquarters.
* The Chattanooga Lookouts stadium on Hawk Hill is due to be demolished in 2025 and replace with a new stadium on South Broad Street
Downtown development
* A half dozen new hotels are planned or under construction, including a $54 million Embassy Suites hotel at Fourth and Broad streets, a $33 million Home2Suites and Tru by Hilton hotel at 1201 Carter Sreet, a $40 million Tapestry Collection by Hilton in the vacant Chattanooga bank building, a LaQuinta Inn & Suites at Cowart and 13th Street, a $30 million Caption by Hyatt at 105 W. Main Street and potentially a Drury hotel in the former Sportsbarn downtown.
* A $200 million-plus federal courthouse is planned in downtown Chattanooga to replace the aging Joel Solomon Federal building.
* The Bend projects $800 million of new office, commercial and residential development on the Westside. Next door, the Chattanooga Housing Authority is seeking to rebuild and bring new development to its oldest housing project, College Hill Courts.
* Hamilton County bought a site in the Golden Gateway from BlueCross BlueShield to potentially develop another vocational school in the downtown area.
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