COVID-19: Impact on Development in the City

Construction, 726 Sevier Avenue, Knoxville, March 27, 2020

As I’ve done with local business owners, I approached local developers with a series of questions regarding the impact of the pandemic and the economic shutdown on their current and future projects. I asked about the impact on their employees and how they saw the implications for future development in the city. Here are their responses.

Tim Hill of Hatcher/Hill

The impact has been more severe on existing developments because few tenants are able to pay rent. We will proceed with extreme caution and monitor economic  activity as well as potentially new social behaviors which will most likely impact gathering places such as restaurants and bars.

The relief for developers will not be enough. We have bank mortgage obligations, property taxes, operating expenses to maintain commercial shopping centers and many of our tenants are unable to pay rent and CAM. The lines of credit will help support our operating obligations and mortgage payments.

The impact downtown will be similar to other areas of the city and county. You will see more vacancies in the near term. Fewer restaurant expansions.

Jeffrey Nash of The Courtland Group

I think it is premature to draw any conclusions and effects from this horrible situation, we are all going through. Most people appear to be responding to the advice from all governments, we are busier than ever on maintenance as most people are in there homes 24/7.  Our construction crew are still working, as they are considered essential, although the distancing and restriction on numbers is causing things to move at a slower pace than normal. Everyone is having to make sacrifices and difficult choices at the moment.

Supreme Court Site, Henley Street, Knoxville, February 2020

Rick Dover of Dover Development:

It’s hard to see how any of it resolves until it resolves medically. We’re going to lose a lot. The government help will be flawed and spotty. It’s all sad for our community. We’d spent two-and-a-half years building a great team and we had to furlough them all, though they are getting benefits and will be brought back.

Dover development has multiple properties and businesses. During the shut down, crews continue to work at each. For example, they are currently doing work to triple the size of the rooftop bar on the top of the Hyatt Place. At Knox High, they have put severe restrictions on access in order to protect the residents, many of whom are in the high risk population.

Dover Development was poised to open the new assisted living project at South High. That has now been put on hold for the moment even though there is a waiting list. That, he says, will have to wait until we have some clarity on what happens next with the pandemic. He also noted that it may be needed for other purposes in the interim, such as child care for health care workers and they’ve offered that to the Health Department.

They are also under construction at the Supreme Court site and he said practicing social distancing isn’t really that hard on a construction site. He also pointed out that much of the work is outside. Asked about disruption of material supplies, he said there had been very little, with the exception of a particular type of rubber tape they prefer, so they found another option.

Exterior, Knoxville High Independent Living, Knoxville, April 2018

Exterior, Knoxville High Independent Living, Knoxville, April 2018

He also said they are sequencing a bit differently, having one crew finish completely before another starts, which is a shift in how he has operated before and may slow projects down slightly.

While it seemed counter-intuitive to me that this would be a time to hire, he said that his company is currently looking for fifty to one hundred additional semi-skilled workers for both sites. If you are interested, you can contact them through their website.

As Mr. Nash said above, it’s early. We don’t know how long social distancing will be a reality. We don’t know what will happen six months from now with the supply of money for projects. We don’t know if consumers are going to return to restaurants and bars and in what kind of numbers. We don’t know if an economically damaged middle class will return to spending in the short term or be more cautious. This will impact businesses and their ability to pay rent.

It certainly seems likely there will be a pause in the amazing trajectory of development and new business the city has experienced over the last ten-to-fifteen years. How severe and long-term that pause is anybody’s guess at this time.

Comments

  1. Jeannette Brown says

    Is the viaduct reconstruction still on schedule?

  2. Here’s hoping they at least finish what’s already been started. And that rent prices go down for prospective downtown residents.

  3. Cant help but think of just how large in scope this will negatively change downtown and its future direction for many years to come. People were so willing to overpay to live downtown, due to convenience of being so close to so many bars and restaurants. The bubble it created, with all the activity/development/skyrocketing home values. This virus and the new “norms” that will permanently be with us are the antithesis of that entire way of living/thinking. Tim Hill said it best when pointing to all the new vacancies around downtown that we’ll be seeing sooner, rather than later. Such terrible news, since our city had been booming for so many years.

    • First weeks, then months, then years and now the changes are permanent? I’m sorry but where did you see anything saying these changes will be permanent?

      • I think what he’s referring to is that this situation is going to get into folks psyche- which I agree 100%. Same reason you (maybe not you, but a lot of people) find ourselves asking “why are those people standing close to one another” when you see a group walking around downtown or on the sidewalk when you drive by. I think its on the same level as other big events that have happened in our country thats changed us permanently. It makes you fundamentally change behavior, similar to terrorism in the early 2000’s. It’s an extreme example, but I think its in the same conversation. It may not have directly effected you, but it fundamentally changed how our country operates and how we interact with each other and our collective mindset. I think thats what he’s referring to? The psyche of a large majority of the population.

        Not everyone- clearly.

        • First of all, I’m not sure I like your tone. But the way you explained that makes more sense. I was referring more to the tangible changes, such as when stores, bars, and restaurants will be open again, when we can see our friends and hug our families again. Etc. Because at least to me (and hopefully most people, maybe not everyone,) thinking those changes are going to be permanent is unrealistic.

    • I just ordered a fantastic carry out lunch from Cafe Vicolo! (Hot roast beef sandwich on a toasted kaiser roll served with fried potatoes) I’ve ordered from several other restaurants as well! As a downtown resident, I’m excited to share the downtown live/work/play experience with everyone as soon as it is safe to do so! Come join us! It is, and always will, be an awesome place to live/work/play!

    • Ridiculous fear mongering. People will be back to normal before the end of the year.

      • I don’t think it’s ridiculous fear mongering, at all. I’m patiently optimistic, and I truly hope I’m wrong, but I don’t think there will ever be a sense of “normal” like there was before. Maybe something “close” to normal, but this will change how we live and the way we do things for the foreseeable future.

      • Seriously?

        How exactly are people going be returning to normal? Does normal mean half of all small businesses are closed and there are 30+ million unemployed?

        It’s apparent you’re very insulated from everything that’s happening, but there is nothing normal about that.

        • Watch more entertainment news. Tennessee will begin its phased reopening next month. People will not continue to stay at home through the when year. Unlike you, I’m actively working on the recovery effort and know it won’t be permanent (far from it). If you want to sit at home and scream the sky is falling, do you.

      • You should look at some of the Federal reserve projections. They are estimating 20-30% unemployment in 3 months. Basically the same time these stimulus type unemployment programs end. Which is going to be, well I can’t really imagine.

        Just going back to work is not going to fix this problem. We had a huge corporate debt problem before this happened. It is systemic and widespread in a lot of different industries. Even before this restaurants like Applebee’s, Taco Bell, Ruby Tuesdays, Hooters, Burger King, O’Charleys…..etc had all given warnings to Wall Street in end of the year reports of their intent to close lots of stores by the end of 2020. Large scale retail has been declining for 20 years and manufacturing has been in a recession for the past two years.

        Regardless of the virus we were headed for a recession before the end of 2020. This is going to amplify it. Don’t be scared but don’t be naive either.

        • Absolute garbage. Continue to follow Krugman et al and continuous calls for doom and gloom if you want. Other projections show very different things. You’re ignoring the fact that advanced manufacturing has steadily grown for years and terrible chain restaurants don’t represent the entire economy.

          • Watching Fox News around the clock doesn’t count as “actively helping in the recovery effort”. I really hope this thing doesn’t touch anyone you know or love, but with all due respect- simply telling everyone their opinion is garbage and Tennessee is going to become the anchor of the US economy leading the bull market going into the end of 2020 is just talking out of their neck.

  4. What can you tell us about all of the utility work that is going on downtown? I can hear jackhammers somewhere nearby. Big rolls of orange cables are appearing and disappearing. A lane on Clinch between Walnut and Locust is blocked off for some kind of road work. I guess it is a good time to get this kind of work done since it won’t be interfering with the Spring festivals – sadly.

    • That’s directional boring you see, which is ideally a less intrusive method of installing buried utilities/infrastructure as opposed to digging out entire pathways of trenching to achieve the same result. An entry point and exit point are excavated so boring can occur between the two, then innerduct (orange conduit) is pulled back to the boring device. Pull boxes are set at each point to facilitate the future installation of things such as fiber optics. My understanding is that Knoxville has had a considerable shortage of these types of duct paths for quite some time, so this should help expand areas like data transmission and the like.

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