State Delays Office Lease Announcement

By Amos Maki

Groups hoping to garner the state’s real estate needs Downtown will have to wait a little longer to find out if they placed the winning bid.

The state agency that handles real estate said the 12-story Hill Building, which opened Downtown in 1968, is functionally obsolete. The state plans to issue a notice of awarding the lease for new office space in August.

(Daily News File Photo/Lance Murphey)

The state had originally planned to issue a notice of awarding the lease for its office space needs Tuesday, July 23, but that date has been changed to Aug. 19, when the executive subcommittee of the State Building Commission meets.

Last year, the state agency that handles real estate said the 12-story Hill Building, which opened in 1968, was functionally obsolete and it would be cheaper to sell the 12-story structure than spend $9 million to improve it. The state’s decision was based on a recommendation by Jones Lang LaSalle, a Chicago-based real estate firm with an office in Memphis. Buildings in Nashville – including the Cordell Hull building next to the state Capitol – and Chattanooga also are facing uncertain futures.

Gov. Bill Haslam, the former mayor of Knoxville, said the state workers at the Hill Building, which opened in 1968, and contains 121,505 square feet of space, would be relocated Downtown.

“Gov. Haslam deeply understands how important a Downtown office environment is to a city’s overall success,” said Downtown Memphis Commission President Paul Morris. “He spoke eloquently on the subject at the DMC’s annual lunch a couple of years ago, and he did great things in Downtown Knoxville while he was mayor. Gov. Haslam gets it.”

The last proposal from the state Department of General Services said the area for the new site would be bounded on the west by the Mississippi River, Interstate 40 on the north, I-55 to the south and I-240 on the east. The location must also be within “a comfortable walk,” which it described as 10 minutes, of a bus stop. A previous state request sought bids for Downtown, Midtown and the airport area.

The state also broke up its requirement for 100,000 square feet of contiguous space so multiple buildings could compete.

The state said the need for 100,000 square feet of contiguous space could be met if the space is divided into blocks where 35,000 square feet and 65,000 square feet are contiguous. The state also said that hurdle could be met if proposers submitted proposals for only 35,000 square feet or only 65,000 square feet, opening the door for property owners with smaller square footage to offer and for state workers to be located in multiple buildings.

Five groups submitted bids to become the new home to the state workers currently at the Hill building, which shares Civic Center Plaza with Memphis City Hall, the Shelby County Administrative Building and the Clifford Davis/Odell Horton Federal Building.

JP-Memphis, Memphis Commerce Square Partners, Peabody Tower GP, Peabody Place Gold GP and Hertz Memphis all submitted bids for the state’s real estate needs.

The state received those bids July 2 for 100,000 square feet of office space that will become vacant when the state abandons its Downtown building.

JP-Memphis owns the office building at 1991 Corporate Ave. in the Nonconnah Corporate Center, near the airport and outside the state’s Downtown-focused request; Memphis Commerce Square Partners owns One Commerce Square at 40 S. Main St.; and Hertz Memphis owns two Downtown properties, the Toyota Center at 185 Monroe Ave. and the Falls Building at 22 N. Front St.

While the groups competing for the state space are known, what ultimately happens to the Hill building is still an open question.

“I don’t know what will become of the Hill building,” Morris said. “Initially, at least, the state will have to maintain it until it can be repurposed or demolished.”