insights (2005-39)

Gay Street’s Remarkable Transformation

Less than a decade ago, most of the historic buildings that line Gay Street stood like tombstones, moribund memorials to a bygone era when the street was Knoxville’s retail hub.

Today, virtually all those buildings have been restored to active use or are on a fast track to becoming so. The only ones that don’t already have clear-cut restoration plans are the erstwhile S&W Cafeteria and its companions on the east side of Gay Street’s 500 block. But these city-owned buildings, which adjoin the site of downtown’s prospective new movie theater, are now the subject of a request for proposals to which developer responses seem assured.

The pace of Gay Street’s renaissance has escalated just within the past few months by a surge of acquisitions of landmark buildings from prior owners who were more or less land banking them. Consider:

• Developer Bob Talbott is actively seeking the Farragut Building that was Knoxville’s preeminent hotel for two generations after it was built in 1919 and later converted to an office building. Its present owners have stopped renewing leases of a dwindling tenancy in anticipation of a sale. Talbott plans to transform the upper eight floors of the Farragut into 70 apartments, with retail on the ground floor.

• Just across the street, David Dewhirst has acquired the 13-story building that’s been known in recent years as Charter Federal and had been foundering as an office building. Along with investing upwards of $10 million in its restoration as condominiums, Dewhirst is also restoring its original pre-depression bank name: The Holston.

• In partnership with architect/developer Buzz Goss, Dewhirst has also acquired the long vacant “big box” on Gay Street’s 400 block that once housed J.C. Penney. Goss envisions adding three floors atop the four-story building to make way for about 60 condos in all at a total cost of more than $10 million. The ground floor provides a 12,000 footprint that represents the best extant site for another downtown retail anchor adjacent to the Mast General Store that’s going into the long vacant White Store Building.

• On the once downtrodden 100 block where Gay Street’s renaissance began, a Knoxville native who now lives in California, William Cole Smith, has acquired the three dormant structures of a four structure complex that’s collectively known as the Commerce Building. Smith plans 24 condos in these three buildings, with marketing already underway. The fourth was renovated several years ago.

Gay Street’s remarkable transformation can be ascribed to several factors. For one, a largely youthful craving for an urban lifestyle (and urban loft dwelling in particular) has become a national phenomenon over the past decade. While Knoxville is still dwarfed by many larger cities, the seemingly insatiable demand for lofts that’s arisen here has pushed downtown’s residential reclamation ahead of other cities in Tennessee.

Still, it took pioneers like Leigh Burch with the Sterchi Building and Dewhirst with the Emporium to demonstrate that large-scale residential restorations of old buildings would work here. As an old saying goes, pioneers usually get arrows in their backs. But both Burch and Dewhirst weathered a lot of adversity to make their projects successful.

Former Mayor Victor Ashe also made a major contribution. Even before the residential resurgence started, he boldly committed $14 million to the restoration of the landmark Miller’s Building that had gotten so dilapidated it was almost beyond reclamation. Resale to KUB for its relocated headquarters took the city off the hook. Ashe also initiated, albeit belatedly some would say, tax abatements and other city incentives that made many of the residential restorations financially feasible.

The Haslam administration has extended the incentives, primarily through what’s known as tax increment financing, to downtown commercial as well as residential redevelopment. A TIF contributed to developer Wayne Blasius’ acquisition of the White Store building that paved the way for the Mast General Store. Dewhirst, Goss and Smith also have TIFs for their projects, as does Metro Pulse owner Brian Conley for his conversion of the historic Burwell Building from office space into condos on the upper floors.

The only building on Gay Street that remains down and out is the former KUB building at the corner of Gay and Church. Even though it was built in 1925, it is not considered historic because a complete makeover in 1957 disqualifies it for listing on the National Register of Historic Places.

The vacant KUB building highlights a weakness amid downtown’s resurgent strength: demand for office space isn’t growing at anything like the rate of residential. But it’s an article of faith among downtown developers and realtors that all of the yuppies, techies and other creative types who are moving in to live will want to work downtown as well.

The same goes for shopping, and there’s every reason to believe that a retail resurgence is getting underway, with the movie theater and Mast as catalysts. The chairman of the Central Business Improvement District, Jeff Johnson, reports that a much-needed drug store is seriously looking at a downtown location. And rising property values, which form the base for the CBID’s assessments on downtown property owners, are strengthening its ability to offer inducements to other, bigger retailers to locate downtown. The $1.2 million line of credit that the CBID recently obtained from AmSouth Bank for such inducements is supported in large part by the growth in its assessments.

So a rising tide appears to be lifting all boats, and it’s no longer Pollyannaish to envision downtown once again becoming Knoxville’s vital hub.

© 2005 MetroPulse. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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