Local commercial real estate transactions were down 19.6% in 2023. And while it wasn’t the best of years from a transaction standpoint, it was a pretty good year. It was a good year because investors who were keeping their power dry last year seem poised to pull the trigger this year because rural metro markets are increasingly getting strong attention in both the commercial and residential real estate sectors.

“It’s the quiet before the storm,” said Northeast Tennessee Association of Realtors (NETAR) Commercial Chair Jerry Petzoldt. “When things are at a low common denominator, there’s only one way to go …. up. Businesses and investors who pay attention to business cycles know this and are preparing.”

Now that better data is coming in about the region’s influx of new residents, investors, and businesses are taking stock of how and where to meet what should be new and increased demand.

Here’s a recap of the four major local market sectors that includes last year’s transactions and some commercial real estate insights on the region’s from the research division of the National Association of Realtors (NAR).

OFFICE

The local office sector took the biggest hit last year. Transactions were down 60%. The NAR insights says demand in Kingsport-Bristol is stronger than it is nationwide since it has a faster absorption of office space. So, rents have risen faster than they have nationwide, and the vacancy rate (4%) is lower. That current rate is down 0.9% from the previous year.

The situation is opposite in the Johnson City metro. Demand is weaker that it is nationwide, but there’s a bright side to that. “Despite weak conditions, rent rose faster than they did across the U.S.” The vacancy rate (5.2%) is up from 1.2%.

MULTIFAMILY

Demand in both local metro areas is stronger than it is nationwide. Vacancies in the Kingsport-Bristol metro area is 4.4%, up from 3%. The market effective rent is $1,037, up from $983. Johnson City’s vacancy rate increased to 3.9% from 1.6% and the effective rent increased to 985 from $948.

Multifamily had the largest number of transactions – 98 – last year, down from 154.

RETAIL

This sector followed the weaker-stronger trend of the other sectors. Demand in the Johnson City metro is stronger than it is nationwide, and rents have risen faster. The current vacancy rate is 1.2%, down from 1.9%.

Kingsport-Bristol is seeing retail demand that’s weaker than the national level. The current vacancy rate is 2.3%, down from 4.5%.

There were 62 retail transactions last year, down from 111 the previous year.

INDUSTRIAL

Demand in the industrial sector is weaker than it is nationwide in both local metro areas. But despite weaker conditions, rents have risen faster than they have nationwide. The current vacancy rate in Johnson City is 4.2%, up from 0.4%. It’s 4.2%, up from 1.7%, in Kingsport-Bristol.

There were 19 local industrial transactions last year, down from 31.

Other sectors that were not part of the NAR insights report were:

• Vacant land. Transactions were down 37.5%.
• Special purpose – down 25%.
• Hospitality – down 90%.

Last year’s local lease and sales transactions were the lowest since 2019.