Local commercial real estate sales, leases at a new high
Local commercial real estate transactions ended 2021 at a decade high and are expected to perform well despite the prospects of higher interest rates.
Transactions from listings on the two local commercial databases were a 54.7% improvement from 2020. Commercial leases and sales totaled 571 on the area’s two local databases for commercial listings. The 2020 total was 369.
“While office transactions had the largest number of deals for the second straight year, the Retail-Commercial sector had the strongest annual growth rate,” said Cassie Petzoldt, Northeast Tennessee Association of Realtors (NETAR) Commercial Committee chair said. “Transactions across the board were consistently strong in both the third and fourth quarters. Out-of-state investors have and continue scouting for opportunities as they shift their focus from the secondary metro areas like Knoxville and Chattanooga to tertiary rural metro areas like the Tri-Cities.”
There were 99 leases and sales in the office sector on NETAR’s Commercial Market Listing Service (CMLS). Last year’s total was 73. The year began with 119 office listings and ended with 69. The Johnson City metro area had slightly more inventory absorption than Kingsport-Bristol.
Retail-Commercial saw 87 leases and sales. That was up 81.3% from the previous year. Absorption was evenly divided between the region’s two metro regions.
Transactions in the Shopping Center sector increased 32.2% during 2021. The total was 41. The Johnson City metro area dominated absorption in the Shopping Center sector, but the sector continues to have an abundant inventory.
Industrial transactions were up 50%. Commercial Realtors say there would have been more activity if the region had more inventory – especially inventory suited for the increase in last-mile functions.
Vacant land is the one sector that is segmented by both local databases. There were 2,065 transactions during 2021 – a 41.3% year-to-year increase. It’s also basically the same growth rate as 2020.
The National Association of Realtors (NAR) expects interest rates to rise about 75 basic points this year. That would still be low compared to historical levels and should not crimp investment activity and the ability of companies to service their debt, according to a NAR market outlook.
Bottom line: CRE’s underlying demand fundamentals should more than migrate the impact of the slightly higher interest rates in 2022, according to the report.
NETAR is the voice for real estate in Northeast Tennessee. It is the largest trade association in the Northeast Tennessee, Southwest Virginia region, representing over 1,600+ members and 100+ business partners involved in all aspects of the residential and commercial real estate industries. Weekly market reports and information for both consumers and members are available on the NETAR website at https://netar.us