Local commercial real estate up 3% so far this year
GRAY, Tenn. – Tri-Cities area September real estate transactions are up 3% for the first nine months of this year and down 11% from September last year.
The local transaction pattern is similar to the third quarter slowing of U.S. commercial real estate in the face of rising inflation and geopolitical events. The only local sector where transactions declined was Industrial, which is more of a lack of inventory than demand.
Office transactions continue dominating the local market. Much of it is churn as firms move to smaller offices due to the work-from-home trend. So far this year, the office listing inventory has dropped to 836. Last year it was 908. Before the pandemic accelerated the work-from-home trend, it was 1,381.
The local sector that isn’t showing a significant transaction effect is consumer spending. Retail deals increased by five from the first nine months of last year. The growth rate is small, but volume shows a more robust pattern. So far this year, there have been 76 sales or leases, which is almost double the pre-pandemic volume.
The local multi-family sector is seeing some rent competition, but it hasn’t dampened investors’ plans to expand the market. Kingsport’s BMA recently approved a zoning change on a University Drive land parcel bought by the Valcap group. It owns the Allendale Falls and Bradley Hills apartments on University Drive and plans to expand those holdings with a new multi-story complex. So far this year, there have been 16 multi-family deals. That doesn’t include the sale of larger apartment communities that are typically listed on national commercial services.
Vacant land sales are also seeing a cooling phase. Transactions tracked by the Northeast Tennessee Association of Realtors (NETAR) Commercial Multiple Listing Service (CMLS) increased to 34 from 33 last year. Vacant land deals tracked by the Flex commercial database are down 9% from this time last year.
Inflation, interest rates, supply chain woes, and geopolitical events are the main factors that will determine how commercial real estate will perform in the following months.
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 1,800+ 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