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PROPERTY MARKET STUDIES

The Executive Summaries from the most recent MPC Market Analyses of industrial, office and shopping center space are available below. To purchase the complete reports, contact Bryan Berry at (865) 215-2500 or bryan.berry@knoxmpc.org

 

2012 Office Market Analysis

Knoxville’s office property markets made a lukewarm showing in 2012. The areawide vacancy rate climbed 200 basis points, from 14.9 percent in 2011 to 16.9 percent this year. The downtown market reported slightly higher availability, up from 14.1 percent in 2011 to 14.7 percent, but this year’s big story was the large increase reported in suburban market vacancies, swelling 270 basis points to an 18.0 percent overall rate (Table 1).

Occupancy fell in all Knoxville sub-markets, and areawide absorption turned negative, dropping to levels similar to those last seen in 2010. Absorption figures for the suburbs showed a 365,241-square foot loss, while downtown absorption was 65,403 square feet in the red.

Two new properties were added to the local inventory this year: the 17,031-square foot Southeast Eye Center on Conner Road in the North sub-market and the 9,616-square foot building at 306 Prosperity Drive in the Cedar Bluff sub-market.

Among Knoxville’s three main categories of rentable office inventory, general use accounted for the bulk (68 percent share) with a vacancy rate of 17.9 percent (Table 2). Medical followed with more than 3.3 million square feet of rentable space and 25.0 percent availability. Government use comprised the remaining supply with the lowest vacancy, 7.0 percent.

2012 Shopping Center Market Analysis

In the past year or so, the national economy has shown glimmers of improvement. Unemployment was 8.1 percent in April of this year, down from the 10 percent peak of October 2009, while per capita retail sales were up 5.0 percent in 2010. Although employment and consumer confidence have improved, total retail sales are still below performance figures registered in 2007.

According to analysts, national retail vacancies remained flat, hovering around 11 percent over the last three quarters of 2011. Despite stagnant availability, the prospects of economic improvement stirred developers to revive retail projects shelved when the economy contracted in early 2008. This was evidenced by new retail supply increasing from 23 million square feet in 2010, to almost 50 million square feet delivered in 2011. Most analysts, however, do not expect the pace of new retail development to accelerate further until 2014.

Since last reported by MPC in 2008, the Knox County shopping center market offered mixed signals about its overall health. The inventory of gross leasable retail space increased 7.9 percent for a total of 17.7 million square feet countywide, and, while new supply was added, vacancies climbed from 9.2 percent in 2008 to 12.9 percent availability in 2012 (Table 1). Among local sub-markets, results were also mixed. Broadway/North, Chapman/Alcoa, and Farragut/Pellissippi each reported inventory gains over 300,000 square feet, but they also recorded some of the county’s highest vacancies.

2009 Hotel Market Analysis

The nationís lodging industry declined during the past two years as indicated by several market measures. Average occupancy rates fell from 63.2 percent in 2007 to 55.1 percent in 2009, while average guestroom rates dropped 5.9 percent since 2007 to $97.51 this year. Across the country the annual revenue per available room (RevPAR) was $53.72 in 2009, down 18 percent in the last two years.

Knox Countyís hotel market experienced a tumultuous two years as well, with occupancy rates falling from 60.4 percent in 2007 to 50.1 percent this year across the areaís 8,737 guestrooms in 95 properties. Despite increased availability, the average guestroom rate only fell two percent since 2007 to $70.11 in 2009. The RevPAR this year was $35.13, a decline of 18.5 percent since 2007ís level of $43.12.

Not all news was bad though as construction added five new properties to the local market, accounting for 424 new guestrooms. Forty-two percent of areawide guestrooms could be found for under $80 per night, while 18 percent collected over $120 per night.

2009 Industrial Space Inventory

Market fundamentals remained weak in the U.S. as the economy continued to struggle. In December of 2009, national unemployment notched double digits (10 percent) for a third consecutive month. Unemployment remained high and the economy showed few signs of adding to payrolls in 2010. Manufacturing unemployment continued to rise from an annual rate of 4.3 percent in 2007 to 12.1 percent in 2009. Erosion of the manufacturing employment base reflected declines in the industrial economy as vacancy rates climbed from 12.1 percent in fourth quarter 2008 to 13.2 percent in fourth quarter 2009.

Knoxville’s industrial market had mixed reviews. With over 32.8 million square feet of space this year, total supply was up 2.1 percent since 2007. Areawide, the market gained eight new industrial buildings since 2007. However as the local inventory grew, so did availability. In the fourth quarter of 2007 the vacancy rate was 11.1 percent. The rate grew 300 basis points to 14.1 percent in the fourth quarter of 2009.

 

E-mail comments or questions to: contact@knoxmpc.org

This is not a legal document. It does not replace or amend the existing procedures and regulations governing the publication of agency information. If you have questions, please contact MPC by telephone at (865) 215-2500.

Page Last Updated:
February 26, 2013