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 Gretchen Beal in the MPC Library at (865) 215-2500 or gretchen.beal@knoxmpc.org

2007 Office Market Analysis

Knoxville’s office property market remained stable in 2007 as performance indicators were similar to those of previous years. Areawide rentable square footage increased three percent for the second year in a row, with the suburbs accounting for 100 percent of new construction (eight buildings totaling 534,322 square feet). Since 2006, vacancy rates declined areawide and downtown, from 12.8 percent and 15.9 percent, respectively, to 12.6 percent and 14.8 percent this year. Suburban rates increased 50 basis points to 11.6 percent, a local record for suburban vacancies.

Nationally, office markets improved again this year as vacancies continued to drop, but at a slightly slower pace than previous years. Metropolitan markets improved 60 basis points since last year to a 12.6 percent availability level this year. In Downtowns, rates decreased 140 basis points from 11.7 percent in 2006, to 10.3 percent in 2007, while suburban vacancies dropped only 10 basis points to 13.9 percent. New construction continued to improve, while absorption was slightly down, but remained strong.

2007 Industrial Space Inventory

Nationally, job expansion continued to slow with growth in service providing industries being largely offset by job losses in construction and manufacturing, according to analysts. Despite being in the midst of a housing slump, credit squeeze, and declining economic growth, the U.S. industrial market performed reasonably well. National vacancy rates gained 50 basis points since 2006 to 10.2 percent this year. Construction remained strong and increased 27 percent from 93.5 million square feet in 2006 to 118.5 million square feet in 2007.

Knoxville’s industrial market showed great improvement as availability dropped 190 basis points since 2005 to 11.1 percent in 2007. Total square footage was down from 33.2 million square feet in 2005 to 32.1 million square feet in 2007, while the number of buildings fell to 605.

2006 Shopping Center Market Analysis

Questions about consumer spending circulated during 2005 and 2006 in the face of rising interest rates, a softening housing market, and high gasoline prices. Although sales were resilient, the retail property market cooled in the past two years as national investment decreased from $46 billion annually to $34 billion, and the vacancy rate increased from 7.2 percent to 8.1 percent. Despite declined investment and increased availability, analysts feel current economic growth and a healthy labor market will encourage consumer spending into 2007.

In Knoxville, retail property markets improved as vacancies dropped 40 basis points from 6.9 percent in 2004 to 6.5 percent in 2006. Total gross leasable area (GLA) increased four percent since 2004 to over 15.6 million square feet this year. At the submarket level, Farragut/Pellissippi continued to draw investors and retailers alike with a 26 percent increase in the amount of GLA since 2004 and the lowest vacancy rate in 2006 at 2.7 percent..

2005 Hotel Market Analysis

National hotel occupancy increased three percentage points from 2004, reaching 64.3 percent in 2005, while lodging expenditures grew to $113.7 billion. Over $12 billion in hotel construction took place in 2005 and, according to analysts, should increase as much as 30 percent in the next two years.

Knox County’s occupancy rate was 62.4 percent across the area’s 81 hotels and 7,860 guestrooms in 2005. Thirty-six percent of areawide rooms were priced from $51 to $80 per night, followed by 30 percent less than $50. Hotel supply continued to grow as five new properties were completed since 2005, adding 498 rooms to the area’s inventory.

 

MPC Publications Catalogue

 

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Page Last Updated:
March 4, 2008