Where to start? The Knoxville market is about as diverse (regarding locations) as you can get for a community this size.
If you are not familiar with Knoxville it is broken down into several submarkets:
1. Downtown/UT-includes the downtown high-rise buildings, courthouses etc…as well as the University of Tennessee.
2. West Knoxville-where most of the large scale growth is taking place and includes everything from the Bearden area to Farragut (which is becoming a submarket in itself)
3. North Knoxville (including Clinton Hwy area)-quite a bit of retail development going on in this area and a resurgence in general.
4. South Knoxville-popular area for commercial & residential growth/redevelopment being pushed by municipal governments.
There are several other submarkets that are players as well that we won’t cover in detail:
a. Maryville/Alcoa-home to the region’s airport, Ruby Tuesday HQ, Alcoa Aluminum. Very quaint area with some growing retail areas and some new office buildings.
b. Sevier County-home of tourism and retail located about 35 minutes east of Knoxville
c. Oak Ridge-a city built by the government (originally) and home too many Department of Energy offices and related contractors. Billions of federal dollars are poured in to this area every year. Only 25 minutes from downtown Knoxville.
Knoxville has been lucky to avoid the harshest lashes of this recession because of a strong employment base. Federal groups, like the Department of Energy and TVA, are two of the largest employers in the area. The University of Tennessee employs almost 9,000 people and the top four hospital/health groups employ almost 20,000. Still Knoxville has dealt with some of the effects of the recession that has affected real estate and development.
Downtown the growth has been in residential condo’s and some street front retail, the latter pushed by local governments. While the growth of downtown continued through the recession it has slowed in the past 12 months because of the economy. Still this area is a vibrant part of the market.
Most of the class-A office is limited to five buildings, Riverview Tower, First Tennessee Plaza, the Bank of America building and One & Two Centre Square. It has been almost 20 years since a Class-A building was developed in the downtown market, and without something new it will be difficult for downtown to thrive. Two large projects were on the drawing board, Sentinel Tower and Metropolitan Plaza, but both have been shelved because of the economy. There is a shortage of available Class-A space because of this, although there are several thousand square feet of sub-lease space on the market because of large corporations downsizing.
Downtown is becoming a vibrant place thanks to efforts on Gay Street and Market Square to increase retail and entertainment in the area. The Central Business District continues to market the area and solve parking issues that may be limiting growth in the sub-market.
West Knoxville is the site of most of the growth in the office sector, as has been the trend for the past 20+ years. In fact, in the last five years, I am not aware of any multi-tenant office developments in north, south or east Knoxville that exceed 25,000sft.
Large, new developments have taken hold in west Knoxville; some of the largest being Century Park at Pellissippi (developed by Commercial & Investment Properties), Parkside Plaza I &II (developed by Partners Development), Lakeside Center and Brookview Town Centre (developed by Blue Ridge Development). These projects combine for almost 500,000sft of office space in west Knoxville in the last eight years. The result has been high-levels of supply with lagging demand thanks to the economic down turn. The hottest area in the past two years has been Dowdell Springs off Middlebrook Pike. Three new medical facilities have opened their in the past two years along with a 100,000sft FBI headquarters.
Retail has been dominant in this area as well. Turkey Creek is Knoxville’s first lifestyle center. All the national big boxes are there, with more on the way. Even in this economic environment smaller stores, some locally owned, are surviving (I don’t know about thriving, but surviving). There has been some turnover; mainly in restaurants, of which there is an over abundance.
City and County governments are pushing for development of the South Waterfront. This area has had an industrial and commercial base for decades but holds some of the finest property in Knoxville. On the south shore of the Tennessee River this area has views of UT and downtown. For more about the potential developments click on the link below. http://www.ci.knoxville.tn.us/southwaterfront/
Plans are for more parks and mixed-use development along the waterfront. Deeper into south Knoxville is Chapman Highway. It is a hodge podge of aging retail, commercial and residential. The only real growth is near the interchange of Chapman Hwy and John Sevier Hwy with a large retail center.
Clinton Highway has been a site of substantial retail growth in the past five years. At the junction with Callahan Road several big boxes have popped up, along with associated shadow centers. Traffic counts in this area have jumped from 15,000 cars per day to 20,000 cars per day in the last four years according to MPC.
In the industrial market things are always adjusting. The information below is based on an MPC report from 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.
Knoxville is generally thought of as having a lack of supply in the industrial sector.
So there you go a basic look at the market. Of course we could go in to more detail but that would take a long time, and I’ve got properties to show.
I’ll be happy to go in to more detail. Feel free to contact me at 865-617-2989 or jcazana@cornerstonecres.com
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