Knoxville Region Market Report Q3 2022
Leasing
Industrial leasing activity in the Knoxville market has slowed thus far in 2022, but that slowdown is more due to a lack of available space rather than any weakness in the market. The metro’s vacancy rate of 1.1% is one of the lowest in the Southeast region, and large availabilities are rare. While there is some supply in the pipeline, most of the space under construction is preleased, so vacancies will likely remain relatively low over the next several quarters.
Owners are capitalizing on the tight market and are raising rents at a brisk pace. Year-over-year rent growth of 12.4% marks an improvement compared to rent gains posted in the quarters following the onset of the pandemic. Asking rents are now more than 40% above rates from 2017. Given that availabilities remain exceedingly scarce in the Knoxville metro, property owners may be able to continue raising rents at an above-average pace over the next several quarters. Average asking rents of $7.50/SF are also roughly in line with those found in Chattanooga, and both metros come at a 25% discount to rents in Nashville.
Sales
Deal volume in Knoxville has remained consistent following the onset of the coronavirus pandemic, and quarterly deal volume has remained right around or above the metro’s five-year average. While there has been an uptick in out-ofstate investment in recent years, local and regional buyers are still the most active players in Knoxville. Owner/user deals made up nearly half of the investment volume in 2019. This marks an increase from the 10-year average of closer to 30%. Market pricing trends indicate that SF pricing increased by 6% in 2019, with cumulative growth of more than 70% being achieved since 2008. Additionally, cap rate compression has slowed in recent years, with the figure sitting just under 7%.
Notable Baker Realty Company Transactions in Q3
– Leased 130,560 SF Warehouse in Eastbridge Industrial Park
– Pre-leased 60,000 SF Warehouse in West Knoxville
– Sold 43,358 SF Warehouse in Sweetwater Industrial Park