Tri-Cities commercial real estate sees 2.3% permit growth in first half of 2016


Commercial real estate development – as measured by new permits – was up 2.3% across the Tri-Cities region mid-year. Permit value for the 360 permits issued since January is $178.7 million. That’s a 46% improvement over last year’s 353 permits.

Two counties showed fewer permits year-to-date than last year, but gains in the remaining five counties lifted the regional total to eight more than last year, according to the recently released Commercial Building Permit Trend Report by The Market Edge.

Sullivan and Greene counties accounted for the most new permit activity so far this year. The two counties showing permit declines were Washington Co. TN and Hawkins.

Although Washington Co. TN saw a decline in the number of permits, the construction value for this year’s permits was 70% greater than last year. That was a one-point gain from the value increase in Sullivan Co.

While new commercial development is making a slow improvement from previous years, re-development and re-purposing of existing of commercial property shares the focus.

The Tri-Cities lost 635 business to the Great Recession. Retail took the third largest hit with a loss of 199 establishments. That added to the inventory on the market, an inventory that is constantly being repurposed to fit the ever-changing needs of retail and office clients.

Two areas that are being closely watched are the malls in Kingsport and Bristol. Both have seen better days, but new owners in Kingsport and a shifting in enclosed mall strategy nationwide is creating renewed interest and speculation about local potential.

According to a recent article in the Atlantic, there are about 1,200 enclosed malls in the U.S. and about a third of them are dead or have one foot in the graveyard.

At the same time, a little over 200 malls are being retrofitted for new uses. Some examples include medical centers, churches, schools and there some retrofitting to parks.

Retailers like Sears and JCPenney are headed for greener pastures and leaving second-tier malls for open-air developments – like the Pinnacle – adding to the demise of yesteryear’s marketing model and adding to the necessity for repurposing of the properties.

With the right marketing strategy and some value-added pricing this could be a seismic shift in the retail marketplace.

Downtown development continues at an incremental pace in all three major cities. So does expansion in Gray, North Johnson City and West Kingsport where the old National Guard Armory – which sits across the road from the Allandale Shopping Center – is being converted to retail space.

And while most of the focus in the Bristol area is on the Pinnacle, there’s also movement along the Parkway and infill in other areas. Expansion in the Exit 7 area is also drawing renewed attention.

In East Tennessee, the Knoxville metro area saw the highest year-over-year growth rate for commercial permits, up 18.3%, followed by the Tri-Cities, up 2.3%.  Chattanooga metro permits were down 19.6% from the first six months of last year.

Here’s how a breakdown of new commercial permits and the construction value for the first six months of this year:

Carter Co. 18 – $3.7 million.

Greene Co. 40, $25.4 million.

Hawkins Co. 5, $1.7 million

Sullivan Co. 142, $75 million.

Washington Co. TN, 103, $51.3 million.

Scott Co. VA 6, $458,000

Washington Co. VA 46, $21.1 million.

 

 

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