Corvid-19 spotlights office space trend; local cre markets lag last year’s performance

Tri-Cities commercial real estate sales dropped to their lowest monthly level this year during April, while leases saw a slight increase, according to the Northeast Tennessee Association of Realtors (NETAR) Commercial Multiple Listing Service (CMLS).

Local listings traffic took a hit during the last weeks of March and the first half of April as public attention focused on the coronavirus pandemic. It picked up during the latter part of the month and totaled almost 4,000 views for the week ending Saturday, May 9.

Year-to-date sales and lease transactions are lagging last year’s performance, as are Q1 overall real estate sales and the sales volume. There were 122 sales during the first three months of this year compared to 144 last year. The volume was $60.8 million, down $56.9 million from the same period last year, according to the Appalachian Highlands Dashboard for Real Estate Analytics. More details about those transactions and the five-year trend will come later this month with Commercial Real Estate Building Permits Trends Report.

Office sales and leases continue to be the strongest CMLS performers. The short and long-term office market landscape is getting renewed attention since the imposition of work-from-home and remote working is accelerating those fledgling practices

Lawrence Yun, the National Association of Realtor’s (NAR) chief economist, said the question is whether businesses will increase space to accommodate physical distancing for workers after the all-clear is sounded. Or will they continue – and maybe expand – the working from home and remote work practices. His position was remote working is a trend – one that would increase how office space is used. His comments came during a Zoom update on the effects of the pandemic on commercial real estate.

Shannon and Jose Castillo are at the forefront of the remote working infrastructure in the Tri-Cities. They think the demand for co-working space like their Spark Plaza in Johnson City, Sync Space in Kingsport, and Cowork Bristol will increase.  Shannon is also a commercial Realtor with Mitch Cox Realtors. Jose is a Johnson City motivational speaker and entrepreneur.

Now that millions of employees have experienced the world of remote work, some won’t want to go back to the office – especially not before there’s a Covid-19 vaccine. Some will likely never want to go back. Sixty percent of workers participating in a Gallup survey said they would like to work from home as much as possible even after the pandemic is over.

“It’s easy to see why: No need to spend time and money commuting, you can escape coworkers when you need to focus, and you have more control over your day. Granted, not all coworkers have the option to skip the office. But for those who do, this shift may be permanent, according to a New York Times report.

That has new possibilities for areas like the Tri-Cities that want to grow their populations with workers who have good jobs but have a poor track record of attracting them. It enables another desire that the pandemic is motivating those who can to relocate from high-density areas to more suburban and rural areas.

“We’re going to need more non-traditional workspace,” Jose said.  There’s an economic incentive for employers who won’t have to maintain as much office space. There’s also the possibility of it being a labor force accelerator. Some of the economic advantages for both workers and employers is co-working space doesn’t require 10-year infrastructure terms. It can be leased on a month-to-month base. And it’s a fact that working from a home office is not a good fit for all workers. Studies have found if workers have jobs that include repetitive functions, remote working can increase productivity. But for those who need some social contact to keep the creative juices flowing co-working facilities are a better fit.

Expanding co-working space won’t be as easy as taking advantage of the glut of excess inventory in the local market and hanging out an “open for business” sign. “It will take some planning and investment, Jose says. “A good co-working environment has to be unique and creative.” It also requires a high-quality technology infrastructure.

The local office space inventory was hit hard by the collapse of the coal industry in SW Va. and the Great Recession and has yet to recover. Add to that local health care consolidations and you have an inventory surplus

There are currently 88 CMLS listings for 319,607 sq. feet of office space for sale or lease in the three-county Johnson City Metropolitan Statistical Area (MSA) and 64 listings for 475,902 sq. feet of office space in the four-county Kingsport-Bristol MSA.

There are also 21 listings for industrial buildings, 60 classifieds as retail-commercial, 39 for shopping center space, 134 for land, two for farms or ranches, and three for multi-family properties in the Johnson City metro area.

Kingsport-Bristol has 25 listings for industrial property, 55 for retail-commercial, 28 for shopping center parcels, 65 for vacant land, one farm and one multi-family.

CMLS listings can be searched by the public at www.netarcmls.us




Categories: REAL ESTATE

1 reply

  1. Don: Very informative article. Ken Rea

Leave a Reply