There shouldn’t be any argument that the local economy is on shaky ground. The labor market would have to create 8,500 new jobs by December to match the 2019 annual total. And there are hundreds if not thousands of locals wondering what they will do if there’s no second round of pandemic relief.
But at the same time, the NE Tenn. – SW Va. commercial market is lagging last year’s performance by only 3.7%. Compared to the 21% gain in home sales, that’s a weak showing. But it’s better than the doom and gloom presented in some markets.
The local commercial real estate market is slowly moving toward balance even though the recovery continues to be uneven. And it typically takes about three years to recover from a recessionary trough. Still, November’s transactions, listings traffic, and total listings were positive despite the hospitality and retail sectors’ drag.
Last month’s transactions were 21.4% better than last year. So far this year, there have been 313 transactions compared to 325 during the first 11 months of 2019.
“The commercial market is looking better than some expected it would be in this pandemic economic,” said Cassie Petzoldt, chair of the Northeast Tennessee Association (NETAR) of Realtors Commercial Committee.
There were 825 listings at the end of November. That’s a 1% increase from October. And listing traffic on NETAR’s Commercial Multiple Listing service was up 32.4% from October. “That’s a sign investors are shopping for opportunities,” she added.
Sales and leases for office properties continue to lead CMLS activity in November. They were up 11.1% from last year.
Industrial transactions were the second-best performing sector with a 22.2% increase over last year.
Vacant land sales were up 9.5% percent.
Shopping Center sector sales and leases were down 24.9%.
Third-quarter new commercial building permits are also encouraging. They were up 13.3%, while neighboring metro areas saw declines.
It’s not necessary to study building permit data to see the green shoots of expanded development and redevelopment in the commercial sector.
The twin cities are an example. Although much of the visual demonstration of the casino-driven demand won’t hit full stride for a while, downtown development is humming.
Meanwhile, Johnson City is seeing the links to a downtown, ETSU, and West Walnut Corridor come together. David Lefemine is one of the commercial practitioners at the center of the effort.
“The Model Mill is now functional. Work is and will continue for a while, but some of the prime occupants are beginning to move in.” And plans for a new hotel on the old Mize site are well underway, he added.
Add to that new parks, restaurants, and a slowly lowering of speed limits to something comparable to school zoning, and the area will transform into the link that binds the other areas together.
Downtown development and redevelopment continue to advance. The recent purchase of the property that used to house a Kmart and Kroger by Ingles Markets will be a shot in the arm for south Johnson City.
Similar green shoots of commercial development can be found in some infill and expansions in West Kingsport.
Whether or not those green shoots expand and how fast remains linked to the recovery of the local economy outside the real estate industries. At the top of the list of things that will accelerate the process is controlling COVID-19.
Lawrence Yun, chief economist for the National Association of Realtors (NAR), recently observed that many consumers have been saving during the pandemic. He says that could lead to a “spending spree next year on retail, restaurants and other businesses – and tipping off a robust commercial real estate recovery.
“This is a very positive upside to all of this savings. There is the potential to unleash savings and power back to the economy once things open up,” he told Catherine Mesick, a free-lance writer and member of the NAR Advocacy Group.
Meanwhile, the commercial sectors that have and continue to outperform their 2019 performance levels keep moving slowly ahead on a road to recovery where there are a lot of question marks.
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Categories: REAL ESTATE