Commercial real estate (CRE) across the Tri-Cities is into the last quarter of 2025 with a tone best described as measured optimism. National Association of Realtors® (NAR) data show a striking through line across all property types: demand may be softer than the U.S. average, but rents have risen faster, and vacancy rates remain below national benchmarks. That combination signals a region where investors and occupiers remain active – but with more precision and purpose than in past cycles.

The first nine months of 2025 reflect this transition clearly, according to the Northeast Tennessee Association of Realtors (NETAR). Total transaction volume is broadly comparable to 2024, but the composition of deals is shifting: industrial and retail are reliable performers, office absorption is recalibrating, multifamily is gaining traction, and land has cooled slightly after last year’s surge.

 Industrial: Modest but Durable Momentum

The industrial sector logged 26 transactions through September, up from 21 a year earlier. Momentum built as the year progressed, culminating in six September deals. That’s the second-highest monthly total in two years.

Demand is driven by regional logistics and light manufacturing growth, though deal sizes remain conservative. NAR data underscores the sector’s stability:

• Johnson City metro: Demand is weaker than the U.S. average, but rents have increased faster, and the 1.9% vacancy rate remains well below national levels.
• Kingsport-Bristol metro: Similar dynamics, with a 4.9% vacancy rate pointing to ongoing space absorption.

Office: Shifting Strategies Shape Market

Office remains the most disrupted CRE segment, with 33 transactions year-to-date, down from 41 in 2024. The slowdown reflects shifting workplace strategies – more flexible leases, shared environments, and tighter space utilization. A brief rebound in July (6 deals) was the exception in an otherwise subdued year.

• Kingsport-Bristol: Slower absorption and higher rent growth despite a slight rise in vacancy to 4.6% (from 3.9%), still below national levels.
• Johnson City: Stronger-than-average demand and rent growth, but vacancy edged up to 11.7% from 11.5%, indicating a balanced but evolving market.

 Retail: Steady Investor Confidence

Retail-commercial activity remained stable, with 47 deals through September — nearly matching last year’s 49. Momentum was especially evident in August and September (7 deals each), highlighting consistent demand for service-oriented properties such as medical, food, and neighborhood retail.

• Kingsport-Bristol: Demand is weaker and absorption slower than it is nationally, but rents are rising faster, and vacancy remains tight at 3.0%, up slightly from 1.8%.
• Johnson City: Similar demand conditions with a 1.6% vacancy rate, up from 1.1%, which is below the national average.

 Multifamily: Rising Strategic Focus

Investor appetite for multifamily assets is climbing, with 75 up from 56 last year.

• Kingsport-Bristol: Demand trails the U.S. trend, but rents continue to outpace national gains. Vacancy declined to 5.1% from 5.8%, indicating tightening supply.
• Johnson City: Demand remains below the national pace, but rents grew faster while vacancy rose slightly to 3.3% from 2.8%.

Land: Still Dominant but Moderating

Land remains the most active component of the CRE market, though volume has cooled. Transactions are tabulated in two categories. The first is CMLS listings. The second is for the region’s internal listings on the Flex service.

• Vacant land: 25 transactions YTD, up from 17 in 2024.
• Flex land: 975 transactions, down about 12% from 1,094 last year.

The decline reflects more cautious investor behavior amid elevated borrowing costs and extended development timelines. Most analysts view this as a strategic pause — not a reversal.

 Bottom Line: A Market Redefining Its Priorities

The 2025 Tri-Cities CRE market is still expanding — but with sharper focus. Across industrial, office, retail, and multifamily, rents are outperforming national benchmarks while vacancies remain lower, even amid softer demand. That resilience reflects investors’ selective approach: capital is flowing toward assets aligned with demographic growth, evolving workplace trends, and long-term regional fundamentals.

Categories: REAL ESTATE