The Tri-Cities and Knoxville commercial market is in better shape than most of the country. The two things to keep an eye on: Kingsport-Bristol’s retail sector, where something significant appears to have closed and nobody has moved in yet; and Knoxville’s apartment market, where builders got ahead of demand and landlords are now feeling the squeeze. Everything else – industrial space, offices, and retail outside of KB – is holding up well or outright thriving. If you’re a business owner, investor or commercial tenant in this region, you’re operating in a fundamentally tighter, more landlord-friendly market than the national headlines would suggest.
Industrial – The region’s engine is running hot
Think warehouses, distribution centers and light manufacturing buildings. This is the healthiest part of the commercial market by a wide margin. Space is so scarce – vacancy as low as 1% in the Johnson City metro – that if a business needs a warehouse today, there’s almost nothing available. Landlords know it, which is why rents are climbing at 3% or better. Kingsport-Bristol and Johnson City are seeing real demand: companies are actually moving in and filling space. Knoxville is the one head-scratcher. Space is still tight, but more square footage emptied out than filled up over the past year. That likely means one or two large tenants packed up and left, and nobody has backfilled yet. It’s a watch item, not a crisis.
Multifamily – Depends entirely on which city you’re in
Multifamily is just apartments. In Morristown, Kingsport-Bristol and the Johnson City metro, the apartment market is in decent shape. Rents are nudging up, vacancy is manageable, nothing alarming. Morristown in particular is tight: only 3.3% of apartments are sitting empty, which gives landlords real pricing power.
Knoxville is a completely different story. Developers built a lot of new apartments, and the market hasn’t fully digested them yet. Vacancy hit 8.8% and that’s forced landlords to actually cut rents. Knoxville is the only market in the entire dataset where rents went negative (-0.6%). That’s not a disaster, but it tells you renters there have more leverage right now than they’ve had in years. If you’re apartment hunting in Knoxville, this is actually good news for you.
Office – Surprisingly healthy given what’s happening nationally
You’ve probably read the headlines about empty office towers in New York, San Francisco and Chicago. This region doesn’t have that problem. Vacancy is below 3.5% everywhere, and rents are growing modestly in all four markets. Morristown is essentially full at 1.2% vacancy. Knoxville lost some office tenants on net but even there, the vacancy rate stayed low. The reason this region is insulated is straightforward: these are smaller markets anchored by healthcare systems, professional services firms and government offices. Those employers didn’t send everyone home permanently the way big-city tech companies did.
Retail – Rents say one thing, foot traffic says another
Here’s where it gets interesting. Rents are going up in every single market. That part looks healthy. But in Kingsport-Bristol and the Johnson City metro, more retail space is emptying out than filling up. Kingsport-Bristol lost a massive 351,855 square feet of net retail occupancy in a year. To put that in perspective, that’s roughly the size of a large shopping mall anchor wing. Yet vacancy is only 4%, which seems contradictory.
Meanwhile, smaller shops and restaurants are still doing fine, which is why rents are still rising and vacancy hasn’t spiked. Knoxville and Morristown are actually gaining retail tenants, which tracks with Knoxville’s growth and Morristown’s stable workforce population.