Here is what the Tri-Cities commercial real estate market in the region’s two metro areas looks like so far this year.

Most market sectors are tight, which is good for owners and harder on the people who want space. Apartments are the exception, and that exception favors renters, according to a local analysis and observations by the National Association of Realtors (NAR) and the Northeast Tennessee Association of Realtors (NETAR).

What it all means

If you own commercial property in the Tri-Cities, most of your markets are working in your favor. Buildings are full and rents are firm, especially in industrial and office. If you run a business that needs space, the same tightness works against you, and you should expect limited options and steady rent increases. Apartments are the one place where the balance has shifted toward the customer.

The thread running through all of it is the lack of new construction. It is what keeps these markets tight, and it is the thing to watch. If builders start adding commercial space, the squeeze eases. Until then, the region stays in a low-supply, low-vacancy holding pattern that rewards owners and tests everyone looking for room to grow.

The big picture: tight markets almost everywhere

Across both metros, three of the four commercial markets have very little empty space. Office, retail, and industrial buildings are mostly full. When buildings stay full, rents tend to rise and new tenants have a hard time finding room. The national story is the opposite in some sectors, and that gap matters. The country is still working through a glut of empty office space and a wave of new apartments, while the Tri-Cities never built that excess in the first place.

The reason is simple. Almost no new commercial construction is happening here. When nothing new gets built, demand has nowhere to go except into the buildings that already exist. That keeps vacancy low and pushes rents up. It also means the region is stable rather than growing fast.

Office: full buildings, no recovery needed

Office is the clearest example of the Tri-Cities going its own way. Nationally, roughly one in six office spaces sits empty, and the news is full of a slow recovery in big cities. Locally, the picture could not be more different. Kingsport-Bristol office vacancy fell to 3.4%. Johnson City held steady at 2.3%. Both sit far below the national rate on nearly 18%.

The takeaway depends on who you are. If you own office buildings, your space is full and your rents are holding or rising. If you need office space for a business, expect slim pickings and little room to negotiate. For everyone else, a full but flat office market signals a steady local economy that is not adding much new office work. More people working from home, above the national average in both metros, is part of why.

Industrial: the strongest market in the region

Warehouse and light-manufacturing space is the standout in both metros. Johnson City industrial vacancy dropped to 1.1%, and Kingsport-Bristol fell to 3.9%. Both markets saw rents climb faster than any other property type, up 6% or more over the year. This is real demand from companies that move, store, and make things.

For investors, this is the most promising local market, though good buildings rarely come up for sale. For businesses that need warehouse or distribution space, the news is harder. There is almost nothing available, and getting more may mean building from scratch. For the rest of us, a busy industrial market is a quiet sign of economic activity. It supports local jobs even when the broader employment numbers look soft.

Retail: tight, with a few empty storefronts opening up

Stores and shopping centers stayed tight in both metros, though a little less so than a year ago. Johnson City retail vacancy held at 2.4%. Kingsport-Bristol rose to 4.0%. Both still sit below the national rate, and rents kept rising in each.

Some space did come back onto the market over the past year, more in Kingsport-Bristol than in Johnson City. That is a normal seasonal pattern and not a sign of trouble. For shoppers, slightly more empty storefronts could mean a few new businesses opening nearby. For anyone trying to open a store or restaurant, good locations remain scarce and will not come cheap. One caution on the sales figures in these reports: a single large property changing hands can swing the average sale price wildly in a small market, so those numbers move on noise as much as trend.

Apartments: Market that favors renters

Multifamily is the exception to the tight-market story, and it is the one most people will feel directly. In both metros, apartment vacancy rose over the year. Johnson City climbed to 6.1%, and Kingsport-Bristol reached 5.8%. Rent growth slowed to a crawl in both, near 1%.

The reasons differ between the two metros, and the difference is worth understanding. In Johnson City, builders added a meaningful number of new apartments, so the empty units reflect fresh supply that needs filling. In Kingsport-Bristol, almost no new units were built, so the rising vacancy points to softer demand instead. The result for renters is the same in both places. This is the friendliest apartment market in years, with more choices, room to negotiate, and rents that have mostly stopped climbing. Landlords in Johnson City have started offering small concessions, such as a free month, to fill units. That is an early sign that renters hold more cards than they have in a while.

Methodology: Data for this analysis is from NAR’s Commercial Real Estate Reports for the Johnson City, TN and Kingsport-Bristol, TN-VA metro areas. The analysis is based on NAR analysis of U.S. Census Bureau, U.S. Bureau of Labor Statistics, Bureau of Economic Analysis and CoStar data. National benchmarks also reflect reporting from CBRE and Cushman & Wakefield. Providers differ on national vacancy definitions, so comparisons are directional. Small-market figures can move sharply on individual transactions.

Categories: REAL ESTATE