NETAR CMLS Blog
A musical chairs situation for Kingsport apartments: What the Johnson City and Bristol markets look likeKingsport will likely be the softest apartment market in the Tri-Cities for a while due to the volume of new product that has and is coming online in that community. It has created a sort of a "musical chairs situation" between some new complexes that have comparable rents to the 30 and 40-year old complexes. At the same time the apartment supply and demand in the Johnson City and Bristol areas is more balanced. That was one of the takeaways from Universal Development & Construction Principal Shane Abraham's market briefing at a Northeast Tennessee Association of Realtors® (NETAR) Commercial Multiple Listing Service (CMLS) meeting this week.
Abraham outlines the apartment market landscape.
Abraham is a regional leader in the multifamily development and property management industry and his insights offer a valuable inside look at both the history and future of that industry in the Tri-Cities region. His comments were made for an audience of almost 40 NETAR commercial and residential Realtors®, local bank and credit union lenders and representatives from other real estate professions. It was one of the events that are part of a CMLS project funded by a National Association of Realtors® (NAR) grant to further community knowledge about commercial real estate and its role in the economy of Northeast Tennessee.
Kingsport has seen an influx of apartment product in the past year, and there are another 700 new units that will be hitting the market in the next 24-26 months. Abraham said if there is little new population "most of the stabilization will occur from attrition." There are people coming out of leases in Kingsport's 30 and 40-year old complexes who are moving over to the new apartments that have comparable rents. "It's sort of like musical chairs." How this affects the current occupancy levels of the B and C products - how the new A class products fill up and who feels the pain remains to be seen. "It will be interesting to watch."
The Bristol Market seems balanced, but recent lease-ups were slower than 2014-2015 lease-ups. That market also saw very little if any population growth, he said.
The Johnson City absorptions have definitely slowed over the last 10 years with well over 2,000 new units built. Most properties still seem to be meeting national average occupancies, but there may still be pockets for small product success. Little new market supply will hopefully allow time for the market to tighten somewhat.
The full report can be found on the NETAR Web site at:
Apartment development has skyrocketed throughout the Tri-Cites TN and SW VA region for the past several years with thousands of new apartment homes entering the market. How much longer will this trend continue and is it here to stay to replace the once coveted single-family homes and condo. The recession of 2008 has caused new shifts and dynamic is the residential market.
Our guest speaker for this CMLS Membership meeting is Shane Abraham, President of UDC, Universal Development & Construction, developer and property manager of over 1,600 apartment units since 2008 with an additional 700 units in the pipeline for the Asheville and Sevierville markets.
Our meeting sponsor is Eastman Credit Union. No RSVP required. Plan to attend and network with some of your 70 CMLS co-members. A good place to start some new business.
Look forward to seeing you then...
Jerry Petzoldt, 2018 CMLS Chair
A brand new three-hour CE course free to NETAR members and funded by a NETAR Commercial Multiple Listing Service (CMLS) grant is scheduled for Oct. 24 at NETAR's office in Gray.
Waddell Wright, CCIM, CPM of Nashville, is the instructor.
The class is structured to give those who attend all the tools they need to understand the entire Commercial Purchase and Sale Agreement. It will also strengthen their practical and negotiation skills by covering elements, formation, and performance on a commercial contract. It also capsules covers common mistakes, contract management, dispute resolutions, inspection periods and best practices from contract to close.
The first class in this series of free workshops for NETAR members had 65 attendees. The class begins at 8:30 a.m. and ends at noon. Please confirm your reservation ASAP to Pamela at NETAR office (423-477-0040)
Waddell has worked with leaders, asset management, and insurance companies while managing, renovating and selling their commercial distressed properties. He has provided over 1,000 asset valuations to lenders and has sold/purchased investment real estate more than $500 million. He is a licensed broker in Tennessee and Florida.
Commercial real estate – as measured by new construction permits and their value estimate – was softer during the first quarter than previous years. At the same time, there's ample commercial property listed. Sales were up from last year while the number of leases declined, which reflects the decline in new construction.
The permit decline was driven by fewer pulls in three of the region's largest markets – Washington TN and VA counties and Sullivan. Greene County saw the biggest permit growth, and new permits increased in other counties across the region.
According to Q1 data compiled by The Market Edge, there were 129 new permits during the first three months of this year. Those jobs had a combined permit value of $24.6 million compared to $90.9 million last year.
The regional permit trend shows the Q1 pace was not that far from the same period during the past three years. During those quarters, the moving average was 177 compared to 163 this year. Fewer permits are also a reflection of last years above average permit activity in Sullivan County.
The local outlook is similar to what Chief Economist Lawrence Yun capsuled in the National Association of Realtors'® Commercial Real Estate Outlook for this year. "The positive direction for commercial real estate this year will be guided by the steadily expanding U.S. economy, which has legs to grow."
So far, this year the overall local economy has shown continued improvement that is still being led by the housing sector. Residential resales closed the first quarter with record performance, and the average sales price is beginning to increase at a faster pace than it did during the past two years. New home construction is also slowly increasing.
The labor market continues to improve and is seeing some of the lowest unemployment rates in decades. Regional wages have also increased even though they have not been evenly distributed among the area's two Metropolitan Statistical Areas (MSA).
" Commercial property new construction is driven mainly by either business expansion or tenant demand to lease space. Unlike new residential construction where new homes are built on speculation to sell, almost no commercial building speculation occurs in our region. Expansion is totally dependent on business expansion or tenant demand to lease space for business use," according to the Northeast Tennessee Association of Realtors'® (NETAR) Commercial and International Real Estate Committee Chairman Jerry Petzoldt.
A quick review of NETAR's Commercial Market Listing Service (CMLS) shows ample listings for the region's two MSAs.
Area-wide there's 3.8 million square feet of commercial space listed for sale and 1.6 million square feet for lease. There's also a little more than 3,000 acres of land listed.
The three-county Johnson City MSA shows listings for 30 industrial sites and 21 in the four-county Kingsport-Bristol MSA.
Johnson City listings leads the Office category with 130 compared to 120 in Kingsport-Bristol
There are 110 listings in the retail-commercial category – 66 in the Johnson City MSA and 44 in Kingsport-Bristol.
Shopping center listings total 82 – 48 in Johnson City and 34 in Kingsport-Bristol.
The Johnson City MSA has 135 acres of land listed. Another 122 acres are listing in Kingsport-Bristol
Kingsport-Bristol has three hospitality listings compared to two in Johnson City.
There are also ten multiple-family listings – nine in the Johnson City MSA and one in Kingsport-Bristol.
NETAR's CMLS is the largest commercial real estate listing source, so it is a pretty sound market barometer. During Q1 this year there were 27 leases and 28 sales of CMLS listed properties compared to 18 sales and 34 leases during Q1 last year. The lease demand decline correlates with the decrease in new commercial permits.
NETAR's CMLS is powered by the Catylist system and distributed worldwide. Those listings can be reviewed at http://www.netarcmls.us/. Scroll to the bottom of the page for the featured local listings. For a detailed review use the links under the "Tennessee Commercial Property Listings by City. "
Like its residential cousin, commercial real estate is a significant contributor to the local labor market and the overall economy. Last year's new commercial permit value was $317.3 million.
Here's a capsule version of the number of new commercial permits issued during the first three months of this year across the region:
- Carter County – 11 permits with a value of $45,000.
- Greene County – 23 permits with a value of $4.2 million.
- Hawkins County – four permits with a value of $272, 292.
- Sullivan County – 42 permits with a value of $11.3 million.
- Washington County TN – 36 permits with a value of $7.6 million.
- Scott County – five permits with a value of $255,000.
- Washington County VA - $887,000.
Eric Kistner is the 2017 president of the Northeast Tennessee Association of Realtors. The real estate education and trade group is the voice for real estate in the Tri-Cities and has over 1,200 local Realtor® members and over 100 affiliates.