NETAR CMLS Blog
It wasn’t a big increase, but during a year that saw the worst crash since the Great Depression, the local commercial real estate market posted a small 2020 transactions gain.
There were 361 commercial sales and leases last year – one more than during 2019, according to the Northeast Tennessee Association of Realtors (NETAR) commercial transactions report.
“Vacant land, office, and industrial deals continued as market leaders and balanced the slum in retail-commercial and shopping center activity,” Cassie Petzoldt, chair of the NETAR Commercial Committee, said. Last year was also the continuation of a trend that saw more deals for less money, she added.
There were 37 more listings on NETAR’s Commercial Multiple Listing Service (CMLS) and the regional Multiple Listing Service’s (MLS) during December than during December 2019 for a 4.8 percent year-over-year listing growth rate.
Fewer monthly average listings in each of the CMLS commercial sectors last year than in 2019 was the norm for last year. Flex does not categorize its listing. There were 76 fewer Flex commercial listings in December than December 2019.
Web traffic for CMLS was down by 15 percent in December. At the same time, one-on-one inquiries continued to increase. According to local commercial Realtors. There has also been an increase in activity – especially in Kingsport restaurant venues – from New York and California investors.
The 2021 outlook for commercial real estate is for continued activity in the land, office, and industrial sectors. There hasn’t been much new construction for these properties, so relocation to accommodate post-pandemic business and renovations are big factors.
Warehousing should also be a high-interest sector as the e-commercial firms continue to improve their last-mile infrastructure.
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.
While the retail-commercial sector has the weakest performance so far this year (down 36.7%), it had the second-highest number of transactions at the end of November.
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.
The local commercial real estate market is slowly clawing itself out of the COVID-19 black hole. Recovery continues to be uneven, with retail and hospitality properties taking the biggest hits. The market lags last year by 3.7%, but November transactions, listings traffic, and total listings increased.
Last month’s transactions were 21.4% better than last year. 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 economy. November transactions made a strong gain. Listing traffic is higher, and that shows investors are shopping for opportunities,” said Cassie Petzoldt, chair of the Northeast Tennessee Association (NETAR) of Realtors Commercial Committee.
There were 825 listings on NETAR’s Commercial Market Listing Service (CLML) and the regional Multiple Listing Service (MLS) at the end of November. That is a 1% increase from October. Compared to November last year, it is down 3.6%.
CMLS listing traffic was up 32.4% from October. The MLS commercial market summary does not monitor listing traffic. Sales and leases for office properties continue to lead CMLS activity in November. They were 11.1% better than 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% from last year. While the retail-commercial sector has the weakest performance so far this year (down 36.7%), it had the second-highest number of transactions at the end of November. Shopping Center sector sales and leases were down 24.9% from last month.
Third-quarter new commercial building permits are also encouraging. They were up 13.3% in the Tri-Cities while neighboring metro areas saw declines. Chattanooga took the biggest hit with a 53.5% decline, followed by Asheville, down 16.9%, then Knoxville, down 8.5%. November’s Tri-Cities new permits had a value of $159.1 million.
But there’s more to the story. Look past the pandemic savaged sectors. Some sectors are weathering the storm in pretty good shape.
So far this year, three sectors are outperforming transactions during the first 10 months of last year. Those sectors are vacant land, industrial, and office.
There are also ample examples of commercial real estate construction picking up. More about this as soon as the Q3 commercial construction reports are available.
See attached file for the full report
October's Commercial Real Estate Market posted a small transaction decline on the heels of its best two months this year. Compared to October last year, transactions were down 11.7%. But while Covid is still savaging some commercial sectors, others are seeing growth.
There were 30 transactions, according to the Northeast Tennessee Association of Realtors (NETAR) monthly Commercial Real Estate (CRE) Report. September's total was 31. During August, the total was 35.
The 10-month total from NETAR's Commercial Multiple Listing Service (CMLS) was 176 compared to 197 last year. The Flex Multiple Listing Service (MLS) total so far this year is 103, up from 100 last year.
The local commercial market continues to get a lot of attention, but total transactions are flat, Cassie Petzoldt, chair of the NETAR Commercial Committee, said. Contracts with contingencies based on the Bristol casino outcome should "begin showing up on reports for the last two months of the year, she added.
Last month, the most active CMLS transactions were sales and leases of office properties, followed by industrial sites then retail-commercial. The current year-to-date total for office deals is 63, six more during the first 10 months of 2019.
Interest in vacant land interest has been high all year. There have been 22 deals so far this year compared to 19 during the first 10 months of last year. And the 175 vacant land listings are the CMLS CRE sector leader.
The largest October increase in new listings across the region was in the shopping center – up 4 - and multi-family – up 2 - sectors.
The combined CMLS and MLS commercial listings October total was 928, up 8.4 percent from September.