SOUTHEAST SNAPSHOT, JULY 2005

Chattanooga Industrial Market

David DeVaney President NAI Charter Real Estate Corporation

In 2004, the Chattanooga Area Chamber of Commerce announced 27 projects totaling $90.53 million. This included major expansions by Tennessee Rand, McKee Food Corporation and Tag Manufacturing. In the first quarter of 2005, the Chamber announced five projects totaling $25 million. Among the largest of these projects is the LJT Tennessee expansion in Centre South Riverport and the Aerisyn, LLC lease of 150,000 square feet from Alstom Power. LJT manufactures steel tubing and Aerisyn is a manufacturer of wind turbines and wind power structures. There are 300,000 square feet on the drawing board for new construction this year, and much of the activity involves the renovation of older buildings, which is due to the cost of land and construction materials.

The most dramatic announcement, which will affect Chattanooga for years to come, is the Megasite Certification for Enterprise South Industrial Park. Enterprise South Industrial Park is an approximately 6,000-acre parcel located in Hamilton County and adjacent to Interstate 75. Approximately 2,000 acres now are ready for development with 1,600 acres being classified as a Megasite. A Megasite is an industrial unit that has 1,600 or more contiguous acres, multiple types of transportation, multiple access and labor availability.

According to Jim Reichardt, business development director for the Chattanooga Area Chamber of Commerce, “The Megasite Certification by McCollum Sweeny Consultants has given the Enterprise South Industrial Park third-party validation of such caliber that will capture world-class manufacturing attention and let them know we are serious about attracting high quality jobs.” With an additional 100 acres of the Enterprise South Industrial Park set aside for smaller users of 10 acres or less, Chattanooga is poised to meet the needs of all industrial users. Enterprise South is co-owned and co-developed by the city and county with marketing and infrastructure support from the Chamber, TVA, Electric Power Board and the state of Tennessee.

The Bonny Oaks Industrial & Office Park sold its last parcel to Daltile Company. With this, coupled with the possibility of Enterprise South selling to one major user, Chattanooga could experience a shortage of land that is ready for industrial development. Land developers, which get an early start on the zoning and entitlement process, will reap the benefits; plus, these speculators historically have been first in line for the build-to-suit transactions. 

There also is a shortage of buildings of 100,000 square feet or more. Kenco, which owns and/or operates more than 4.8 million square feet of warehouse space, is experiencing an occupancy rate of approximately 95 percent. At any given time, Kenco is in a position to make 200,000 to 300,000 square feet available for customers or tenants through the shifting of product in their public warehousing operation. Some of the users that recently have signed major leases are Regis Corporation, Iron Mountain Information Management, Inc. and Array Manufacturing.

With Enterprise South being heavily marketed for a major user by the Chattanooga Area Chamber of Commerce, there is anticipation in the market of renewed growth and strength of the industrial sector. Chattanooga’s industrial inventory is approximately 35 million square feet including roughly 14 million square feet of Class A product.           

Chattanooga always has seen steady growth from its largest employers. McKee Baking, Synthetic Industries and Astec Industries, all of which have made substantial expansions in the last 12 months, exemplify this.

— David DeVaney, SIOR, CCIM, president, NAI Charter Real Estate Corporation

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