The majority of Knoxville's growth is in the west sector, as it has been for the past decade, according to Louise Fogarty, leasing manager at Parkway Realty Services. "This growth is due to the area's interstate system, access to the airport, availability of land and proximity to the largest concentration of residential areas in the county," she says. Absorption has been strong, and the Class A market has been relatively steady hovering at about 95 percent occupancy for the past five years, adds Fogarty.

Several new office developments have been announced for the Knoxville market in 2001 and 2002, for a total of more than 500,000 square feet, according to Fogarty. This includes the 150,000-square-foot Lakeside Centre, a Blue Ridge Development project at Northshore Drive and Pellissippi Parkway. Lakeside Centre is at the same intersection as One Falling Water, the 77,000-square-foot, three-story office building that was completed in 1999 and is now 100 percent leased. "Lakeside Centre is being designed, developed, constructed, managed and leased by the same team, and it will have 64,000 square feet ready for occupancy by December," says Fogarty.

The downtown, Class A office market of about 1,000,000 square feet is currently 90 percent occupied, and should be at 95 percent by the end of this year, based on current deals in the market, says Fogarty. A large central business district public/private venture has been proposed by Worsham-Watkins that would include office, retail, hotel and residential, a $300 million investment. This new development is in addition to the convention center that will be opening in downtown Knoxville in 2002.

Other significant developments in Knoxville include Dowell Springs, an upscale, multi-use development, which has a 36,000-square-foot spec office building under construction; a 150,000-square-foot project at Walker Springs in the Cedar Bluff area; and three new buildings in the Pellissippi Parkway/Mabry Hood area that total approximately 210,000 square feet.

Developers new to the area include Marriott, which relocated its accounting department to Knoxville in a 50,000-square-foot build-to-suit in October of 2000. At present, there are a number of major leases which are being negotiated, and they will be announced at any time, says Fogarty.

Class A rental rates in Knoxville range from $15 to $17 in the central business disrict and from $16 to $20 in the west Knoxville suburbs. Class A vacancy in the CBD is 10 percent, and 5 percent in the suburbs.

Continued growth is forecasted for the west Knoxville market, according to Fogarty. "The availability of new space will continue to meet the demands of new and expanding companies, with the majority preferring the suburbs to downtown," she says. "The downtown area has received a boost in the past two to three years because of the high occupancy rates in the suburbs, forcing prospects to consider the CBD as an option." With the new buildings coming on-line through 2002, this will not be as great of a factor to locating downtown; however, downtown redevelopment will help keep existing occupancy rates steady. The Worsham-Watkins' proposed new downtown office building of 600,000 square feet, which has been announced to have interested parties for approximately 40 percent of the building, will help keep the downtown a dynamic location, she adds.

"Knoxville has had steady growth in its office development over the past decade and this trend is expected to continue. The downtown redevelopment will be watched closely to see how it revitalizes the CBD market and its overall economic impact on the region," Fogarty says.

Louise Fogarty serves as leasing manager with Parkway Realty Services.


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