SOUTHEAST SNAPSHOT, MAY 2007

Knoxville Retail Market

For the first time in the recent history of Knoxville, major retail development is proceeding simultaneously in the north, south, east and west sections of Knoxville. Historically, big box retail development has been concentrated in west Knoxville due to higher growth rates and disposable income. In the past 5 years, however, residential growth has increased dramatically in the north and in the east. This new growth, combined with the fact these markets were already underserved from a retail standpoint, has fueled the new big box retail developments. But, despite the strong retail development surge during the past couple of years, vacancy rates continue within their normal range of 6 to 8 percent.

In the north, North Fork Station is being developed in the Halls neighborhood of north Knoxville and will be anchored by a Wal-Mart Supercenter and The Home Depot. The project is a joint venture of Cullom Properties, Inc., and Tarver Properties, Inc. Completion of the 106,000-square-foot The Home Depot is scheduled for April 2008 and the 207,000-square-foot Wal-Mart Supercenter’s completion is slated for June 2008. In addition, there will be 40,000 square feet of small shops and four to six outparcels on site. Further north, on Highway 61, a Wal-Mart Supercenter-anchored retail property, totaling 225,000 square feet, is scheduled to open in May 2008.

On the east side near Knoxville Center Mall, Levcor is developing Harvest Park Shopping Center on the site of the former farmer’s market. Anchors for Harvest Park include Target, Marshall’s, Bed Bath & Beyond, Ross Dress for Less, and Books-A-Million. The east side has historically been underserved in the fashion and book categories. Target has opened and the remaining anchors are slated to open in the fall.

To the south of Knoxville on Chapman Highway, a 117,000-square-foot Lowe’s Home Improvement Warehouse has recently opened in the new South Grove development by Graham Corporation that is slated to total approximately 400,000 square feet upon build out. Further south, in Maryville, Tennessee (about 15 miles south of Knoxville), R&M Partnership’s 101,000-square-foot Hamilton Crossing is under construction across the street from Wal-Mart on U.S. Highway 129. Anchors for this 100-percent-leased power center include Circuit City, Ross Dress for Less, Old Navy, PetSmart and Shoe Carnival. South of Maryville, Wal-Mart has opened a 220,000-square-foot Wal-Mart Supercenter on South Highway 411. Land prices surrounding this Wal-Mart Supercenter have soared to $1 million per acre and higher.

In west Knoxville, the 300-acre Turkey Creek development continues its buildout through a Phase III of Colonial’s Pinnacle at Turkey Creek lifestyle center.  Construction will begin on the 190,000-square-foot expansion in July.  A 458-car parking garage is included in the plans for the Phase III. Southern Commercial is also contributing to Turkey Creek’s buildout through a series of smaller, unanchored strip centers.  An announcement is expected this month regarding a Costco to be developed adjacent to Turkey Creek.

Two new projects have been proposed further west of Turkey Creek in Lenoir City. Creekwood, a proposed 204-acre mixed-use development, would front Interstate 75 near the interchange with U.S. Highway 321. The retail component of that site is proposed to encompass 672,650 square feet, but anchors have yet to be announced. Town Creek, another proposed master-planned, mixed-use development that would be located across Highway 321 from the existing Wal-Mart and The Home Depot, would provide more than 300,000 square feet of additional retail. Kroger has announced that it will anchor the Phase I of Creekwood’s retail component, developed by Mims Enterprises, which planned to break ground in April.

There is much anticipation about the retail component of North Shore Town Center, a 141-acre “new urbanism” style mixed-use development at the intersection of Northshore Drive and Pellissippi Parkway. Housing construction has commenced and office space is being pre-leased. Currently no retail anchors have announced, although the retail component is advertised to cover 500,000 square feet of space in a Main Street setting.

Southern Commercial, Levcor Inc., Holrob, Hunter Development Company, Trinity Development, Cullom Properties, Inc., Tarver Properties, Inc., Graham Development Corporation, Jay Dunlap, Turkey Creek Land Partners and Colonial Properties are all players in retail development in Knoxville. New retailers to the market include Mast General Store, Qdoba Mexican Grill, Tropical Smoothie Café, Abuelo’s Mexican Food Embassy, Tossed, Ashley Furniture, Gander Mountain, World Market, Fleming’s Prime Steakhouse, Anne Taylor Loft, HH Gregg, Ruth’s Chris and Vitamin Shoppe.

Halls, Powell and Hardin Valley are submarkets to keep an eye on for retail growth in Knoxville. Strong housing starts in these areas will create future retail demand. Prior to the development of Turkey Creek in west Knox County in the early 2000s, retail rents above $15 per square foot were fairly rare. Within just a few short years, rental rates quoted for new construction in the $25 to $30 range are not uncommon.

— Ben Kenney is with Wood Properties in Knoxville, Tennessee.


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