SOUTHEAST SNAPSHOT, OCTOBER 2004

Knoxville Industrial Market

Maribel Koella Broker NAI Collins, Sharp & Koella

Located in the shadows of the Great Smoky Mountains and the Cumberland Mountains lies the city of Knoxville, Tennessee. In a time when massive growth typically indicates a robust market, quite the opposite is true for the city ranked the best place to live in the United States and Canada among cities with a population of less than 1 million. In fact, the lack of growth in Knoxville represents the stability of a healthy market, especially in the industrial sector. The local community has kept construction in check to avoid oversupply that would have otherwise created problems during the economic slowdown. Consequently, the construction of new industrial buildings is flat, with vacancy rates in the 5 to 10 percent range. But the market outlook is good, as adaptive reuses of existing buildings are taking place.

One such transformation includes the redevelopment of the 1 million-square-foot former BASF facility in Lowland into a distribution space. At this facility, 350,000 square feet already has been leased and the owners are in negotiations to lease another 300,000 to 400,000 square feet.

Situated on 44 acres in downtown Knoxville, the I-275 Business Park is another significant industrial development that has taken shape. The park is zoned heavy industrial, with Norfolk-Southern and Gulf & Ohio rail lines running alongside the site. The area workforce has the choice of a public or private commute to the park, which has easy access to Interstates 40, 75 and 81.

With the majority of available land and proximity to the airport as contributing factors, the majority of industrial development is happening to the west and south of Knoxville and will continue to be the corridor to watch in the future.

Though no developers are new to the Knoxville area, most properties are trying to attract high tech and warehouse distribution tenants. Most recently, Aisin Automotive signed a lease in Anderson County for 260,000 square feet.

Knoxville rental rates range from $2.50 to $3.50 per square foot.

— Maribel Koella, broker, NAI Collins, Sharp & Koella

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