SOUTHEAST SNAPSHOT, OCTOBER 2005

Knoxville Office Market

The Knoxville, Tennessee, office market is seeing an influx of office condominium developments and ownership/tenant partnership developments. The vacancy rates for the entire market currently stand at 5 percent, and the Class A rental rates range from $18.50 to $21.50 per square foot for full-service leased properties.

Several new office developments adorn the Knoxville market's landscape, all of which significantly will impact the area. The Turkey Creek Development is a retail/hotel/office/ medical project that encompasses more than 500,000 square feet of new retail space located at Gallaher View Road and Walker Springs. Onyx Pointe is a Class A professional office development owned and constructed by TJ Development, a locally based company. Building I is a 45,000-square-foot structure that was completely leased in 2004, and Building II also is 45,000 square feet and will be available this December. In addition, Lovell Pointe is a Class A development owned by Dillard Construction. Building I encompasses 24,000 square feet and was completely leased this year, and Building II is a 45,000-square-foot project that will be available in 2006; this project is located at Lovell Road and Parkside Drive near Turkey Creek.

Due to extensive residential and retail growth, west Knoxville, Farragut to Loudon County and Pellissippi Parkway to Karns are seeing the majority of office development. Century Park, Northshore Town Center and Lakeside Centre all are mixed-use developments that will be located in these areas.

Major tenants that recently have absorbed significant space in the Knoxville market include Team Health, which is subleasing 60,000 square feet at Centerpoint Plaza on Pellissippi Parkway; Scripps Howard/HGTV has located in 45,000 square feet within Three Lakeside Centre at Pellissippi Parkway and Northside Drive; and Barge Waggoner Sumner & Cannon has located at Century Park on Sherrill Boulevard, occupying 30,000 square feet.

In addition, several other significant lessees have entered the market: attorneys Leitner Williams Dooley & Napolitan and Bernstein Staire McAdams have located in the area, the former occupying 13,250 square feet within The Terraces at 180-A Market Pl., and the latter signing a lease for 9,000 square feet at The Weston on Old Kingston Pike; NEXTEL also has signed on in Century Park for 10,000 square feet; and Arcadis is located in Lovell Pointe I, where it occupies 8,000 square feet.

Future developments that will impact the market include Brookview Town Centre, a mixed-use development located at Papermill Road and Northshore Drive, which offers visibility from and easy access to Interstate 40/75. The project will include 150,000 square feet of office, 80,000 square feet of retail and a six-story hotel development. In addition, Phase I of a 59,000-square-foot office development will be constructed near McGhee Tyson Airport.

The Knoxville office market retains optimism toward new development companies in the coming 6 to 12 months, as it looks forward to national and regional corporate tenants that are relocating to the city and surrounding areas.

— Roger Moore, president, R.M. Moore Real Estate Company

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