March 30, 2023

NETAR logo

NETAR logo
Tri-Cities commercial real estate (CRE) transactions continued a steady growth pattern in August.
So far this year, 393 transactions have been finalized for a 54.7 percent improvement over the first eight months of last year. And they’re 120 percent above the local pre-pandemic level.
The only sector lagging the first eight months of last year is Industrial. It’s down 15 transactions and is more of an inventory than a demand issue. Office continues as the strongest sector performer compared to the first eight months of last year. It’s closely followed by Multi-Family, which hasn’t seen the annual volume improvement of other sectors but has better than tripled the number of sales. That activity is being driven by the local housing shortage, which has put additional upward price pressure on rents.
Total transactions since the first of the year are:
Office – 80
Retail-Commercial – 66
Vacant Land – 32
Industrial — 26
Shopping Center – 22
Multi-Family – 15
Special Purpose – 3
Farm/Ranch – 1
Hospitality — 1
The sales and lease volume this year has taken a toll on inventory. It’s down 18 percent from August last year.
New listings have increased every month so far this year, but not by enough to overcome the overall inventory absorption rate and add to active listings. Region-wide the biggest inventory decline has been in Industrial listings.
The biggest inventory declines since the first of the year in the Johnson City metro area are in the Office sector – down 44 percent – and Shopping Center, down 68 percent.
Kingsport-Bristol Industrial listings are down 50 percent from the first of the year. Retail-Commercial listings are down 13%, while all other sectors’ inventory is at or slightly above the first January level.
Web traffic to the Northeast Tennessee Association of Realtors (NETAR) Commercial Multiple Listing Service (CMLS) was down 14 percent from last year. Since CMLS is the primary local and regional commercial listing service, most of that traffic is from Tennessee. Views from Virginia have the second highest volume, followed by Georgia, New York, then Florida.
Cash deals, seller discounts, and over-list-price sales
Cash deals accounted for 34% of August’s existing home sales because the number of total sales declined. Cash sales have ranged from 262 to 265 for the last three months. The only month they were higher was April when the count rose to 280.
Combined with conventional loans, cash deals account for a little over 80% of all existing home sales.
A noteworthy aspect is also the type of loans where sellers got over-list deals or discounted their price.
There were a little over 300 sales in the core Northeast Tennessee Association of Realtors (NETAR) service area last month, where sellers came off their asking price. The median discount was $11,900. At the same time, there were a little over 200 sales that were above the list price. The median amount over the list price was $9,850.
THDA loans accounted for 0.4% of the last month’s sales, but they had the highest above-list average of any other loan type ($9,922).
USDA loans had the second highest share of above list deals, and the overage was $2,690 per sale.
Buyers who financed with FHA loans accounted for 8.1% of all sales and averaged $347 above the list price.
The highest average discount from the listing price ($4,900) was from cash buyers. Those who used conventional loans had the second higher discount from the listing price ($4,475).
VA loans accounted for 7.6% of all sales and had the third highest discount from the list price ($3,378).
August’s typical list price was $286,070 – the highest so far this year. List prices have increased every month since the first of the year.
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