The national headlines around commercial real estate have been sounding the alarm: rising interest rates, office vacancies and uncertainty about what lies ahead. But what’s really happening here in East Tennessee? Andrew McGranaghan, chief development officer at Wallace Real Estate, sat down with Jim Staley CCIM of Wallace Commercial to get his take on what’s happening locally — and what business owners should know when navigating the commercial market.
“Everyone in the CRE zone is paying attention to interest rates,” Staley noted. “You can feel it when you speak with clients: ‘When is the Fed going to drop rates?’ No one knows for certain, and that makes some consumers hesitant.” Still, activity hasn’t come to a halt. “Deals are still being done even in the local office market, which has been hit hard by the Covid work-from-home phenomenon.”
According to Staley, Knoxville’s office vacancy currently sits at 13%, with roughly 886,590 square feet available for lease. “We expect that to rise to 15% by the end of 2025,” he said. “But that still tracks better than the South Atlantic Region, which is predicted to have a 20.2% vacancy rate by the same time.”
The multifamily and industrial markets in Knoxville also show lower vacancy rates than regional averages. However, the retail sector tells a different story. “The Knoxville retail market doesn’t fare as well as the nation, with a current vacancy rate of 20.4%,” Staley added.
Commercial real estate is often seen as a complex and intimidating world — but that’s exactly why representation matters, Staley emphasized. “Commercial real estate is much more complex than residential. Every deal is different,” he said. “I do wish that buyers, tenants, landlords and sellers understood that getting good representation is critical to making sure they get the best deal possible. It really does make a difference.”
When asked about key considerations for buyers and tenants, Staley didn’t hesitate. “There are dozens of books written on this subject,” he said with a smile. “But here are the top two things to know when buying: First, you make your money when you buy. That’s a truism that’s been around forever. It means you want to have an exit strategy before you even close. And second, treat your property purchase like an investment. Don’t let emotions override your judgment.”
As for leasing? “You’ve got to understand what your expenses will be — especially the ones passed through from the landlord like real estate taxes, property insurance and common area maintenance,” Staley explained. “Also, know who’s responsible when something breaks, like the A/C or plumbing. And don’t overlook what happens at the end of your lease. Know your options, and know what you’ll pay if you extend. Those details should be clear from the beginning.”
Wallace Commercial, a dedicated division within Wallace Real Estate, specializes in helping clients navigate these kinds of decisions across every market sector. So, what makes their advisors stand out?
“There are three big things,” Staley said. “One, our advisors know the market inside and out. Even our newer advisors are trained and coached to understand what makes a good deal. Two, we know the players — buyers, sellers and vendors who keep deals moving smoothly. And three, we know how to solve problems. Negotiation and creative problem-solving are essential in this business. Even our newer team members can tap into the collective experience of the group.”
Looking ahead, Staley is feeling confident about what’s next for East Tennessee. “I’m very optimistic about the Knoxville commercial market,” he said. “Local businesses are thriving, and out-of-state business owners are seeing the value of buying and relocating here. I can’t tell you how many times someone has said they wish they had moved here 10 years ago. I don’t see that enthusiasm waning — in fact, I see it accelerating.”
Wallace Commercial features 16 full-time advisors and is responsible for $65 million in sales and leases annually. To learn more, visit www.WallaceCRE.com.
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