Investment Opportunities Emerge in Chattanooga CRE Market

Strong Fundamentals Drive Chattanooga Investment Activity

Chattanooga's commercial real estate market is presenting compelling investment opportunities, supported by improving fundamentals, strategic transactions, and a robust development pipeline that signals long-term growth potential.

Office Investment Shows Pricing Stability

The recent sale of 123 Main Street demonstrates stable office pricing in downtown Chattanooga. ABC Investment Group LLC acquired the 15,000-square-foot Class B office building for **$2.25 million**, representing $150 per square foot. This transaction was part of XYZ Properties Inc's portfolio restructuring, suggesting strategic repositioning rather than distressed selling.

The timing of this acquisition coincides with improving office fundamentals. Downtown vacancy rates declined to **8.5% in Q3 2023**, down from 9.2% in the previous quarter. This 70-basis-point improvement indicates strengthening tenant demand and suggests potential for rental rate growth and occupancy gains.

Industrial Assets Demonstrate Rental Growth

The industrial sector is showing particularly strong investment characteristics, with rental rates in the Airport submarket increasing to **$6.75 per square foot annually** in Q3 2023, up from $6.50 in Q2. This 3.8% quarterly growth rate, if sustained, could translate to meaningful revenue increases for industrial property owners.

The recent 20,000-square-foot lease at 456 Industrial Boulevard to Logistics Solutions LLC demonstrates market depth. At $10 per square foot on a five-year term, this transaction reflects premium pricing for well-located warehouse space near transportation infrastructure.

Competitive Advantage in Regional Context

Chattanooga's industrial rental rates of $6.75 per square foot maintain a **6.9% discount** to Nashville's $7.25 per square foot, providing a cost advantage that attracts tenants while offering room for rental growth. This pricing differential supports Chattanooga's value proposition for businesses seeking Tennessee locations with lower occupancy costs.

Development Pipeline Creates Future Value

The $45 million Riverfront Mixed-Use Development represents significant private capital commitment to Chattanooga's growth. Riverfront Partners LLC's 120,000-square-foot project along the Tennessee River will deliver 80,000 square feet of retail and 40,000 square feet of office space by June 2025.

This development timeline aligns with improving market conditions and suggests developers anticipate sustained demand. The riverfront location and mixed-use format target both lifestyle retail and professional services tenants, diversifying revenue streams.

Corporate Relocations Support Demand

Tech Innovations Inc's headquarters relocation from Knoxville brings 75 employees to downtown Chattanooga's 200 Market Street. This 10,000-square-foot commitment, effective Q1 2024, demonstrates corporate confidence in Chattanooga's business environment and talent pool.

Such relocations create multiplier effects, generating demand for additional office space, retail services, and supporting businesses. The technology sector focus aligns with Chattanooga's positioning as an innovation hub.

Infrastructure Investment Enhances Asset Values

The approved $120 million I-75 Corridor Expansion will improve access to East Brainerd commercial properties. Construction from Q2 2024 through Q4 2026 will enhance traffic flow and increase the submarket's attractiveness for logistics, retail, and office users.

Infrastructure improvements typically drive property value appreciation by reducing transportation costs and improving accessibility. Properties positioned along the improved corridor may benefit from increased tenant demand and rental growth potential.

Investment Thesis

Chattanooga's commercial real estate market presents attractive risk-adjusted returns supported by:

- **Improving occupancy trends** with office vacancy declining 70 basis points quarterly - **Rental rate growth** in industrial properties showing 3.8% quarterly increases - **Competitive regional positioning** with cost advantages over Nashville - **Development activity** indicating private capital confidence - **Corporate relocations** driving tenant demand - **Infrastructure investment** enhancing long-term accessibility

**Schedule a consultation with Liberty Commercial Real Estate to discuss specific investment opportunities and develop a strategic approach to Chattanooga's commercial real estate market.**