Knoxville Commercial Office Space for Rent

Q4 2025

Knoxville Commercial Real Estate Market Report

Focus: Q4 2025 Market Trends

Executive Summary

The Knoxville commercial real estate (CRE) market is characterized by robust economic expansion and a thriving rental sector as 2025 concludes. The Multifamily market is a standout performer, ranking as a top up-and-coming real estate market nationally due to healthy rent growth and strong occupancy [1, 2]. Retail activity is energized by new developments in South Knoxville and downtown, with steady demand for neighborhood centers [3]. Industrial and Office sectors are navigating national headwinds, but local affordability and steady job growth (1.6%) provide a cushion against broader volatility [1].

TenantBase Proprietary Data [6] highlights the distribution of active tenant demand over the last 90 days:

  • Retail/Storefront led market activity with 65.96% of all searches [6].
  • Office was the second most active sector at 19.15% [6].
  • Warehouse accounted for 14.89% of total search volume [6].

Office Market

Market Overview Knoxville's office market is benefiting from steady economic fundamentals, even as national trends show a slow recovery. The region's affordability compared to major metros makes it an attractive option for businesses seeking stability.

  • Vacancy & Availability: While specific local vacancy rates fluctuate, the market is supported by a 7.3% GDP growth rate in 2023 and continued job additions, fostering a stable environment for office occupancy [1].
  • Leasing Trends: Demand is shifting towards flexibility and move-in-ready spaces, mirroring the national "flight to quality" where Class A assets outperform [3, 4].
  • Market Drivers: TenantBase data indicates a split in lease term preference, with 41.18% of office inquiries seeking 2-3 Year leases and 35.29% seeking Less than one year, highlighting a cautious but active tenant base [6].

TenantBase Activity [6]

  • Demand Share: Office accounted for 19.15% of total search volume [6].
  • Lease Term Preference: Tenants are prioritizing mid-term stability and short-term flexibility:
    • 2-3 Years: 41.18% of deals [6].
    • Less than one year: 35.29% of deals [6].
    • 3-5 Years: 11.76% of deals [6].
  • Size Requirements: The average lower size requirement for office space is 2,000 SF for 2-3 year leases, while short-term users typically seek smaller suites averaging 500 SF [6].

Industrial & Warehouse Market

Market Overview The Knoxville industrial market remains tight, driven by logistics and local distribution needs. While national trends show some softening, Knoxville's strategic location keeps demand healthy.

  • Vacancy & Rent: National industrial vacancy sits around 7.5% with rent growth decelerating to 1.4%, a trend likely mirrored locally as supply catches up with demand [5].
  • Demand & Supply: Leasing activity is steady, with a focus on functional distribution space. TenantBase data reflects this, with significant interest in smaller-to-mid-sized warehousing [6].
  • Leasing Highlights: Demand is concentrated in short-term leases, with 37.50% of warehouse inquiries for 1-2 Year terms [6].

TenantBase Activity [6]

  • Demand Share: Warehouse accounted for 14.89% of total search volume [6].
  • Lease Term Preference: Demand is strongest for shorter commitments:
    • 1-2 Years: 37.50% of deals [6].
    • Less than one year: 25.00% of deals [6].
    • 3-5 Years: 12.50% of deals [6].
  • Size Requirements: The average lower size requirement for warehouse space varies significantly, from 2,500 SF for short-term leases to 25,000 SF for 3-5 year commitments [6].

Retail Market

Market Overview Knoxville's retail sector is vibrant, supported by population growth and new residential developments in areas like South Knoxville and Hardin Valley [3].

  • Vacancy & Availability: Retail vacancy remains low as consumer spending in the region holds up well against national economic uncertainty [3].
  • Market Trends: "Hotspots" include South Knoxville, where new retail clusters and breweries are driving foot traffic, and Downtown, where slim availability keeps upward pressure on rents [3].
  • Demand Drivers: The influx of new residents is fueling demand for essential services, dining, and lifestyle centers [3].

TenantBase Activity [6]

  • Demand Share: Retail/Storefront activity dominated with 65.96% of all search volume [6].
  • Lease Term Preference: Retail tenants show a balanced appetite for lease lengths:
    • 1-2 Years: 27.59% of deals [6].
    • 3-5 Years: 27.59% of deals [6].
    • 5+ Years: 17.24% of deals [6].
  • Top Locations: Tenant interest is highest in Knoxville (City) (14 deals), Oak Ridge (5 deals), and Sevierville (4 deals) [6].

Multifamily Market

Market Overview The multifamily market is a powerhouse for the Knoxville economy, with high occupancy and rent growth that outperforms national averages.

  • Vacancy & Occupancy: Vacancy is reported at 5.9%, significantly lower than the national average [1]. Stabilized occupancy is even stronger at 93.9% [2].
  • Rents: Asking rents grew by 2.9% year-over-year to $1,464 per unit, driven by a 4.4% population growth rate in 2023 [1].
  • Construction: Developers have been active, adding over 300 units recently, with North Knoxville leading new development [1, 2].
  • Investment: Knoxville was ranked the #28 up-and-coming real estate market in the U.S. for 2025, signaling strong investor confidence [1].

2026 Outlook

Looking ahead to 2026, the Knoxville market is positioned for sustained growth and stability.

  • Housing Strength: Home sales are forecasted to increase 8.7% in 2025, indicating robust demand that will likely spill over into the retail sector as new households form [2].
  • Multifamily Resilience: Occupancy is expected to remain steady near 96.7%, with rent growth forecasted to hold around 3.5%, keeping the market attractive for investors [2].
  • Economic Expansion: With real GDP projected to grow by 2.2% in 2025, the commercial real estate sector will benefit from a stable and expanding local economy [2].

Sources

  1. Buildium: The 5 Best Rental Markets in Tennessee in 2025
  2. East Tennessee REALTORS: 2025 Housing Market Forecast
  3. Knoxville Property Management: Knoxville Rental Market Trends 2025
  4. Cushman & Wakefield: U.S. Office MarketBeat Reports
  5. MMCG Invest: Current State of the U.S. Industrial Real Estate Market – Q3 2025
  6. TenantBase Proprietary Market Data (Knoxville - Last 90 Days)

Information in this report is aggregated from various third-party sources and synthesized using artificial intelligence and other research tools. While we believe these sources to be reliable, we cannot guarantee the absolute accuracy or completeness of the data. This report is intended for informational purposes to provide market insight and should be independently verified prior to any use in a real estate transaction or legal commitment.