MARKET REPORT

2017-2018C H A T T A N O O G A, T N

Table ofContents

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Why Chattanooga?

Economic Development

2017 Totals

NAI Charter Information

Office

Retail

Industrial

Land

Investment/Development

Property Management

Our Team

Why Chattanooga?

With over $400 million projects under construction and another $400 million in predevelopment it is easy to see why Chattanooga is rapidly growing into ““The best mid-sized city in America.” The reason for this surge can be attributed to the many factors that make Chattanooga great; its quality of life, the rejuvena-tion of its urban core, and its strategic economic development.

Named “Best Town Ever” by Outside Magazine for the second time in five years, Chattanooga draws to those that love the outdoors. The city is surrounded by mountains, lakes and the Tennessee River, which allows for a wide variety of outdoor recreation such as rock climbing, mountain biking, whitewater rafting, and kayaking. Plus the development of parks, greenways, and linear trails in the urban core has facilitat-ed residential and mixed-use development.

Located in proximity to larger cities, Chattanooga is only a two hour drive to Nashville, Knoxville, Birming-ham, and Atlanta. Chattanooga has the reach of 131 million people within a day’s drive. This combined with the 16,000 miles of navigable river ways, interstates, and air access leaves Chattanooga as a highly desirable spot for many companies. Chattanooga has grown extensively with the help of major business-es starting with Coca-Cola Bottling Company United and continued with Volkswagen, Amazon, Unum, BlueCross BlueShield of Tennessee, CBL, and McKee Baking Company.

Chattanooga, also known as Gig City, provides access to high-speed internet and the newly formed In-novation District, host to the Edney Innovation Center, which has created an influx of entrepreneurialship. This has contributed in the rejuvenation of the urban core which has led to the following investments; $73 million in the Southside, $149 million in the City Center, $130 million in the UTC/MLK area, $79 million in the Riverfront, and $14 million in the Northshore. In total, 1,500 apartment units, 1,331 student beds, and 564 hotel rooms in development or pre-development.

David F. DeVaney, SIOR, CCIMPresident

J. Bryan Rudisill, SIOR, CCIMVice President

Thank you for your interest in Chattanooga and we look forward to working with you in 2018!

CHATTANOOGA ECONOMIC DEVELOPMENT• Chattanooga Metropolitan Airport approved plans for West Star, compa-

ny that service private aircraft, for a $20 million expansion and expects

to add about 100 more jobs.

• M&M Industries plans a $42.7 million expansion and an addition of 110

more jobs

• Yanfeng Automotive Interiors opened its new manufacturing facility. It

represented an investment of $55 million and created 325 new jobs.

• Shaw Industries Group, Inc. has completed a $30 million investment to

manufacture composite core LVT flooring.

• FedEx Ground opened a new $30 million distribution center that was set

to employ 300 people

• HomeServe USA expands Chattanooga office and plans to add 200

more employees

• An Atlanta company, dcBLOX, has started up a $10 million data center

in Chattanooga and plans to add 20 jobs when fully staffed.

• $214.8 million total investment in housing under construction

• 443 hotel rooms are under construction with an additional 122 hotel

rooms in pre-development, a $112+ million dollar investment

• Hamilton County led the state in new business formations in the first

quarter of 2017 with the number of new businesses created this year

up by nearly a third from the same time a year ago. The Tennessee

Secretary of State’s Office said today that 787 new business entities

were created in Hamilton County during the first three months of this

year, up 32.2 percent over last year’s volume.

* Taken from Greater Chattanooga Economic Partnership, Chttanooga Chamber of Commerce

TRANSACTION VOLUMES

2016

2015

2014

2013

2012

2011

2010

$47,125,880

$61,551,007

$48,596,653

$32,424,633

$24,548,767

$47,704,658

$34,471,000

2017 TOTALS

41 Leases totaling 526,265 SF valued at $30,289,553

$62,221,5532017 TRANSACTIONS VOLUME

33 Sales totaling 747,593 SF valued at $31,932,000

74 Transactions totaling 1,273,858 SF valued at $62,221,553

1.1Million SF Managed

95%OCCUPANCY RATE

2017 PROPERTY MANAGEMENT

which maintains a

Over $308 million in total transaction volume since 2010

In 2017, NAI Charter had a record year with over $62,221,553 in transaction volume

Approximately 8 million square feet of sold or leased properties since 2010

Combined, NAI Charter’s Team offers more than 100 years

of experience in commercial real estate

NAI Charter is a family owned business with a more than

45-year history of success in the Scenic City

designations represent its deep commitment to expertise, and its affiliations with local, national and

international organizations enables NAI Charter to actively track and interpret both industry-wide trends and

local movements to give clients the most current and accurate intelligence about the current regional real

estate landscape.

NAI Charter’s experienced brokers have intimate knowledge of the market and business climate in

Chattanooga, and implement their far-reaching relationships with investors, buyers, sellers and tenants to

work for all their clients.

NAI CHARTERNAI Charter is Chattanooga’s leading commercial

real estate firm, with a professional team of 6

agents working extensively in all areas of real

estate services. NAI Charter’s local expertise

includes brokerage and transaction services,

property management, appraisal services, and

investment services for commercial, industrial

and retail clients of all sizes and profiles.

For over 45 years, Chattanooga has turned to

the NAI Charter team for full-service commercial

real estate services on projects that have

transformed the city. The NAI Charter team’s

NAI CHARTER BROKERS DEAL FOR 210 ACRES OF RIVERFRONT PROPERTY

recent transactions we have been involved in, demonstrating a clear demand and excitement for the Chattanooga area.”

The property is located off Hixson Pike and consists of five parcels totaling 210 Acres. The topography offers excellent vistas and multiple building sites with 3,300 feet of Tennessee River frontage.

NAI CHARTER BROKERS SALE OF GADD CROSSING

property to qualified buyers” said Jeff Jennings of NAI Charter. “Our arduous approach yielded numerous domestic offers coming in from New York to Miami; along with offers from investors as far away as Canada and Israel.”

The undisclosed buyer is an American based company with real estate assets located throughout the nation. This deal shows NAI Charter is the Chattanooga firm with both local and global reach.

D. FRAZIER DEVANEY, JR. JOINS NAI CHARTER

CHATTANOOGA, TN - August 15, 2017 - D. Frazier Devaney, Jr., son of NAI Charter President David F. DeVaney and grandson of Charter Real Estate founder Chester C. DeVaney, has joined the team as Property Manager.

“I am very excited to be part of the NAI Charter team and the opportunities the career can bring,” Frazier said. “Being a third generation at the company, I am excited to work with my father and I hope to help bring a fresh approach to property management and help grow the company.”

Frazier graduated from McCallie School and Cum Laude from Sewanee: The University of the South with a Bachelor of Science Degree in Natural Resources and a minor in Economics. Previously, he worked as a Project Manager at ENERG3 where he designed, implemented, and oversaw projects for multiple properties. In his spare time, Frazier enjoys mountain biking, golf, and skateboarding.

CHATTANOOGA, TN - January 22, 2018 - David F. DeVaney, President of NAI Charter, is pleased to announce that NAI Charter represented BlueCross BlueShield of Tennessee in the sale of 210 acres of riverfront property within the city limits of Chattanooga to the buyer, Riverton, LLC.

“We found the right developer for what, I believe, is one of the most important residential and mixed-use tracts for Chattanooga’s future development”, said David DeVaney of NAI Charter. “This sale is the latest of several

CHATTANOOGA, TN - October 20, 2017 - Jeff Jennings,CCIM of NAI Charter is pleased to announce the sale of Gadd Crossing. Jennings was selected by the Oregon based ownership of Realnet Investment Management, LLC to market the 75,000 SF multi-tenant Retail Center. Anchored by best in class tenants Aldi Grocery and Gold’s Gym the center is poistioned at the highly exposed corner of HWY 153 and Gadd Road.

“Instead of simply using a mass marketing internet based platform we made the effot to direct market the

Sold: $6,560,000

Sold: $8,100,000

OFFICE

Tenant/Buyer Address City/State Size Type Broker

Arcadis 1210 Premier Drive Chattanooga, TN 10,720 SF Lease J. Bryan Rudisill, SIOR

National Seating 5959 Shallowford Road Chattanooga, TN 39,508 SF Lease J. Bryan Rudisill, SIOR

Center for Sports Medicine 6401 Lee Highway Chattanooga, TN 7,231 SF Lease Parker Wamack

Coca-Cola United 8302 Dunwoody Place Atlanta, GA 12,041 SF Lease David F. DeVaney, SIOR, CCIM

McVey Investments 6048 Century Oaks Dr. Chattanooga, TN 7,000 SF Sale Arnold Farmer, SIOR, CCIM

NOTABLE TRANSACTIONS

The Chattanooga Central Business District office market in 2017 had non-traditional office users occupying former office space. The Westin Hotel opened in December in the nine-story former BlueCross BlueShield of Tennessee Headquar-ters. Also an international religious institution leased 8,400 square feet of the fourth floor of the Tivoli Center.

Rental rates regressed in some of the buildings such as: the Tallan building, the Krystal building, the SunTrust building, and Warehouse Row. These buildings all leased spaces at rates below their respective published rental rates. This neg-atively impacted buildings with higher published rates as the news spread across the brokerage community.

The suburban office market continues to thrive with the success of the mixed use property, Cambridge Square in Ooltewah, Tenneessee. The square’s rental rates begin at $17.50, triple net lease, with operating expenses of approxi-mately $5.50 per square foot. Plans of new construction for three other building pads are currently in the works.

The Pointe Centre in East Brainerd is leasing spaces at increased rates from 2017. A new trend emerging is the move from full-service leases, with annual rent increases, to triple net leases, with tenants paying for their own utilities and janitorial services, along with the pro-rata share of CAM, taxes, and insurance.

The medical office sector is experiencing strong growth as well. The Atrium on Gunbarrel Road is leasing their spaces at $28.00, triple net lease, with operating expenses estimated at $8.50 per square foot.

Office sales are increasing in 2017, with some properties achieving selling prices in excess of 20% of the listing price.

Written by: Arnold Farmer. SIOR, CCIM

O OFFICE LISTINGS

1101 Broad Street1101 Broad Street, Chattanooga, TN

Lease Price: $23.50 SF/yr (NNN)Size: 2,400 - 6,500 SFListing Agent: David F. DeVaney, SIOR, CCIM

7480 Zeigler Road7480 Zeigler Road, East Ridge, TN

Sale Price: $2,100,000Size: 14,400 SFListing Agent: J. Bryan Rudisill, SIOR

153 Commons5819 Winding Lane, Hixson, TN

Lease Price: $14.00 SF/yr (Gross)Size: 1,500 - 3,000 SFListing Agent: Chad Wamack

Hamil Professional Centre5022 Old Godsey Lane, Chattanooga, TN

Sale Price: $935,000 Lease Price: $15 SF/yr (NNN)Size: 7,201 SFListing Agent: Jeff Jennings, CCIM

RETAIL

Tenant/Buyer Address City/State Size Type Broker

Body Fitness of Cha. 5600 East Brainerd Chattanooga, TN 2,366 SF Lease Arnold Farmer, SIOR, CCIM

Mike’s Hole in the Wall 535 Cherokee Boulevard Chattanooga, TN 4,200 SF Ground Lease Jeff Jennings, CCIM

Funky Monkey, LLC 516 E. Main Street Chattanooga, TN 5,500 SF Sale Chad Wamack

Kaleidoscope Salon 901 Cherokee Boulevard Chattanooga, TN 3,200 SF Sale Jeff Jennings, CCIM

NOTABLE TRANSACTIONS

Chattanooga’s retail market may be the strongest its been in the past decade. The Scenic City has continued to garner positive reactions from both national retail executives and local specialty store owners.

Development has been at the forefront of the retail surge. New unanchored strip centers are being erected at a quick pace by local experienced developers who are deep-rooted in the market. Single tenant retail stores are also now being built more expeditiously than any time since the great recession.

There has been a rush to market across the area with many Quick Servce Restuarants and Fast Casuals looking to cap-ture market share but nothing quite as noticeable as the obvious war between numerous national tire retailers, all looking for the best intersection to open their shops first. Land prices and rental rates continue to rise in the Chattanooga area.

While cautious developers are unnerved by the growth rate of the Southside District, many investments continue to pay off in the growing area. Downtown still remains a steady area to invest, while the major retail thoroughfares of Gunbarrel Road, Highway 153 and Battlefield Parkway continue to be tight for retailers looking to enter or expand in the market.

Written by: Jeff Jennings, CCIM

R RETAIL LISTINGS

The Market at Collegedale5243 Little Debbie Parkway, Ooltewah, TN

Lease Price: $24.00 - $30.00 SF/yr (Modified Gross)Size: 2,151 - 3, 146 SFListing Agent: David F. DeVaney, SIOR, CCIM

Four Corners9415 Apison Pike, Ooltewah, TN

Lease Price: $14.00 - $16.00 SF/yr (NNN)Size: 1,075 - 2,995 SFListing Agent: David F. DeVaney, SIOR, CCIM

Owl’s Nest5024 Hunter Road, Ooltewah, TN

Lease Price: $30.00 SF/yr (NNN)Size: 1,200 - 9,360 SFListing Agent: Jeff Jennings, CCIM

Former Henpecked405 Market Street, Chattanooga, TN

Lease Price: $12.50 SF/yr (NNN)Size: 5,000 SFListing Agent: Jeff Jennings, CCIM

INDUSTRIAL

Tenant/Buyer Address City/State Size Type Broker

Tram Pointe, LLC East 42nd Street Chattanooga, TN 290,500 SF Sale David F. DeVaney, SIOR, CCIM

Sears 6300 Enterprise Park Chattanooga, TN 100,000 SF Lease David F. DeVaney, SIOR, CCIM

Jeffan Group, LLC 420 Workman Road Chattanooga, TN 105,000 SF Sale J. Bryan Rudisill, SIOR

TAG General Partnership 3851 Tag Road Chattanooga, TN 58,750 SF Sale Chad Wamack

NOTABLE TRANSACTIONS

Chattanooga’s industrial market continues to improve with the postive momentum generated from Volkswagen and Am-azon. All sectors of real estate have experienced growth due to the City’s outdoor lifestyle reputation and its affordable cost of living.

The Chattanooga industrial market continues to face similar challenges from previous years. Vacancies are at an all time low while rents continue to rise. This makes finding affordable available space difficult. Construction of new large industrial buildings has begun due to the lack of existing qualified industrial sites. As rates increase, the market is ap-proaching a tipping point. New construction of industrial space is starting to be more attractive for industrial investors. Spring Branch, the new industrial park in sourthern Bradley County, is poised to be adventageous for future industrial growth near Chattanooga.

The rapid growth in the southeastern second tier markets, like Nashville, have had a pour over effect on the local indus-trial market. Industrial landlords and developers in those markets have begun to move to Chattanooga.

Written by: Chad Wamack

I INDUSTRIAL LISTINGS

4180 South Creek Road4180 South Creek Road, Chattanooga, TN

Sale Price: $2,900,000Size: 115,000 SF / 26 AcresListing Agent: J. Bryan Rudisill

7801 & 7823 Lee Highway7801 & 7823 Lee Highway, Chattanooga, TN

Sale Price: $4,200,000Size: 90,000 SF / 10 AcresListing Agent: Chad Wamack

4352 North Creek Road 4352 North Creek Road, Chattanooga, TN

Lease Price: $7.75 NNNSize: 7,600 SFListing Agent: David F. DeVaney, SIOR, CCIM

1019 Appling Street1019 Appling Street, Chattanooga, TN

Sale Price: $9.00/SF Industrial GrossSize: 10,000 SFListing Agent: Chad Wamack

LAND

Tenant/Buyer Address City/State Size Type Broker

Patel 1201 & 1203 Carter St Chattanooga, TN 1.45 Acres Sale David F. DeVaney, SIOR, CCIM

McRo Properties 962 & 976 Pineville Rd Chattanooga, TN 2.50 Acres Sale Chad Wamack

Webb Orthodontics Lot 3 Sequoyah Crossing Chattanooga, TN 0.70 Acres Sale Jeff Jennings, CCIM

Elmington Capital 2108 Chestnut Street Chattanooga, TN 3.00 Acres Sale David F. DeVaney, SIOR, CCIM

NOTABLE TRANSACTIONS

Land continues to be described as a scarce commodity in Hamilton County for 2017. Residential development main-tained its upward trend in both the single family and multifamily sectors. The North Chattanooga and Southside sub-mar-ket continues to be a hot spot for residential and retail development.

Due to the scarcity of land, redevelopment became a more common practice. As an example, the former East Brainerd Lumber Company located on Lee Highway, zoned M-1, which represents approximately 20 acres, was bought by a lo-cal investment group. The group plans to redevelop the site to appropriate use for light industrial or retail and wholesale.

Strong demand continues along the I-75 corridor. Mixed-use development at Waterside, north of Hamilton Place Mall, improves the retail area with a new REI store. Following in REI’s steps, Publix has announced another store under con-struction for the Waterside development. Further North of the Waterside development at the Apison Pike exit, FedEx opened a new, automated, 236,000 square foot distribution center. The next interchange North, at the Ooltewah exit, development continues to strengthen with in-fill at Cambridge Square.

The first exit for Cleveland, TN, has one of the largest industrial and mixed-used parks in development. Spring Branch has roughly 200 acres dedicated to industrial use with another 159 acres of mixed-used planned to be dedicated in 2018.

Another large tract of undeveloped land is the BlueCross BlueSheild of Tennessee’s Lupton City property, in North Chat-tanooga. This 200 acre site recently sold to Riverton, LLC, a local development group. They plan to develop the site for residential and retail projects.

Written by: J. Bryan Rudisill, SIOR

L LAND LISTINGS

Pleasant Grove Road (Exit 20)Pleasant Grove Rd(exit 20 I-75), Cleveland, TN

Sale Price: $1,400,000Size: 4.6 AcresListing Agent: David F. DeVaney, SIOR, CCIM

9227 Frontage Road NW9227 Frontage Rd NW(Exit 33), Charleston, TN

Lease Price: $1,145,000Size: 4.58 AcresListing Agent: David F. DeVaney, SIOR, CCIM

Northpoint Boulevard2770 Northpoint Boulevard, Chattanooga, TN

Lease Price: $250,000 - $400,000 acreSize: 13 AcresListing Agent: J. Bryan Rudisill, SIOR

4801 & 4902 Central Avenue4801 & 4902 Central Ave, Chattanooga, TN

Sale Price: $1,000,000Size: 40 AcresListing Agent: David F. DeVaney, SIOR, CCIM

5300 Howardsville Road5300 Howardsville Road, Apison, TN

Sale Price: $1,800,000Size: 165 AcresListing Agent: Chad Wamack

INVESTMENT

NOTABLE TRANSACTIONS

The investment community continues to make big bets in Chattanooga. Net leased investors are attracted to the elevat-ed CAP rates they can receive in such a steady market that is just a 2 hour drive from the dynamic markets of Nashville and Atlanta.

Large scale investment is coming in across the east coast from New York to Florida. While the overwhelming majority of passive investment is still being made from within a day’s drive of the market, Chattanooga is seeing an influx of California dollars also chasing deals.

Net leased transactions have continued across the region highlighted by the disposition of the 75,000 SF retail center Gadd Crossing in Hixson by the Oregon based ownership of Realnet Investment Management, LLC.

While some national prognosticators are worried about Amazon and its effect on the overall health of retail, money still continues to flow into the Scenic City because of its steady growth and attractive returns.

Tenant/Buyer Address City/State Size Type Broker

Gold’s Gym/Aldi 5510 Highway 153 Chattanooga, TN 74,346 SF Sale Jeff Jennings, CCIM

Rite Aid Center 9145 Apison Pike Chattanooga, TN 32,000 SF Sale J. Bryan Rudisill, SIOR

Tyler Gray 5950 Shallowford Rd Chattanooga, TN 14,500 SF Sale David F. DeVaney, SIOR,CCIM

Michael Dietrich 938 Fortwood St Chattanooga, TN 3,100 SF Sale Chad Wamack

Written by: Jeff Jennings, CCIM

I INVESTMENT LISTINGS

1517 Mitchell Avenue1517 Mitchell Ave, Chattanooga, TN

Sale Price: $3,475,000Size: 36,000 SFListing Agent: Chad Wamack

CHI Memorial Net Leased5022 Old Godsey Lane, Hixson, TN

Sale Price: $2,500,0000Size: 16,535 SFListing Agent: Jeff Jennings, CCIM

Earth Fare5414 Hixson Pike, Hixson, TN

Sale Price: $6,250,000Size: 40,000 SFListing Agent: Jeff Jennings, CCIM

REDEVELOPMENT LISTINGS

PROPERTY MANAGEMENTProperty Management is critical for ensuring the longevity and vitality of commercial Real Estate Investments. Charter Management Company, LLC offers a full-service property management program. We act as the single point-of-contact to provide proactive solutions for both the tenants and the landowners.

Charter Management Company, LLC provides active management and integrated resources to preserve and enhance the value of your real estate assets. Our property management team maintains cognizant of industry trends and best management practices through active membership in Institute of Real Estate Managers (IREM) and Building Owners and Managers Association (BOMA).

Our commitment to the highest standard of service has allowed us to develop trusting and mutually rewarding rela-tionships with our clients. Through our commitment, Charter Management Company, LLC has earned a reputation for acquiring and retaining quality tenants, and maintaining high levels of tenant occupancy and satisfaction.

In 2017, Charter Management Company, LLC was awarded 224,072 square feet of new commercial and retail proper-ties to add to our portfolio. Our team now manages 1,195,406 square feet of commercial properties which maintains a 95% occupancy rate. Charter Management Company, LLC is looking forward to continuing its portfolio growth in 2018.

Single Point of Contact

24-Hour Emergency Response

Collection & Deposit of Rents

Monthly/QuarterlyFinancial Reporting

Bid Comparisons onAll Services & Projects

Property Leasing Services

Accounting & Financials: Monthly Financial StatementsBudget to Actual ComparisonBanking ReconciliationsAccounts Receivables & PayablesLease Rent EscalationsAnnual BudgetsOwner’s Monthly/Quarterly ReportsProperty Real Estate Tax EstimatesProperty Tax Audits & AppealsCAM & Property Insurance Reconciliations

Our Services:24-Hour Emergency ResponseBid Comparisons on All Services & ProjectsCollection & Deposit of RentsProperty Leasing ServicesMarket AnalysisIndividual Property AnalysisRoutine Property InspectionsEmphasis on Tenant RetentionMonthly/Quarterly Financial ReportingDiligent Pursuit of DelinquenciesTenant Improvement CoordinationDue Diligence & Lease Analysis

David F. DeVaney, SIOR, CCIMPresident

J. Bryan Rudisill, SIORVice President

The Leader In Commercial Real Estate Since 1972

Jeff Jennings, CCIMBroker

Chad WamackBroker

Arnold Farmer, SIOR, CCIMBroker

Parker WamackBroker

D. Frazier DeVaney, Jr.Property Manager

Amie R. ThomasController

Mary T. BrannonMarketing

Administration

M. Caitlin GallagherMarketing/Public Relations

Property Manager

414 Vine Street, Chattanooga, TN 37415www.naicharter.com (423)264-6549