Summary: Chattanooga’s industrial market ended Q3 2025 in solid shape, with vacancy holding below 3% and rents continuing a steady climb. While absorption cooled from Q2’s outsized gains, fundamentals remain healthy relative to national trends, supported by logistics strength along the I-75/I-24 corridors and stable occupier demand across distribution, auto-related suppliers, and light manufacturing.
“Chattanooga’s industrial story is resiliency with discipline. Vacancy under 3%, rents inching up, and measured construction all point to a market that’s balancing growth with operational reality.” — David Melton, Managing Broker, Pointe Commercial Real Estate
Local conditions (Chattanooga, TN-GA MSA) as reported by the Chattanooga Area Chamber (source: CoStar data compiled by the Chamber):
Vacancy: 2.7% (vs. 2.5% in Q2 2025; 3.5% in Q3 2024) — a 22.9% YoY improvement and a modest +8.0% QoQ uptick.
Net absorption: +83,646 SF (after +618,001 SF in Q2 2025; -74,301 SF in Q3 2024), reflecting normalization after a surge last quarter.
Average asking rent: $7.76/SF (up from $7.61 in Q2 and $7.48 in Q3 2024), a 3.7% YoY and 2.0% QoQ increase.
Inventory: 63.77M SF total; 1.75M SF vacant.
Nationally, the industrial market in Q3 2025 showed renewed demand with ~60M SF of net absorption and signs of equilibrium after the construction wave, while vacancy edged to ~7.6% as supply tapered. Asking rents continued to grow nationwide, averaging ~$10.10/SF. Chattanooga continues to outperform the U.S. on vacancy and maintains rent growth momentum from a lower base.
“When you’re sub-3% vacant in a logistics hub like Chattanooga, even small delivery batches or lease rollovers can move the needle. Owners with modern clear heights and trailer capacity are still in the driver’s seat.” — David Melton
Logistics & regional distribution remain the backbone, leveraging Chattanooga’s location within a day’s drive of much of the Southeast. Along the I-75 corridor (Enterprise South to Ooltewah) and I-24 west toward Tiftonia, we continue to see steady inquiries for 50–200K SF blocks, especially from 3PLs and consumer goods distributors seeking network resiliency and favorable operating costs.
Auto and advanced manufacturing provide a durable floor for demand. Volkswagen’s Chattanooga operations remain a marquee regional anchor; 2025 has included both marketing pushes around U.S. manufacturing and labor/production headlines (unionization in 2024 and production adjustments in 2025). While these developments warrant monitoring, the supplier ecosystem and logistics advantages continue to support space needs across the metro.
“VW and the supplier base matter, but what really underpins Chattanooga is diversified logistics demand. Even as the auto cycle evolves, we’re seeing consistent interest from 3PLs and regional distributors who value speed-to-market.” — David Melton
With average industrial rents at $7.76/SF and a tight vacancy rate, landlords of functional mid-box product (28-32′ clear, dock-high, truck courts that can stage trailers) are selectively pushing face rates and moderating concessions. We continue to see:
5–7-year base terms are common for 50–150K SF deals, with modest TI packages focused on racking, LED retrofits, or office refreshes.
Escalations generally 3%+ annually (or CPI-linked caps for some credit tenants).
On older stock or less-infill-oriented sites, concessions appear as free-rent months or landlord-delivered improvements rather than rent discounts—particularly where trailer parking is constrained or column spacing is tight.
“Best-in-class boxes can still command a premium. If you’ve got clear height, trailer capacity, and near-interstate access, the market will meet you.” — David Melton
Chattanooga’s measured new supply posture has helped preserve fundamentals. With inventory at ~63.8M SF and only incremental additions this year, the market avoided the overbuilding seen in some Sun Belt metros. Deliveries in 2025 have been manageable relative to absorption, creating a soft landing after the pandemic-era build cycle.
Regionally, the U.S. construction pipeline has been decelerating through 2025, aiding the national rebalancing; Chattanooga’s below-average vacancy underscores its favorable supply/demand alignment even as national vacancy sits in the mid-7% range.
Enterprise South / I-75 North (Volkswagen area): Sticky manufacturing and supplier activity; expansions are more selective, but core space needs remain intact. Labor headlines are a watch item, not a thesis breaker.
Airport / Amnicola Hwy / Riverfront industrial: Smaller bay users (10–40K SF) maintain steady demand; location and dray to interstates are key differentiators.
Catoosa/Ringgold & Walker (GA side): Cost-sensitive occupiers consider hop-over options for slightly lower rents and land availability; backfill of second-gen space remains active.
Cleveland, TN (Bradley County): Growing interest from suppliers and light manufacturing tied to I-75 access, with appeal to users needing incremental labor pools.
Investment activity in Q3 remained selective as debt costs and bid-ask spreads continued to affect transactions nationwide. For Chattanooga, the low vacancy and rising rents are attractive to private buyers and regional funds targeting stabilized yield with modest growth. Cap rates are wider than 2022 troughs but holding firmer here than in higher-vacancy metros, particularly for STNL/logistics with strong credits.
We’re seeing the most engagement with well-located mid-box assets that have functional specs and renewal visibility within 18–36 months. Class B assets with functional obsolescence or shallow sites are trading—but at pricing that reflects capex and downtime.
“Capital is rewarding operational simplicity and location certainty. Chattanooga checks both boxes—if the real estate is functional and the story is repeatable.” — David Melton
Baseline expectations for the next 12 months:
Vacancy to hover in the high-2% to low-3% range, given modest deliveries and consistent tenant demand.
Rents to grind higher from the $7.76/SF level as existing availabilities lease and limited new supply enters; pace tied to interest-rate path and macro inventory cycles.
Deal timelines to stay disciplined: tenants will continue right-sizing footprints; landlords with best-in-class specs will retain pricing power.
Auto ecosystem watchlist: labor agreements, production schedules, and EV demand will shape supplier space decisions; we do not see a wholesale demand reset.
“Chattanooga remains a fundamentals market. If you’re a tenant, plan early. If you’re an owner, invest in functionality. If you’re an investor, focus on location, clear heights, and parking—those are the levers that compound here.” — David Melton
Chattanooga Area Chamber of Commerce, Real Estate Quarterly (Industrial Market, Q3 2025) — vacancy 2.7%, absorption +83,646 SF, rent $7.76/SF, inventory 63.77M SF.
Colliers, U.S. Industrial Market Statistics Q3 2025 — national absorption rebound (~60M SF).
JLL, U.S. Industrial Market Dynamics Q3 2025 — vacancy ~7.6% and supply deceleration.
Cushman & Wakefield, U.S. Industrial MarketBeat — Q3 national asking rents avg. ~$10.10/SF, continued YOY growth.
AP/FT/Reuters — labor developments at Volkswagen Chattanooga (2024–2025).
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