Nationwide, commercial real estate is trending toward increased remote and hybrid working environments, leading to large numbers of office vacancies. In some markets, commercial spaces are transitioning to the residential market. With so many individuals relocating to and/or starting businesses in WNC, those trends are not happening in Asheville, according to Jessica Auge, Commercial Broker at Carla & Company.

Despite a strong remote work culture, vacancies are low in all commercial space types, and Auge said demand is still high. While the number of large businesses occupying one large space is decreasing, there is an increase of multiple small businesses occupying similarly-sized spaces. 

Demand for medical office spaces has increased as large medical systems are expanding in Buncombe County. In Henderson County, much of the commercial real estate growth is a result of the County’s focus on developer-friendly economic development and attracting large companies.

“Because the Asheville area is an attractive place to live, work, and play, large businesses are giving the area a strong look when considering expansions,” Auge said. “Often, they end up having to look elsewhere because we don’t have the inventory and prices are still high. The cost of dirt is so high, it’s difficult for developers to build and make a profit. Physical infrastructure is limited as well.”

The retail market is not seeing levels of vacancies that exist in other metro areas. During COVID shutdowns, there was not a large exodus of retail business leaving downtown and other large shopping areas around WNC. Many existing retail businesses are still in place, and Auge said a community that loves to support local helped keep these small businesses running. 

For industrial and flex-industrial real estate spaces, the demand is also very strong in the area. Auge said that sector is seeing more growth and more construction.

“As soon as they build it, they fill it up,” Auge said. “Local businesses are growing exponentially, and that’s really great for the area. We desperately need more small flex-industrial space because of the strong business community, and there’s not enough space for everyone.”

Auge said the region’s topography, geography, and geology can be a challenge for building industrial spaces. Large, flat tracts of land are more difficult to find outside of Asheville and Hendersonville, and she is seeing more demand for areas like Weaverville and Mars Hill. 

“We get calls all the time from clients looking for small office/warehouse space with dock-door access, and it just doesn’t exist,” Auge said. “A lot of our time as commercial brokers includes educating clients on what is here and what is possible in the region. We strive to provide realistic expectations rather than just what people want to hear.”

While some business owners seem fixated on a certain area, according to Auge, Marion, Old Fort, and McDowell County are becoming more attractive commercial markets. The cost of land and rental prices are lower, residential real estate costs are less, and there is available infrastructure and flat land that doesn’t exist in Buncombe or Henderson Counties. Though there may be more commercial space availability in outlying areas, distance can come with its own challenges, and many businesses want to be as close to downtown Asheville as possible. 

Interest rates are also creating challenges for businesses looking for space. Auge said commercial interest rates are often higher than residential rates, and owner-occupied investments are more challenging, which can make it difficult for business owners to acquire lending. Interest rates that may have been 5.5% to 6% in 2022 rose to 7% to 9% near the end of 2023, and 10% rates exist in some cases including with those seeking SBA loans.

“Business owners have a need, and time is money,” Auge said. “It can be scary for many, but  they have to jump on an opportunity when they can and hope their interest rates go down so they can refinance at a later date. They are making concessions in other areas to make up for it because if they don’t take the opportunities, it can delay the growth of their business.”