Leaders from all the Tri-Cities held their breaths for the market correction since the 1 million-square-foot shopping and entertainment complex opened in Bristol, Tennessee, in 2014 near Interstate 81’s 74B exit.
Now, Steb Hipple, a retired East Tennessee State University economics professor and researcher for the school’s Bureau of Business and Economic Research, says unprecedented retail activity in Bristol from The Pinnacle and The Falls has caused significant changes in market shares among the three cities.
According to Hipple’s quarterly retail sales trend report, dollar sales increased in the fourth quarter of 2016 2.4 percent in Johnson City 2.2 percent in Bristol compared to the same period the year before. Kingsport’s sales fell 1.7 percent in the same time.
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Anchor tenant Bass Pro Shops opened in August 2014, but most of The Pinnacle’s other draws, including a Belk department store and a 12-screen movie theater owned by Marquee Cinemas, debuted in the spring and summer of 2015.
After the shopping center opened, for five straight quarters, starting with the second quarter of 2015, Bristol posted double-digit year-over-year sales growth.
Even through what Hipple called unprecedented growth for Bristol, Kingsport held its own, showing positive gains through 2016’s first quarter. For the second quarter, the city’s sales growth slowed to 0.8 percent and then showed year-over-year declines in the third quarter (6 percent) and the fourth (1.7 percent). For the year, Kingsport produced a 1.2-percent decline in dollar sales.
Johnson City remained in positive territory through 2016, with a 3.9-percent gain for the year. Bristol, even with wild growth in 2015, increased sales by 9.9 percent for the year.
The shifting concentrations increased the share of Tri-Cities purchases made in Bristol to 25.1 percent in 2016, up from 23.7 percent the year before. Kingsport’s share fell from 33.1 percent to 31.6 percent.
Johnson City’s share stayed steady at 43.3 percent.
Kingsport City Manager Jeff Fleming said he expected the changes after Bristol developers’ focus on retail.
When the Kingsport Pavilion Shopping Center opened on 11-W in 2007, the new Target, Best Buy, Kohl’s and other stores pulled some retail activity from Bristol, he said.
“What we try to focus on is long-term trend lines,” Fleming said. “When we added 1 million square feet of retail, we made some gains at Bristol’s expense. Now, Bristol has made some gains at our expense.
“Johnson City seems to be the only one unfazed by either.”
Johnson City’s insulation may be a result of its larger population, and Fleming said Kingsport leaders have focused on growing its housing options to compensate.
For two years, Kingsport officials have worked to incentivize developers to build new and varied housing options in hopes of attracting and retaining young professionals in the city, some of which commute from other Tri-Cities to work in Kingsport.
Fleming said the city has seen modest growth in single-family homes and apartment units over the last year.
“All retails sales don’t occur at one shopping center, there are always ebbs and flows in the market,” he said. “That’s why you have to have a strong consumer base, and we’re making sure we have adequate housing opportunities in Kingsport for the jobs we’re creating.”
He added Kingsport leaders are still investing in its retail opportunities. In February, the Kingsport Economic Development Board approved a $2.3 million Payment In Lieu of Taxes agreement with the owners of the Kingsport Towne Center, also known as the Fort Henry Mall, to help update the facility.
Though Fleming said he’d like to see retail options expand in Kingsport, he said the shopping center in Bristol — because it’s on the Tennessee side — has provided new funding to schools countywide.
Under Tennessee’s sales tax distribution formula, 50 percent of collected sales taxes are returned to the city or county in which they’re collected and 50 percent goes to all the schools in the county using a population-based formula.
In the past year, Kingsport City Schools have seen an uptick of $250,000 from sales tax revenue, he said.
“It’s healthy competition,” he said. “Moving around sales won’t help us in the long run. At the end of the day, the entire region needs to grow to make us successful, and that’s what we’re working for.”