Memphis continued its record-setting ways throughout 2018. Absorption was higher than 2017 by over 735,000 square feet for a total of 6.7 million square feet. Overall vacancy rates fell below 6 percent for the first time in recent history. As of Jan. 1, 2019, vacancy rates were at 5.8 percent. One would think this would come at the expense of rental rates, however, rental rates stayed constant at $2.77 per square foot until year-end. This represents a slight increase of 10 cents per square foot over 2017. With an industrial market exceeding 270 million square feet, it’s no wonder how Memphis got its name as “America’s Distribution Center.” Memphis International Airport is the second largest cargo airport in the world, home to 400 trucking companies, the third busiest trucking corridor (Interstate 40 to Little Rock), one of only four cities to be served by five long-haul Class 1 rail systems, the fourth largest inland port and the second largest stillwater port. Home to the FedEx World Hub, as well as UPS and USPS hubs all operating 24 hours a day, 365 days a week, Memphis provides the most cost-effective distribution and logistics operations in the country. While Memphis has been …
In January, during his annual State of the State address, Memphis Mayor Jim Strickland emphatically exclaimed, “Memphis has momentum!” Memphis, the biggest little town in America, is definitely in a period of unparalleled economic growth. Memphis has momentum on its side with the $10 billion, nine-year expansion at St. Jude Hospital and an infusion of hospitality that includes a new convention center and no fewer than 17 new hotels, which all started, will start or will be completed in downtown in 2019. Additionally, $4 billion in building permits have been awarded in the last few months with another $5 billion planned by developers. Most importantly, the highly anticipated Memphis 3.0 plan — the first comprehensive growth strategy for the city in 30 years — will ensure growth is sustained for many years to come. What are others saying about Memphis? Many respected publications are putting Memphis back on the map. Food & Wine put Memphis in its top 50 places to go and eat in 2019. Frommer’s Travel named the city the best place to visit in 2019. TravelChannel.com lists Memphis as the hottest Southern destination in 2019. And Forbes stakes Memphis as the best bet for real estate investments. …
Memphis is currently undergoing an evolution that has been experienced by many markets in the region: increasing activity among office tenants moving with more confidence. In Memphis, this is manifesting itself in a flight to quality among office-using companies. While East Memphis is considered the most attractive office submarket in the region, the Downtown submarket has experienced significant leasing over the past 24 months and is gaining momentum. This focus on urban office is another trend that is just now hitting the Memphis market. Memphis’ most significant win in 2018 was Indigo Ag’s announcement that it will relocate its North American headquarters for its commercial operations to downtown Memphis. Indigo Ag, a high-tech agriculture firm whose primary service includes coating seeds with protective microbes, will expand its current downtown Memphis office at Toyota Center. With the expansion, the firm intends to increase its workforce by 700 corporate employees and invest $6.6 million over the next three years. Upon its completion, Indigo Ag will occupy 103,500 square feet in the eight-story Toyota Center, which will be renamed “Indigo Plaza.” The move represents the most recent and significant corporate investment in the Downtown submarket, following the relocation of ServiceMaster and its 1,200 …
The industrial real estate sector is currently undergoing one of the greatest expansionary periods in the nation’s history. Record development, all-time high occupancy and rental rates and strong leasing activity have been a boon to the U.S. industrial market in the last two years. In addition to these fundamental elements that make up a strong sector, there has been a demand driver that has transformed the industrial market more now than ever: e-commerce. Amazon is now the largest industrial occupier post-recession, which is forcing retailers and wholesalers to modernize their supply chain to keep up. E-commerce is not a new phenomenon, but it is becoming increasingly competitive, and is expected to grow another 55 percent in the next four years, according to Colliers International research. E-commerce has reshaped the way people purchase goods, resulting in new increased requirements on the transportation of products. As such, organizations are needing to reevaluate their supply chain strategies and transportation costs, and demand for smaller fulfillment centers closer to the urban population is exploding. This challenge around the “last-mile delivery” is altering the distribution and logistics sectors. IMS Worldwide defines the last mile as the “last point of distribution or sortation to the final …
With a staggering number of tower cranes at work every day, Nashville has delivered a record number of multifamily units, office space and hotel rooms in the past several years. Even with all this development and with tourists flocking to downtown seemingly every week of the year, one category has lagged: new retail downtown. To provide a snapshot of growth in downtown Nashville, the number of residential units downtown has grown from 3,700 in 2010 to 11,800 today. Hotel room rates since 2008 have virtually doubled, and we currently have 1.6 million square feet of office space under construction. But even with all this explosive growth, retail development downtown has lagged. Many would wonder why, and there are a number of reasons. Historically, many developers have seen downtown Nashville as an afterthought to include ground-level retail in their projects. Because of this, small amounts of retail were metered onto the market. This retail space was geographically spread out over a number of developments across downtown. This did not lead to a rich consumer experience, because consumers strongly prefer finding retail options in a concentrated environment. Another challenge to building great retail has been the limited scale of individual projects. But …
The Nashville office market continues to have positive momentum coming into 2019, following three years of record-setting leasing that brought several big name corporate tenants to the market — plus a recent surprise announcement that Amazon will soon be adding 5,000 employees to Nashville’s central business district (CBD) within the Nashville Yards development. The bulk of the activity is concentrated in CBD Class A office space, as tenants focus on real estate decisions that emphasize recruiting and employee retention. This trend mirrors activity occurring in many major markets across the country. Companies continue to seek the coveted urban work-live-play environments designed to attract the millennial population. Avison Young research shows that the CBD recorded 255,330 square feet of positive net absorption at year-end 2018. Among the large companies that signed notable leases in the urban core in 2018 are Philips, AllianceBernstein and Asurion, which is adding 400 tech employees and consolidating several locations into a new 550,000-square-foot headquarters at 11th Avenue North and Church Street in the Gulch. Construction is scheduled to begin this year on that headquarters, with completion slated by the end of 2021. Nashville’s strong business climate and robust office leasing activity have caught the attention of …
In 2018, Nashville continued experiencing unprecedented population growth. Major job announcements, rising home prices and income growth have led to a shift in renters-by-choice. This has continued to transform our urban core and has had an immense impact on various industries within the city. On the investment side, multifamily assets in the market demonstrated some notable pricing trends through year-end 2018. The median price per unit in Nashville increased by more than 14 percent from fourth-quarter 2017 to fourth-quarter 2018, reaching $145,000 compared to $117,000 in the Southeast and $162,000 across the nation. This comparison demonstrates how Nashville is a highly valued market in the Southeast but remains attractive from a pricing standpoint to national investors looking to acquire quality product. What was an increasingly concessionary environment in 2017 and 2018, the Nashville multifamily market will tighten throughout 2019. Large-scale job announcements like AllianceBernstein, Amazon and Ernst & Young will bring thousands of jobs to Middle Tennessee. These announcements will help ensure that the recent trend of high absorption will continue through the year. Demand in Nashville has been strong relative to the historical average, but supply has outperformed demand in the past year due to new construction of much-needed …
Memphis ended 2017 with an overall vacancy rate of 14.8 percent, which is up slightly from where the year started at 14.5 percent — the highest level in three years. As the saying goes, “don’t judge a book by its cover,” and this especially applies to the Memphis office market. In 2017, 600,000 square feet of office space was absorbed. Developers also started 2017 with more than 1.2 million square feet of new office space in the pipeline, with 800,000 square feet delivered last year and the other 400,000 square feet expected to be delivered by the end of the first quarter this year. So within just six months, nearly 6 percent of Memphis’ total office market size was added to the overall available space. That is more new product being delivered than the city has seen in over a decade. Of this 1.2 million square feet, nearly 80 percent will come from adaptive reuse projects, where previously non-functioning properties located in non-core submarkets have undergone significant repurposing. The Sears Crosstown building was erected in 1927 as a 1.5 million-square-foot, mail-order processing warehouse and Sears retail store. The project was the largest building in Memphis at the time of its …
Consistency is key, and that’s exactly why investors find Memphis more attractive than ever: the Grind City’s financial and commercial real estate stability. The area has grown into a hub for both the distribution and transportation industries. As the largest economic driver in the state, Memphis International Airport alone injects over $20 billion a year into the region’s economy. Thanks in large part to FedEx, the airport has become the second-busiest cargo airport in the world. FedEx’s presence creates a secondary demand from all retailers as they want to have a large distribution presence in the market. Going High-Tech Marketable growth in the Memphis economy extends beyond the distribution and transportation industries. Sizable expansions at University of Tennessee’s Medical School, St. Jude Children’s Research Hospital, Methodist University Hospital and LeBonehur Children’s Medical Center, as well as the migration of medical device manufacturers such as Smith & Nephew and Medtronic, show how Memphis is not only the Home of the Blues and global shipping, but also a high-tech healthcare hub for the Mid-South region. All this growth has helped propel Memphis’ millennial population, especially 20- to 34-year-olds who make up a high percentage of the city’s workforce. Last year, Memphis marked …
The positive momentum for the Memphis industrial market continues. For the previous three years, the market has had positive absorption every quarter. This momentum continued through 2017, where we saw an annual net gain of 6.6 million square feet of positive absorption. Memphis has not seen this type of multi-year, record-breaking performance since the early 2000s. Achieving year-over-year absorption volume at this level proves Memphis can continue to attract both new developers and investors. Given ideal geographical positioning, Memphis is known as America’s Distribution Center, boasting unparalleled expertise in distribution and logistics. The Memphis International Airport houses the second-busiest cargo airport in the world. Companies recognize that the Memphis MSA offers reliable, cost-effective distribution, with the ability to reach 70 percent of the U.S. population within 24 hours. Moreover, Memphis is one of only three cities with five Class I Rail Systems, and has the fifth-largest inland port, as well as 10 major trucking companies utilizing Interstates 40 and 55. It’s no wonder that FedEx World Hub makes Memphis its home, and UPS chose it to house a major hub. Southeast Submarket The Memphis market continues to see nearly all of its growth to the southeast into Fayette County, Tennessee, …