The Nashville metropolitan retail market remains strong in comparison to the rest of the United States as the overall vacancy rate dropped to 5.7 percent at the end of the third quarter. Nashville’s MSA has grown to more than 1.6 million residents and ranks as the 38th largest MSA in the country with Nashville being the largest core population in the state of Tennessee. The strong economy is supported by diverse sectors of industry including healthcare, entertainment, education, and automotive. At the end of the third quarter, the unemployment rate dropped to only 7.3 percent compared to the national average of 8.6 percent. Highly sought after retail submarkets, such as Green Hills, Brentwood, and Midtown/West End Avenue corridor, have little to no vacancy which has spurred a new trend in Nashville: urban and mixed-use redevelopments. The lack of available large tracts of land for development in and around metro Nashville has created significant demand back into the core urban markets of Nashville. For example, following the success of the highly touted Hill Center retail/office project a few years ago, the Green Hills Mall underwent a major expansion to accommodate Tennessee’s first Nordstrom and Container Store in 2011. In Brentwood, Bristol …
Tennessee
We've all said time and again that the key to recovery in office real estate is continued and significant increase in employment rates. Like much of the rest of the country, Memphis has begun to see an uptick in employment in the professional and business sector. In the Memphis MSA, employment in this all-important sector for office real estate jumped from 73,400 to 87,100 during 2011, approaching pre-recession highs of 88,800. Additionally, on May 3, the U.S. Bureau of Labor Statistics reported that productivity in the U.S. fell at an annual rate of 0.5 percent for the first 3 months of 2012, after steady growth during 2011. This is the first sign that corporations have achieved the efficiency they desired and needed to weather the latest economic storm. As demand increases, corporations will be forced to hire to fill the gap between demand and capacity, so the good news for the market is that employment rates, the most fundamental drivers of office real estate, should continue to improve. There are a couple of black swan events, the outcomes of which will shape the immediate future of the office market in Memphis, and specifically the Central Business District. The first is …
The Memphis metro is an interesting industrial market. Like many other markets, we’ve begun to see positive signs in the numbers. 2011 ended with positive absorption of more than 1.6 million square feet. Because nearly all of the space added in 2011 was build-to-suit, vacancy rates have begun to decline a bit. IDI has just announced plans to build two buildings totaling 1.1 million square feet in Olive Branch, Mississippi, which will be the first new speculative development since 2008. But it’s hard to look strictly at the numbers and really get a sense of our market. That’s because, when compared to behemoths like Chicago and Dallas, we are a relatively small industrial market, with approximately 210 million square feet, depending on how you count the space. This creates significant volatility in the numbers when a major lease is won or lost. So it is the fundamentals that paint a better and more realistic picture of the Memphis market. Though relatively small in size, we’re a giant in terms of the infrastructure that makes us attractive to major players. A few of the major leases during the last 12 months help illustrate that: Trane’s 626,00-square-foot lease, California-based online retailer Newegg …
Memphis, home of the Blues and Elvis Presley’s “Graceland”, is the largest city in the state of Tennessee with a population of 676,646. Tourists are drawn to the downtown Memphis entertainment district, anchored by the world famous Beale Street, NBA basketball with the Memphis Grizzlies, and AAA baseball’s finest ballpark, home of the Memphis Redbirds, the St Louis Cardinals farm team. Coming soon is Bass Pro Shop’s gaming retail store and museum, which will attract outdoors enthusiasts. With more than 50,000 people working in the medical industry, Memphis is internationally recognized for its contribution to the medical field. Located in the Medical District, is St. Jude Children’s Hospital, ranked the No. 3 children’s cancer hospital in the country by U.S. News, Le Bonheur Children’s Hospital nationally ranked in many different specialties, the Regional Medical Center of Memphis, one of the top trauma centers in the country and the University of Tennessee Center for Health Science. With its centralized location in the middle of the country, Memphis is the home of many distribution facilities and hubs, most notably FedEx as well as other Fortune 500 companies. The Memphis Chamber of Commerce expects to add more than 7,000 new jobs in 2012. …
During the third quarter of this year, the Memphis multifamily market slowed down compared to the second quarter. Rent and construction were up, however, occupancy and sales fell during the third quarter. “We’re seeing continued improvement in our market,” says Tommy Bronson, III, vice president of the multi-housing group in CB Richard Ellis’ Memphis office. “Due to record low construction levels, we’re seeing positive rent growth, occupancy and concessions burning off.” The overall occupancy in the third quarter of 2011 was 91.6 percent, compared to 92.1 percent in the second quarter. The strongest submarkets are Germantown/Collierville, Downtown and Cordova, which all average in the low- to mid-90s for occupancy, Bronson says. “In those locations, we are often seeing no concessions now, which is a big deal in the Memphis market because we’ve been a concessionary market during the last few years,” he says. Bronson adds that Class A and B properties are pushing rents because concessions are burning off. Rents for new construction rose from $939 per unit in the second quarter of this year to $960 per unit in the third quarter of this year, an increase of 1.8 percent. Overall rents also increased slightly, from $733 in the …
Nashville’s economic growth has remained positive throughout 2011, strengthening Nashville’s position as one of the more resilient and dynamic metropolitan areas in the southern U.S. Through August of 2011, the metro has recovered more than half of the jobs lost during the recession, having added nearly 22,000 jobs since the beginning of 2010. Currently the unemployment rate in Nashville is hovering around 8.4 percent, compared with 9.1 percent at the national level. The area has become a prime relocation destination for major corporations, bringing well-paying jobs to the area. In 2009, Nissan relocated its headquarters from Los Angeles to Cool Springs, and now employs more than 1,300 people. Amazon recently announced two new major facilities that will bring more than 1,500 jobs to the area. GM plans on restarting assembly at its Spring Hill plant, creating 1,700 jobs as part of the new labor deal. The area has become more than just the country music capital. It is now a hub for higher education and healthcare, as the three largest employers are Vanderbilt, HCA and St. Thomas Health Services. Like many markets across the U.S., the Nashville multifamily market has now rebounded beyond pre-recession levels in terms of both occupancy …
During the second quarter of this year, the Memphis multifamily market showed signs of growth. Occupancy, rent, absorption and sales were all up from the first quarter of this year. Construction remains relatively flat; however, after three consecutive quarters of no new units coming on line, 114 units were delivered in the second quarter. “We’re seeing continued improvement in our market,” says Tommy Bronson, III, vice president of the multi-housing group in CB Richard Ellis’ Memphis office. “Due to record low construction levels, we’re seeing positive rent growth, occupancy and concessions burning off.” The overall occupancy in the second quarter was 92.1 percent, compared to 91.6 percent in the first quarter of 2011. The strongest submarkets are Germantown/Collierville, Downtown and Cordova, which all average in the low- to mid-90s for occupancy, Bronson says. “In those locations, we are often seeing no concessions now, which is a big deal in the Memphis market because we’ve been a concessionary market during the last few years,” he says. Bronson adds that Class A and B properties are pushing rents because concessions are burning off. Rents for Class A and B properties rose from $803 per unit in the first quarter of this year …
It seems like every commercial real estate move made in the Chattanooga office arena is directly related to the industrial market. Landlords, tenants and maybe even some office developers are anxiously waiting for three significant manufacturing facilities to make their mark on the area. The coming Volkswagen plant will spur office growth in a huge way, but a $300 million expansion by the power service provider Alstom and the addition of Munich, Germany-based Wacker Chemie AG’s property in Cleveland, Tennessee, will also jump start the Chattanooga office market. “There’s a lot of industrial activity that’s just starting to really catch its legs. The office is following,” says J. Bryan Rudisill of Chattanooga-based NAI Charter. “There’s going to be support that comes in — lawyers, accountants, engineers — but the office market won’t change over night because of these announcements.” Office transactions, even with a guaranteed influx of industrial facilities, will be slow to pick up, but office development will be even slower due to trouble in the financial markets. Life insurance companies are on the sidelines, and most bigger banks are reluctant to let developers borrow money. The best bet for financing is regional and local institutions, but these banks …
The secret to success in any market is diversity. When a city’s economy isn’t wedded to a single industry, there’s more chance that area can survive a downturn. Crews Johnston of Colliers Turley Martin Tucker says Nashville is such a place. The city has a significant healthcare presence and a number of automakers, but Johnston says none of these industries have suffered an outright collapse akin to the downfall of the big financial firms. “Everybody talks about a diversified economy; we actually have one,” he says. This array of companies has left Nashville office brokers with a better outlook on the current crisis than their contemporaries in similar markets. Unemployment is sitting steady, and office vacancy has topped out at around 13 percent, with most of the empty space situated in the downtown and airport markets. The Interstate 65 corridor, which includes the Cool Springs and Brentwood submarkets, is actually doing relatively well. In fact, national tenants looking to move into Nashville often find the market is tight. According to Johnston, four or five national firms are currently circling the city, looking for available space. On the flip side, very little is happening in the sales arena. Sellers are reluctant …
The Memphis industrial market, comprised of 176 million square feet of warehouse space and 7.7 million square feet of flex space, reached a total of just more than 184 million square feet at the end of 2008. Deliveries during that time included just more than 2.8 million square feet in nine new buildings, including the 1.1 million-square-foot Nike Footwear Distribution Center in the Northwest submarket. In the DeSoto County, Mississippi, submarket the 800,000-square-foot Building F in the Crossroads Distribution Center and the 600,000-square-foot Building 3 in the Olive Branch Distribution Center were added as well. Annual deliveries have been in steady decline since hitting a 5-year peak of 6.9 million square feet in 2005. More than 1 million square feet of industrial space is currently under construction in the market, and more than half of the space is pre leased. Virtually all speculative building deliveries in the market have been occurring in DeSoto County, where the business environment is friendly and tax incentives are healthy. During the second quarter of 2008, 16 buildings were delivered in DeSoto County, driving the vacancy rate in the submarket to a high of 23.4 percent, as of the end of the quarter. Three straight …