From Urban Core to the Suburbs, the Memphis Retail Market is Poised for Growth
Memphis is a city with a soul and is internationally famous for music, food and entertainment. The city draws over 12 million tourists annually, but less publicized is that Memphis is home to six Fortune 1,000 companies (FedEx, International Paper, AutoZone, Terminix, First Horizon and Sylvamo). Additionally, the city’s employment base includes a robust healthcare community with St. Jude Children’s Research Hospital, the University of Tennessee Medical School and Regional One Health. Plus, Memphis is known as “America’s Aerotropolis” with the second busiest cargo airport in the world, Memphis International Airport.
The Memphis metro statistical area (MSA) has jobs, low cost of living and a relatively young population with an average age of 34. There is a perception that the population is flocking to Nashville, but the latest Census Bureau statics show that between 2013 and 2017, slightly more Nashvillians moved to Memphis than the reverse.
Memphis’ unique trade area encompasses parts of Arkansas and Mississippi, leveraging Interstates 40, 55 and 22 with the new Interstate 269 Corridor, a 60-mile half loop around southern Memphis and north Mississippi. The I-269 Corridor links to a web of seven converging highways, serving 152 metro areas and two-thirds of the nation’s population that is reachable by truck in one day.
The north Mississippi submarkets have seen significant growth and increased retail demand. Bordering the Tennessee-Mississippi state line, DeSoto County is the fastest growing county in the state of Mississippi and saw 22.1 percent jobs increase between 2014 and 2019. Notably, Mississippi’s premier Tanger Outlets, which draws shoppers from a 2.5-hour radius according to a CBRE geofence study, is located in Southaven, as well as the only Google Operations Center in the United States.
With an average resident income of $155,000, Germantown is becoming known as a specialty retail destination in the metropolitan area. Saddle Creek is touted as the nation’s first lifestyle center and is anchored by Apple, Anthropologie, lululemon athletica and Stoney River. A former Kroger at Germantown Collection was converted to Trader Joe’s and The Container Store in 2018. The pandemic seemed to actually boost this center as this Trader Joe’s is now the second highest performing store in the state, according to AI Placer.
New retail developments
The growth in Memphis has brought an incredibly unique and exciting mix of retail to the city, particularly several high-profile hotels and mixed-use projects in Tourism Development Zones and Midtown. The demand is high for restaurants, outparcel users and more Class A anchors throughout the MSA.
There are several shopping centers across Memphis that are being renovated and seeing acclaimed new tenants come into the market. Williamsburg Village in east Memphis, a popular dining and boutique district, saw openings in the past year from Crumbl Cookie, Southall Café and the first Torchy’s Tacos location in Tennessee.
One of the most notable new projects is Liberty Park, a mixed-use development at the site of the old Fairgrounds in Memphis’ Midtown district. Adjacent to the University of Memphis Liberty Bowl Memorial Stadium, Liberty Park will include a 227,000-square-foot youth sports and events complex and an 18-acre mixed-use development that features hotels, retail, entertainment venues, restaurants and apartments, as well as public plazas for Memphians to gather.
The Walk on Union, formerly known as Union Row, is a planned mixed-use retail and multifamily development adjacent to AutoZone Park in downtown Memphis. A multitude of other projects focused on urban revitalization are happening in Whitehaven (near Graceland), The Pinch District, Uptown, Raleigh, The Edge, Summer Avenue and Broad Avenue.
There are a handful of new hotel projects that have recently opened in Memphis. The Hyatt Centric Beale Street, a new 227-room boutique hotel, opened in downtown Memphis, and the Memphian Hotel, a $24 million, 106-room hotel in Midtown’s Overton Square, both opened this past spring.
According to local hotel consulting firm Pinkowski & Co., there are 47 hotel projects in some phase of the Memphis hotel market pipeline that propose to add 6,200 rooms by 2025. The addition of these hotels is a great sign for the overall retail market as developers plan for increases in tourism, as well as business travel.
Multiple developments are either under construction or proposed in the suburbs as well. There is significant retail activity in Arlington, Lakeland, Collierville and Germantown, including Carrefour at The Gateway, a planned high-density, 10-acre mixed-use development that will offer upscale retail and dining, Class A offices and apartments.
Absorption, rental rates
In 2020, Memphis retail faced the same challenges as the rest of the world with activity slowing down across the region. However, retail activity remained strong throughout the pandemic for quick-service restaurants, automotive-related users, discounters and grocery-anchored centers.
The Memphis retail market has a 4.4 percent vacancy rate and saw a 3.1 percent increase in rental rates in the past year. These are strong indicators of the increased demand the city is seeing for new retail options.
Overall, the retail market in Memphis is on the upswing, but there is still plenty of room for retail anchors to come into the market as the region continues to grow. The fundamentals of the retail market are strong, and the growing population, as well as new tourism drivers, will continue to create demand for additional retail product.
— By Ashley Utley Walker, Senior Associate, CBRE. This article was originally published in the July 2021 issue of Southeast Real Estate Business.