In a world where volatility has become the norm in commercial real estate, Memphis stands out as a market defined by consistency. While other cities have experienced dramatic swings in vacancy, absorption and construction activity, the Memphis office market continues to follow a more measured pace.
“Slow and steady wins the race” is more than a phrase — it’s a fitting summary of how Memphis has maintained balance amid national disruption.
Stability in supply
Over the past couple of decades, the total supply of office product in Memphis has grown at a moderate pace, sitting at nearly 28 million square feet today. This disciplined approach has kept vacancy within manageable levels and prevented the oversupply issues seen elsewhere.
With no new speculative construction of size since 2009, the market has had time to absorb shifts in tenant behavior without being flooded with excess space.
Demand aligns with supply
Because supply has remained relatively static, demand has shifted in composition rather than volume. Like many cities, Memphis has seen a “flight to quality,” with tenants prioritizing modern, amenitized spaces over outdated properties — even if that means reducing their footprint.
A company that once leased 30,000 square feet in a Class B building may now lease 20,000 square feet in a Class A asset, enabled by hybrid work and more efficient layouts.
This shift has boosted occupancy in the top-tier buildings. Class A assets in Memphis are outperforming pre-pandemic levels, while Class B and C buildings are struggling. Class A space is now averaging 91.2 percent occupancy compared to just 78.3 percent for B buildings, with asking rents for Class A at $24.78 per square foot — over 25 percent higher than lower-tier product.
East Memphis
Unlike many cities where the historic downtown core is the business center, Memphis’s office activity is anchored in East Memphis. Centered at Poplar Avenue and I-240, this area houses the city’s most prestigious office properties and a dense population of decision-makers.
The trend of office users migrating east continues, extending into the Highway 385 corridor and Northeast submarkets. Over the past three years, the East Memphis, Highway 385 and Northeast submarkets had 786,000 square feet of positive absorption, which has especially impacted well-positioned assets.
Meanwhile, Downtown vacancy increased from 12 percent to 17 percent, primarily due to prominent buildings going off line for planned adaptive reuse conversions and then coming back on line vacant.
Cost of construction
One of the biggest headwinds facing tenants and landlords alike is the high cost of construction. Tenant improvement (TI) allowances have become the battleground for winning deals. Where landlords once budgeted $5 per square foot per year of lease term, the cost to remodel is now closer to $8 per square foot. On a 10-year lease, that’s a swing from $50 per square foot to $80 per square foot in TI outlay, which is affordable only to well-capitalized landlords.
Deals are getting done, but only when tenants commit to longer lease terms or contribute to build-out costs. Flexibility, creativity and capital are more important than ever.
Absorption
Memphis posted four consecutive quarters of positive absorption before a brief pause, and it returned to positive territory in the second quarter of 2025. That momentum reflects both confidence among occupiers and the resilience of the local market.
Historically a market made up of smaller tenants, Memphis has benefited from diversified leasing activity. However, 2025 has seen a noticeable increase in demand from larger tenants. These firms — having delayed decisions during COVID — now have greater clarity on long-term space needs and are actively pursuing new leases.
Commute times, utilization
One of Memphis’s key advantages is its short commute times. With nearly everything in the city no more than 20 minutes away, the metro ranks among the lowest nationally for remote work adoption.
According to recent Census data, just 15.2 percent of the Memphis workforce works remotely, compared to a national average of 27.5 percent. In many buildings, office attendance feels more like 2019 than 2025 — encouraging news for landlords and investors alike.
Challenges, opportunities
Memphis isn’t immune to broader economic pressures. Higher interest rates and looming loan maturities are causing stress for some office owners.
In recent quarters, at least five stabilized assets sold in pre-foreclosure situations. While challenging, these sales have helped reset market values and provide a clearer picture for investors.
Looking ahead
The Memphis office market offers a compelling story of steady, sustainable performance. The fundamentals remain strong, tenant demand is stabilizing and landlords who invest in their buildings are finding ways to win.
As we move into the second half of 2025, the Memphis office market isn’t sprinting — but it’s not falling behind either.
Slow and steady, indeed, is winning the race.
— By Landon Williams, SIOR, CCIM, Executive Vice President of Capital Markets, Cushman & Wakefield | Commercial Advisors. This article was originally published in the July 2025 issue of Southeast Real Estate Business.