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 …
Tennessee
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 …
The Memphis apartment market is expected to record mixed performance this year, due to a spike in new inventory and decelerating employment growth. On the demand side, weakness in the housing market is keeping many individuals within the renter pool, boosting retention rates and supporting a modest uptick in tenant demand. Foreclosure activity rose 15 percent in the first quarter, when compared to the same period one year earlier, and is expected to continue this year as more adjustable-rate mortgages reset. Subsequently, apartment demand for Class B and Class C properties should pick up in this year, causing vacancy for the metro’s affordable rentals to improve. On the supply side, development activity is accelerating after 5 years of below-average additions to stock. By year-end, developers are expected to boost inventory by 1.1 percent, or nearly double the 5-year average, pushing vacancy higher while moderating rent gains. Builders have brought approximately 175 new apartment units to the Memphis market during the past 12 months, representing a modest 0.2 percent increase in inventory. One year ago, deliveries had totaled approximately 210 units. Development activity is picking up, as builders have roughly 1,100 units underway in the metro area. As for significant developments, …
What area is your expertise? • I specialize in commercial sales and leasing in the Cool Springs submarket just south of Nashville. What trends do you see presently in office development in your area? • There continues to be speculative development in and around Cool Springs on the office side. We’re also seeing the emergence of more and more mixed-use development in the area. Specifically Boyle Investment Company’s Meridian development and Southern Land Company’s McEwen Place are creating a new dynamic in Cool Springs. Class A office condo developments are also seeing a resurgence. Caden Holdings, The Stauffer Company and Alliant Commercial each have new buildings underway that will allow smaller prospective office buyers to purchase condos in the 3,000-square-foot range and up. Who are the active office developers in your area? • Crescent Resources, Boyle Investment Co., Duke Realty and Highwoods Properties have the biggest presence in Cool Springs. Please name one or two significant office developments in your area. What impact will these projects have on the market? • The mixed-use developments mentioned earlier will allow for a better commingling of living, working and playing. The new headquarters for Nissan North America and Healthways are well underway. These …
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