HOT-TICKET ITEM: Jackson, Miss.-based Parkway Properties bought the Renaissance Center in the Poplar Avenue corridor for $38.1 million earlier this year, helping fuel commercial real estate sales activity. The sale was one of many high-profile transactions in Memphis' market. -- Photo Courtesy Of Www.Pky.Com

Out-of-towners visit Memphis daily to spend money in the city's hotels, restaurants and shops. They come to see ducks at The Peabody Hotel, stroll Beale Street and pay homage to Elvis Presley with a trip to Graceland.

A different sort of visitor, however - the out-of-town commercial real estate investor - has been pumping much bigger dollars into the local economy.

"What's happened is the competition has gotten so fierce in the major markets - the New Yorks, the Chicagos, the L.A.s - that that (investor) money has got to find a home," said Johnny Lamberson, senior vice president of CB Richard Ellis Memphis.

About $39 million of that money came from New York and foreign investors to buy the 26-building Nonconnah Corporate Park earlier this year, just one example of the large purchases shaping the landscape of commercial real estate sales.

Bolstered by big-ticket sales like that one - not to mention a healthy dose of local ones - the commercial market looks healthy. March sales increased 42.5 percent from March 2006, according to Chandler Reports, www.chandlerreports.com.

"Things are real active," Lamberson said, "partly because there's a lot of capital chasing deals."

Second fiddle is a good thing

There were 104 commercial real estate sales in March totaling $215.6 million. That's up from the 73 sales for $141.8 million in March 2006.

Nothing about the month was particularly significant, most brokers noted. Instead, its strong numbers were the result of a number of deals that had been in the works for up to half a year and finally closed.

But such a huge upswing is encouraging nonetheless.

"There have been some amazing sales, truly there really have been," said Bayard Snowden, industrial broker at Colliers, Wilkinson & Snowden and president of the Memphis Area Association of Realtors (MAAR) Commercial Council.

Year to date through the end of March, 319 sales went through for $893.2 million, versus just 234 sales for $352.8 million in 2006.

Snowden noted that much of Memphis' success in commercial sales stems from the city's diversified economy. While first-tier markets sizzle, Memphis' stability on the industrial-property side has helped the city plug along nicely.

"We're definitely a second-tier market," Snowden said, "but there's nothing wrong with being a second-tier market."

More than anything, Snowden attributed the substantial sales numbers to Memphis' continued growth as an intermodal hotbed. With so many railroads and trucking companies expanding their operations because of the city's position relative to the West Coast, the need for warehouse and distribution space grows exponentially.

"There's only Chicago, Memphis and St. Louis where you can cross the (Mississippi) River with multiple railroads and interstates," Snowden said. "We're just in a really good spot for that."

Heading to the office

For all the success on the industrial side, Lamberson said the office sector is where the most action is.

"The majority of the investors are chasing office right now more than any other product type," he said. "The other sectors are still doing well, but the hot-ticket item right now is office."

Lamberson cited the widespread belief that the economy is getting stronger, along with a lack of new construction, rising rental rates and tightening occupancy, especially along the Poplar Avenue corridor.

That helped facilitate plenty of other large office purchases besides Nonconnah. Others include the Lenox Park office complex selling for $90.5 million to a California REIT (real estate investment trust) and also the Renaissance Center selling for $38.1 million to Jackson, Miss.-based Parkway Properties, both in January.

But why are many high-profile properties changing hands?

"In a nutshell, what's happening is people have over the last five years pulled out of the stock market to diversify their accounts," Lamberson said. "Real estate, because the interest rates have been dropping, was a real good investing vehicle for people to start diversifying. It's just becoming increasingly popular, which has enabled a lot of private buyers to enter these markets that were never buying before."

'Pretty good year'

Bob Harrell of Crump Commercial LLC doesn't handle large REITs, but many of the deals he brokers in Memphis are smaller companies looking to get out of leasing and into ownership.

"With the people I deal with, they're mostly people who have been renting and they've found out that if they've got enough excess capital they can put into equity instead of wiping out their operating capital, they can actually own something cheaper than they can rent it," Harrell said.

Ownership indeed has its privileges. It offers the chance to build equity. It gives a business total control of the property for renovation and remodeling. And, maybe most important, it enhances the salability of a business if that's the long-term plan.

"You're selling something that's got a hard asset behind it," Harrell said. "If the business fails, at least you still got the real estate to take up the slack of the loss."

Because of the numerous benefits of ownership, as well as favorable rates, most experts agree that commercial real estate sales in Memphis will continue to prosper as out-of-town investors seek secondary and even tertiary markets.

Also, pricing should hold across the board for the industrial, office, retail and multifamily sectors. The only change, Lamberson noted, might be less-capitalized funds, which could result in fewer offers.

Otherwise, the outlook seems to be positive.

"Right now," Snowden said, "it's looking to be a pretty good year."