VOL. 126 | NO. 56 | Tuesday, March 22, 2011
Memphis Remains a Hot Commodity
Almost daily, we see evidence that reconfirms Memphis’ position as “America’s Distribution Center.” Cotton merchants are leasing and buying affordable warehouse space in one of only a few cities certified by national commodity organizations. Major manufacturers like Electrolux and Mitsubishi have found the market offers the right combination of incentives, trained labor pool, affordability, available land, and multimodal transportation here.
This comes as no surprise to the industrial real estate business, and particularly for Colliers International “insiders” who know a bit about the history of industrial real estate here. In fact, the phrase “America’s Distribution Center” has been attributed in part to one of our founders, Bob Snowden, who helped develop one of the first industrial parks in Southeast Memphis.
As the story goes, Bob and his partner Russel Wilkinson were looking for about 10 rail-served acres for their modular home business, but no such site was available. Envisioning that other businesses would also benefit from rail-served property, they rolled the dice and purchased 234 acres from the Frisco Railroad in the early 1960s for $1,700 per acre. The rest, as they say, is history. Wilkinson, Snowden and their additional partners accumulated several tracts of land over the next few decades to develop Airport Industrial Park, one of many industrial parks that contributed to Memphis’ status as a major distribution hub.
As most know, speculative industrial development came to a screeching halt in the Memphis metro area and virtually every other market in 2009 as a result of the recession. However, during the period between 2001 and 2008, more than 34 million square feet of industrial space was delivered to the Memphis market. With more than 211 million total square feet, our market ranked 33rd out of 141 industrial markets in the country in available inventory by the end of 2010 Yet, we have the fifth-lowest industrial real estate rental rates in the country, at $2.81 per square foot. Contrast that with the fact that we are tied for 26th in vacancy rates, at 13.7 percent. A great inventory of industrial space, relatively low vacancy rates, but extremely competitive rental rates: This tells us Memphis’ rates are not just a relative bargain, but a real bargain. (Data source: Year-end 2010 CoStar National Industrial Report.)
William Dunavant III was quoted in a recent Daily News article about intermodal logistics as saying, “There is a hell of a lot to be excited about from a local supply chain basis for Memphis that we can all sell, that we can all leverage. We can do more distribution and warehousing. This is the place to be.”
We couldn’t agree more. Bob Snowden and Russel Wilkinson would be proud. We believe the Memphis real estate market is finally being recognized as the hot commodity that it is for industrial real estate. As with any hot commodity, timing is everything. We think Memphis is priced to buy, sell or lease!
Thomas specializes in industrial brokerage and investment sales representing both tenants and landlords throughout Memphis for Colliers International.