VOL. 128 | NO. 132 | Tuesday, July 09, 2013
Downtown Offices Gain Attention
By Amos Maki
The Downtown Memphis Commission focuses on living, working and playing Downtown.
Downtown has experienced tremendous success in the living and playing areas over the years, but the “work” part of the equation still needed a boost. So Downtown officials have launched several efforts to bring more workers to the area and promote and capitalize on existing commercial real estate successes.
“We recently launched a new office tenant broker incentive program as part of an overall strategy to address this,” said Downtown Memphis Commission President Paul Morris. “Our conversations with the broker community inspired the program.”
The program is designed to bring more office employees to Downtown by rewarding tenant-representative brokers to encourage office tenants and businesses to look Downtown for office space.
An incentive of up to $5,000 will be awarded upon the commencement of a minimum three-year lease term and the tenant opening for business. Recruited offices must have at least seven employees, sign a three-year lease and be moving from outside of the Downtown boundaries, not relocating from inside Downtown.
The DMC’s new strategic plan places an emphasis on increasing and retaining office and retail tenants.
Downtown experienced a surge in housing development from 2000 to 2010, which resulted in increases in housing units and residential population. According to the most recent population estimate, the 2013 residential population of Downtown is estimated to be almost 24,000, an 18 percent population increase since 2000.
While the residential population has grown, Downtown officials still want more workers Downtown.
The Downtown office submarket has an overall vacancy rate of 21.5 percent, which is higher than the citywide vacancy rate of 18.9 percent, according to a first quarter market review from Commercial Advisors/Cushman & Wakefield. The Downtown vacancy rate trails only the Midtown, North and Airport submarkets, which are not typically strong office performers. Downtown has the highest vacancy rate – 16.8 percent – for Class A space in the city.
Morris said several factors – the suburban car culture, the city’s eastward growth, East Memphis becoming the prime location for office space and the negative attitudes of some decision makers toward Downtown – have made it harder for Downtown to compete for business, but that could change soon.
“I think the younger professional workers by and large prefer working Downtown, and as they grow up to become the decision makers, Downtown office market will fare better,” he said.
Pinnacle Airlines is moving forward with plans to vacate 170,000 square feet of space at One Commerce Square. However, the state is looking for 100,000 square feet of space as it plans to abandon the Donnelly J. Hill office building in Civic Center Plaza.
The state, following a consultant’s recommendation, said it would be more costly to renovate the Hill building than to move to another location. Tennessee Gov. Bill Haslam said the roughly 900 workers there would be relocated elsewhere Downtown, and the latest RFQ from the state made it clear it wanted to remain Downtown. The RFQ from the Department of General Services said the area for the site would be bounded on the west by the Mississippi River, Interstate 40 on the north, I-55 to the south and I-240 on the east.
The DMC is also focusing on one of its major successes, the revitalization of the South Main Historic Arts District, which Morris said had $100 million in investment underway. The DMC recently launched a new branding campaign for the neighborhood called “Go South Main.” The campaign has a regularly updated website, www.gosouthmain.com, which features the businesses and people that have made South Main a success.