VOL. 110 | NO. 1 | Tuesday, January 2, 1996
1/2 real analysis
Memphis retail, lodging outlook rosy for 96
Prospects for the local real estate market remain pretty much bullish on all fronts as we head into the new year, according to those who ought to know.
Belz senior vice president Andrew Groveman summed up the past year this way, "I would describe the Memphis real estate market in 95 as a feeding frenzy in all categories.
"It was a very exciting time for those of us in the business and we should all be proud. I think Mayors Herenton and Rout have shown exceptional leadership in creating a sense of community.
"Youll see great things in 1996, especially Downtown with Peabody Place and all the other development that is going on there."
With respect to retail space in particular, Groveman predicted a continuing strong demand, pointing out that the Belz Factory Outlet Mall is now virtually leased up, with the addition of an annex soon to come on line.
Weston Cos. Brad Smith was likewise sanguine about the retail real estate market, alluding to forthcoming changes in that sector.
"The story in 96 will be the opening of big-box retailers, like Home Depot. Their stores average 130,000 feet each, and three are planned to open in Memphis next year," Smith said.
Absorption of retail space has continued strong, and Smith predicted "extremely healthy" markets for the coming year. Overall retail occupancy in the Memphis market currently is estimated at roughly 89 percent, despite an increasing supply of space.
Westons new Cross Creek center at Riverdale and Nonconnah Parkway, for instance, contains roughly 400,000 square feet and is slated to open in 96. Smith said the center is already 90 percent leased. Typical of the big-box center, major tenants will include Home Depot, Kroger, Computer City and Baby Superstore.
Looking further ahead, the potential coming on line of two new power centers courtesy of Trezevant Realty Corp. and Faison and the opening of the 1.1 million-square-foot Wolfchase development in 1997 will add an interesting factor to the retail equation.
As a volatile hybrid of real estate and other businesses, the lodging industry, like its more pedestrian counterparts, also has maintained a strong showing throughout the region.
Final statistics are not yet in but occupancy for Memphis hotels and motels will likely come in at around 70 percent, a figure substantially above the regional average of roughly 66 percent.
Although occupancy declined fractionally in 95, from 66.7 percent to 66.2 percent, average room rates escalated from $49.10 in 94 to $51.33 last year. And this was in the face of a hike in room supply for the area of 3.7 percent, the highest in the nation, according to Bobby Bowers, vice-president of Smith Travel Research.
Bowers predicted a slight drop in demand for lodging in the coming year and "no huge growth in room supply, probably only about 1.8 percent."
Bowers added that, although the big, full-service hotels are once again doing quite well nationally, no significant capital investment is likely to be sunk into that market segment in 1996.
"There is still a good supply of older full-service facilities out there to be rehabbed. Too many investors remember the role of the big hotels in the S&L crash." Meanwhile Memphis lodging properties should do quite well.