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VOL. 118 | NO. 135 | Wednesday, July 28, 2004

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Commercial data

Commercial Sales Rise, Prices Skyrocket

Most market sectors show improvement from 2003


The Daily News

Anyone seeking signs of economic recovery could look no further than the commercial real estate market in Metro Memphis. Although some areas have been slower to recover than others, overall sales have increased while prices have skyrocketed.

The number of sales of both improved property and vacant land during the second quarter increased by 11.95 percent to 384, according to data published by Chandler Reports. There were 343 transactions during the same period in 2003.

The market is looking pretty firm, said Martin Edwards, a partner with Colliers Wilkinson Snowden. I would say its brisk.

Jolt in prices. Brisk might be an understatement, at least as it relates to prices. While sales were up, total price paid for commercial properties in the quarter shot through the roof.

During the second quarter, total sales volume for improved and vacant commercial properties increased by 59.11 percent over the same period last year to $255.1 million. Second quarter 2003 saw total volume of $160.3 million. Average price increased 42.12 percent to $664,266 from $467,397 during second quarter 2003.

We see a significant pickup in activity in all areas, said Irvin Skopp, vice president and director of asset management with Belz Enterprises. Obviously, youve got better rates on your newer properties, but I think all the activity based on market rates, theyre all getting better.

Strong showing. Frank Dyer III, senior vice president with Loeb Properties, is pleased with the markets performance.

Weve encountered pretty strong markets this year, particularly in retail, he said. Weve had strong call volume and strong showings. Office is a little better than in the past, and our industrial seems to be improving, as well.

By location. Of course, success hasnt been met in every Memphis locale, although several segments of Metro Memphis have seen improvement. Average price for commercial properties went up in 18 Memphis-area ZIP codes during the second quarter.

The way our business works is youre always better off with the best location, said Mark Halperin, executive vice president at Boyle Investment Co. Overall, (office) vacancy is spread out pretty consistently throughout the marketplace. There may be some pockets in one place or another that might be a little bit better or worse.

The 38120 ZIP code saw the highest average price during the second quarter, at $7.4 million for four properties. That compares to $5.4 million for five properties in the same period last year.

Cordovas 38018 ZIP saw a strong improvement in price, as five properties averaging 10,597 square feet garnered an average price of $2.5 million in the second quarter. That compared to six properties averaging 23,084 square feet in size and $570,361 in price during the same period last year, according to Chandler Reports, which is owned by The Daily News Publishing Co.

Mixed markets. Edwards said investors are interested in every sector in the Memphis market, from industrial to multifamily. He said there are several land opportunities in the market.

I had some people in all week from Chicago looking at investment property, he said. I think there is a healthy amount. From an investment land standpoint, you have to get out for things to happen. The 269 loop and all that activity on the other side of Collierville are going to stir up a lot of action for a long time.

As for office space, the market is beginning to show signs of life, but it has been behind the overall pace for commercial property.

The market in general, I would say its pretty slow, Halperin said. Things have picked up a little bit. Most of the high-end products are in pretty good shape.

Reason for optimism. But that doesnt mean Class A space is the only area with potential.

The weakness was in the B class and the C class buildings, but as of late, weve seen more interest in B and C, Halperin said. That is encouraging to me.

Kelly Truitt, executive vice president at CB Richard Ellis, said while office activity has increased, hes concerned that the market is losing a foothold in the corporate arena.

There are concerns weve lost some of our national and regional headquarter-type folks, he said. Some large, some small but we dont like losing any of them.

But we have seen some inquiries from some out-of-town folks.

Time of year. With a national election approaching, this time of year is typically seen as slow. But it seems investors arent concerned.

For an election year, its pretty good, Edwards said. Election years are questionable sometimes. People will be more worried, but it seems the job market is holding pretty well. I think the strength of the continuation of a non-volatile interest market has probably helped the real estate industry.

Cary Whitehead, senior vice president at Boyle Investment Co., said retail activity has been moderate, but it should improve soon.

I think it will stay like it is until after the election, he said. Everyone is wondering who is going to win and what impact it will have on business.


MORTGAGES 80 320 1,066
BUILDING PERMITS 120 590 2,248