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VOL. 126 | NO. 105 | Monday, May 30, 2011

Market Changes

Commercial foreclosure sales increase 47 pct.

By Sarah Baker

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With the local commercial real estate industry showing signs of a rebound, it still appears the bounce back has a ways to go to a full recovery.

Some industrial property transactions helped pace the commercial real estate market over the past year, a market that is seeing slow improvement thanks in part to foreclosure sales.

(Photo: Lance Murphey)

Shelby County’s commercial sales during the past 12 months – May 2010 through April 2011 – totaled 698, up 19 percent from 585 sales during the previous 12-month period, according to the latest data from real estate information company Chandler Reports, www.chandlerreports.com. Commercial real estate sales numbers reflect office, industrial and retail real estate.

The most recent total is down just 1.6 percent from 710 sales during the 12-month period before that.

Commercial bank sales, or foreclosure sales, for the 12-month period – 47 for a total of $20 million – made up 7 percent of the total. That’s a 47 percent year-over-year uptick from the prior period’s 32.

This year’s increase is due to the banks taking a lot of properties back, said Andy Cates, vice president of brokerage with Colliers International. It’s more of a price correction than a market correction.

“I bet we’ve done 65 or 70 transactions and probably at least a third of them are with banks,” he said.

A market correction happens because of a price correction, Cates said. Owners of properties on the market for a while have finally come down to selling prices that are suitable to the buyer.

“Everything sells at a price, so I think that’s what’s driving the uptick in commercial properties, is that some of the stuff that was on the market for a really long time got down to a price level that a lender would approve or the seller would approve,” he said. “The more vacant properties you get off the market, the better it is for the market.”

Average sales price has seen an impressive boost. Commercial sales during the past year averaged $895,478, a 35 percent increase from $663,061 during the previous 12-month period.

For the 12-month period ending April 2011, total commercial sales volume marked $625 million – a whopping 61 percent increase from $387.9 million for the previous period.

Making up nearly 40 percent of this year’s total was Exxon Mobil Corp., with 28 sales averaging $883,500 and totaling $24.7 million.

The Crescent Center, left, and the Triad Centre, both owned by Highwoods Properties Inc., form one of the hottest areas in Memphis real estate along the Poplar corridor.

(Photo: Lance Murphey)

Notable deals so far this year include Panattoni Land 3 LLC’s two sales at 4795 Imagination Drive for a total of $19.2 million in January.

Also in January, Richard Stern, principal with Canadian investment group Olymbec, bought the 1.1 million-square-foot Space Center, 3051-3133 Tranquility Drive, for $7.3 million. Cates represented the seller, a Trammell Crow Co. partnership, in the transaction.

“A lot of people were waiting to see what was going to happen with the market,” Cates said. “As the confidence grows and more and more product comes onto the market, I expect it to be a strong fourth quarter for investment sales.”

By building type, the most commercial sales of the period went to vacant land more than one acre with 127 averaging $533,633, followed by warehouses (85 averaging $1.75 million) and apartments (81 averaging $931,264).

Office buildings saw 31 sales over the past year, a staggering 34 percent dip compared to the previous period. But those sales averaged $2.2 million, a 76.5 percent increase from $1.2 million prior.

For the remainder of 2011 and beyond, Memphis can expect absorption not only in the normal hotspots, but also in previously underserved submarkets, said Mark Halperin, executive vice president of Boyle Investment Co.

“Poplar and 1-240 has in many respects sort of become a central business hub in our community, and I think it’s going to continue to be kind of that central focus,” he said. “There are a lot of other very important significant submarkets, especially Downtown, which has had some very good activity as of late. For Memphis to be a prosperous, successful community, we need all of these areas to offer their different amenities and offer people a different life experience to make our community whole.”

Chandler Reports is a division of The Daily News Publishing Co. Inc.

PROPERTY SALES 56 437 16,061
MORTGAGES 76 508 18,556
BUILDING PERMITS 241 876 33,390
BANKRUPTCIES 64 301 10,314