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VOL. 126 | NO. 173 | Tuesday, September 6, 2011

Mississippi Muscle

Counties south of state line remain top industrial submarket

By Sarah Baker

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Since the 1950s, Memphis has been building industrial space for users to benefit from the city’s transportation amenities, which now includes five Class 1 railroads, several interstate highways, the nation’s fourth-busiest inland waterway port and the world’s second-largest cargo airport.

Employees work in the chute packout area in the ASICS America 515,000-square-foot distribution center in Byhalia. Located about 20 miles from the Southaven facility, the Byhalia distribution center will focus on shipping footwear, while the Southaven location will focus on apparel and accessories. 
(Photo: Lance Murphey)

DeSoto County, on the other hand, has entered the arena within the last 15 years. That’s because land availability in Memphis has been basically tapped out and absorbed, said Jim Mercer, executive vice president of industrial brokerage services at CB Richard Ellis Memphis.

“You’ve got more Class A product down in DeSoto because it’s all newer product,” Mercer said. “Since the land was drying up in Memphis, that’s where the developer went.”

DeSoto County’s vacancy rate during the second quarter stood at 10.8 percent – the lowest out of all five industrial submarkets by a landslide. This is the lowest recorded vacancy figure for DeSoto County, and it is nearly 40 percent lower than the market vacancy rate, according to CBRE’s Q2 2011 MarketView Report.

Meanwhile, average asking lease rate per foot was $2.87, the second highest behind the Northeast submarket. That’s because Memphis’ taxes are about 40 cents higher per square foot, allowing Mississippi investors to charge a heftier rental fee, Mercer said.

“If a landlord can get higher rents, then he can capitalize and sell it for more,” he said. “From the investor perspective, then there’s a greater likelihood that they can get higher rent and rent growth going forward down in DeSoto versus Memphis.”

And DeSoto has the deals to prove it. Since the first of the year, distribution-related companies like Pacific Logistics Corp. (60,000 square feet), WPG Americas Inc. (54,000 square feet), Myers Tire Supply (55,575 square feet) and Anda Distribution (234,000 square feet) have all located to Shelby County’s neighbor to the south.

As far as retaining existing business, FedEx Ground is expanding in Marietta, Miss., and both PFSWeb Inc. (434,900 square feet) and McKesson Corp. (150,000 square feet) renewed leases in Southaven.

And despite no construction deliveries in the five primary industrial submarkets, a 515,000-square-foot build-to-suit for Asics America was completed in neighboring Marshall County, Miss., during the second quarter.

Marshall County is directly east of DeSoto County and is expected to emerge due to the construction of Interstate 269 and its proximity to Norfolk Southern’s new intermodal yard in Fayette County, which is just north of Marshall County.

The Mississippi Development Authority works closely with companies and local officials to provide assistance for projects, often using the Momentum Mississippi incentive program. Also at the heart of the Mississippi industrial scene is the DeSoto County Economic Development Council, which has been recruiting and retaining business in the area for 23 years.

Thanks to the forward thinking of the Council’s president and CEO, Jim Flanagan, DeSoto County is poised to grow in the health care sector.

“We’re seeing this cluster start to take shape, predominantly in the distribution and logistics arena,” Flanagan said. “Our plan will be to design a program around the most effective methods in recruiting additional medical supply, pharmaceutical companies, even medical device manufacturers to the area.”

But for those investments to occur, the Council has found it imperative to be involved in areas such as infrastructure planning, governmental affairs efforts, leadership development and the promotion of educational and training institutions.

The Council is currently working closely with Northwest Community College and the public schools to explore additional training opportunities within DeSoto County.

“That will assist existing companies, not only with a higher technical skills, but also will be a recruiting tool for companies as they look at the area and see the workforce partnership here,” Flanagan said.

Also working in DeSoto’s favor is it’s more user-friendly deal process. In Memphis, incentives much be lined up before a property is purchased or leased, calling for companies to “jump through hoops” on the front end, Mercer said.

In DeSoto, it’s “post-deal,” meaning where a company meets the certain base requirements of jobs and capital investment, it can essentially lease space before obtaining incentives.

“It’s more of a rubber stamp procedure, it’s all done after the deal,” Mercer said. “Nobody likes to open the kimono as it were and show everybody their financials and explain what they’re going to do. A lot of these companies – and we saw it with Electrolux and Mitsubishi – just don’t want to have to disclose all of that to their competitors, for various reasons, in any sooner than they have to.”

With companies being drawn to DeSoto County’s streamline deal process at an impressive clip, only time will tell if Memphis and Shelby County’s new Economic Development Growth Engine program will pay dividends.

Right now, the area of focus needs to be jobs, Mercer said. From a regional perspective, Memphis and DeSoto complement each other in a lot of ways.

“The chamber’s always been high on that, and I have too, because of the medical, the theater, the whole market perspective, you’d rather have a job in Memphis or DeSoto versus obviously going to Louisville or Cincinnati,” Mercer said. “I think any job or company that comes to the area is going to benefit the area.”

PROPERTY SALES 51 333 19,446
MORTGAGES 68 383 22,433
BUILDING PERMITS 138 688 40,004
BANKRUPTCIES 34 238 12,486