VOL. 128 | NO. 214 | Friday, November 1, 2013
Apartment, Retail Markets Holding Steady
By Amos Maki
The Memphis area multifamily and retail markets continue to chug along, with the newer, more upscale products in each sector propping up both overall markets.
Those trends and others in commercial real estate will be the subject of discussion Thursday, Nov. 7, during the 2013 Commercial Real Estate Review & Forecast, one of six seminars in The Daily News’ 2013 Seminar Series.
The seminar, which will be held from 3 p.m. to 5 p.m. at the Memphis Brooks Museum of Art, will feature an overview of local and national commercial real estate trends in the office, industrial, retail and multifamily sectors.
The panelists are Brad Kornegay, president of Colliers International Memphis’ asset service division; Wyatt Aiken, executive vice president and chief operating officer of Commercial Advisors/Cushman & Wakefield; Blake Pera, executive vice president of CB Richard Ellis Memphis’ multifamily division; and Jason Polley, managing leasing director of Stonecrest Investments LLC.
Each broker will discuss how their respective sectors have fared so far this year and what can be expected in 2014.
Pera said the multifamily market “continues to perform at a steady pace.” Overall occupancy through the third quarter is 92.4 percent, up slightly over mid-year and up 0.7 percent since year-end 2012. Rents are also improving, up an average of $14 overall compared to year-end 2012.
“Class A and B locations and properties continue to outperform the market as a whole,” Pera said. “Class C locations continue to drag down the overall statistics of the market, but even these areas are experiencing positive growth.”
Pera said that since Class A locations experienced fewer troubled waters during the economic downturn, those properties were able to rebound much faster over the last few years and are seeing rent levels higher than pre-recession levels.
In addition, Pera said the new supply coming online over the last few years – and over the next two to three years – appears to be “very manageable” and is leading to the creation of a more upscale tier in the rental market.
“The steady pace of new deliveries has allowed the market to remain in balance, without saturating the market with too much new supply,” he said. “The new product coming online today provides a completely new level of finish-out – including granite, stainless steel appliances and an incredible amenity package – and is creating a new, upper-end of the renter segment.”
Notable sales this year include the portfolio sale of Villas at Gray’s Creek and Carrington at Houston Levee for $44.8 million, or $96,552 per unit; Riverset on Mud Island for $43.6 million, or $87,200 per unit; and Country Squire for $49.2 million, or $50,620 per unit.
Pera said properties built in the 1990s and later continue to attract strong interest and that properties built earlier in well-positioned areas that have a potential for repositioning will also be attractive.
On the retail side, the high-income, high-density and high-traffic submarkets attractive to retailers and shoppers – East Memphis, Germantown, Collierville, Cordova and DeSoto County – continue to perform well while other submarkets are treading water or sinking, Polley said.
“It’s really a story of the haves and have-nots,” he said. “The vacancy rates have tightened up a bit in some of these more sought-after submarkets. As we get further along in 2014 we’ll continue to see a downward trend in the vacancy rates in those submarkets.”
Germantown and Olive Branch are seeing a flurry of activity. The Shops of Saddle Creek in Germantown is in store for a multimillion-dollar makeover and expansion. Texas-based Trademark Property Co., which has operated the retail center since 2011, will expand the portion of the 148,000-square-foot lifestyle center on the southwest side of Poplar Avenue and West Street in Germantown.
Whole Foods Market and Cypress Realty Holdings, in conjunction with Ford Jarratt Realty & Development Co., has submitted plans to the city of Germantown to develop a 41,000-square-foot, freestanding Whole Foods store at the southeast corner of the intersection of Poplar Avenue and Pete Mitchell Road in Germantown.
At Goodman and North Hamilton Circle in Olive Branch, Malco Theaters Inc. is building a 12-screen movie theater. Michael Lightman Realty Co. has plans to build a 5,500-square-foot retail building in front of the Malco, next door to the restaurant Memphis-based Corky’s Ribs & BBQ is building.
Polley’s Stonecrest Investments plans to expand its Wedgewood Commons development at the northeast corner of Goodman and Pleasant Hill Roads.
Polley also said he expects to see more core city redevelopment projects following the successful revival of Overton Square by Loeb Properties.
“Midtown is a bright spot with what Loeb Properties is doing with the redevelopment of Overton Square and there’s definitely an opportunity going forward to get back into some urban markets,” he said.