VOL. 6 | NO. 45 | Saturday, November 2, 2013
Commercial Real Estate
By Amos Maki
The explosive population growth and business-friendly environment in DeSoto County have combined to transform its formerly sleepy suburbs into thriving retail and industrial development centers.
Today, Goodman Road looks more and more like a busy commercial strip in Memphis, and DeSoto County has become the favored location for large industrial developers.
Southaven, whose population grew from 16,441 in 1980 to 48,982 in 2010, has led DeSoto County’s retail surge thanks to the development of Southaven Towne Center, an open-air lifestyle center that brought in major national retailers.
(Memphis News/Andrew J. Breig)
Retailers have been drawn by the population boom in DeSoto County – the county’s population tripled from 53,930 residents in 1980 to 161,252 residents in 2010 – while large industrial developers were drawn by the availability of large tracts of land, a business climate they say is friendlier than Memphis and a relatively simple incentive program.
Goodman Road, the main east-west thoroughfare in DeSoto County, has been ground zero for retail development, lined with independent and chain restaurants and a variety of retailers, from mom-and-pop shops to national big-box retailers.
“There are a lot of rooftops, demand and money down there and Goodman Road is a very heavily traveled road,” said Brian Whaley of CB Richard Ellis Memphis. “I can see Goodman Road being the Germantown Parkway of DeSoto County.”
For many years Southaven, whose population grew from 16,441 in 1980 to 48,982 in 2010, led the charge on retail development, culminating with the development of Southaven Towne Center, an open-air lifestyle center that brought in major national retailers in a more upscale environment.
But developers and retailers have increasingly turned their attention toward neighboring Olive Branch, where the population soared from 2,067 people in 1980 to 33,914 in 2010.
“Southaven really saw a lot of development and investment but now it’s bleeding over into Olive Branch,” Whaley said.
In Olive Branch, Stonecrest Investments LLC built the 300,000-square-foot Wedgewood Commons development at the northeast corner of Goodman and Pleasant Hill roads. The center is anchored by Target, TJMaxx, Rack Room Shoes, Ross Dress for Less, Michaels and Homegoods. The existing outparcel sites are 100 percent leased to tenants that include Gould’s Day Spa & Salon, TCBY, Sport Clips, Hollywood Feed and AT&T, among others.
Jason Polley, managing leasing director for Stonecrest, said demand there has been so intense that the Target store has experienced double-digit percentage sales increases each year since the store opened in 2008 and leads all Target stores in the U.S. east of the Mississippi River for same-store sales growth from 2008-2012.
“The trade area exhibited immediate consumer demand,” Polley said. “It was an underserved market. All of our anchors are performing above their sales expectations.”
At Goodman and North Hamilton Circle, Malco Theatres 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 that Memphis-based Corky’s Ribs & BBQ is building. Polley said that while Southaven will continue to be a major regional retail destination, Olive Branch is poised for more growth as more families pour into the area, as schools and infrastructure like new roads and sewer lines are built.
Industrial development has been booming in places like Olive Branch.
(Memphis News/Andrew J. Breig)
“Southaven is and will continue to be a vital regional retail area,” Polley said. “The growth story, in terms of rooftops and higher incomes and roads and schools, is in eastern Southaven and western Olive Branch.”
It’s not just retail that has boomed in DeSoto County. It is now the dominant local market for industrial development in the Memphis area.
Over the last six years at least 4 million square feet of speculative industrial space has been built, or is under construction, in DeSoto County. Nearly all of the new industrial construction announced this year is taking place in DeSoto County.
Industrial Developments International is in the midst of expanding the 478-acre Crossroads Distribution Center with two new speculative buildings, the 241,000-square-foot Crossroads L building and the 430,212-square-foot Crossroads D building. Hillwood Investment Properties also announced plans for a 514,980-square-foot building at DeSoto Trade Center.
Industry experts uniformly say the ease of doing business in DeSoto County, particularly a less cumbersome and more reliable tax incentive program than the one used in Memphis and Shelby County, has fueled the boom.
“The reason the tenants are going there is the ease of doing business and the attitude of the people saying, ‘We want these jobs, we want this investment and we’re willing to do what it takes to get the jobs,’” said Brad Kornegay, president of Colliers International Memphis’ asset service division.
Higher property tax rates in Memphis and the process for obtaining incentives, although improved some under the Economic Development Growth Engine of Memphis and Shelby County, are driving developers and their tenants south to DeSoto County.
“When you’re doing boxes of this size, pennies add up and it becomes a lot of money real quick,” Kornegay said.
The payment-in-lieu-of-taxes program administered by EDGE includes a scoring matrix that grades projects on capital investment, the number of jobs created, wages and other factors.
Companies seeking PILOTs must hire an attorney, and in some cases more than one, get approval for the tax freezes from the EDGE board and transfer the title of the property over to the Industrial Development Board, a process can take weeks or longer.
Kornegay and others say the process in DeSoto County is much simpler and quicker.
“We’re still running into prospects frustrated with the (Shelby County) PILOT program and they see the ease of doing business in DeSoto County and they want to be there,” Kornegay said. “When the developers see that, they will continue to develop in DeSoto County. I don’t see anything bucking that trend.”
While elected officials from Memphis and Shelby County were removed several years ago from voting on PILOTs as part of an effort to depoliticize the process, elected officials in DeSoto County still must sign-off on the tax incentives there.
“Our elected official created a pro-business environment,” said Jim Flanagan, president of the Desoto County Economic Development Council. “They understand the benefits these companies bring when they come here or grow here. The pro-business environment the elected officials have created here and the ease of doing business and the incentive package create a confidence level in investors and users to consider this area a viable option.”