An unusually strong fourth quarter helped push the overall Memphis office market occupancy rate into positive territory for 2013, according to year-end commercial real estate market reports.

The Memphis market recorded absorption of 225,338 square feet in the fourth quarter – the largest positive absorption the market has experienced during any quarter in more than 10 years – to end the year with positive net absorption of 40,558 square feet, according to CB Richard Ellis Memphis.

A series of large transactions led to the high fourth-quarter total.

The Memphis office market recorded absorption of 225,338 square feet in the fourth quarter – the largest positive absorption the market has experienced during any quarter in more than 10 years.

(Daily News File/Lance Murphey)

Wright Medical Group Inc. leased 122,653 square feet for its new headquarters at 1023 Cherry Road in East Memphis. The state of Tennessee also signed its lease for 100,000 square feet at One Commerce Square Downtown for its relocation from the Donnelley J. Hill State Office Building, backfilling part of the 170,000 square feet vacated by Pinnacle Airlines.

Other significant leases in the fourth quarter included Financial Federal taking 27,055 square feet at 1715 Aaron Brenner Drive in the Renaissance Center, Trustmark Bank leasing 12,622 square feet at 5350 Poplar Ave. and Legacy Wealth Management leasing 7,674 square feet in the Renaissance Center.

“It was the biggest quarter we’ve had in 10 years, but it didn’t come from healthy, robust, across-the-board activity,” said Ron Kastner of CBRE Memphis. “There were two really large deals, the state of Tennessee and Wright Medical, and it’s great to have them, but I think folks would say it’s better if it was 25 smaller deals.”

The vacancy rate for Class A space in the East submarket dipped 5.4 percent, which could help improve the position of Class B properties or lead to new office construction.

“With the Class A tightening, you’ll see tenants starting to look at Class B,” said Ron Riley of Colliers International Memphis. “I think it’s possible we may hear of a building in 2014, but there are significant hurdles to overcome. That building will have to be preleased at 50 percent or more.”

Meanwhile, the Memphis industrial market remained in the black in 2013 with year-end net absorption of 3.2 million square feet, according to Cushman & Wakefield/Commercial Advisors. The overall market vacancy rate dropped 0.4 percentage points from the previous year to 15.1 percent.

The DeSoto County industrial submarket continued to post impressive gains.

DeSoto County recorded more than 3 million square feet of absorption in 2013, essentially cutting the vacancy rate in the submarket in half from 12.1 percent in 2012 to 6.4 percent by year-end, according to Commercial Advisors. DeSoto Class A bulk vacancies ended 2013 even lower, at 5.6 percent, down 6.2 percentage points from 2012. By comparison, the Southeast Memphis submarket ended 2013 with a vacancy rate of 15.8 percent.

Industrial developers and their tenants have flocked to DeSoto County because of the availability of space and the area’s business-friendly reputation, according to Commercial Advisors.

“One reason for demand is DeSoto County’s proximity to major transportation corridors coupled with the fact that it is one of the few submarkets where new space can be found,” states the Commercial Advisors report. “Furthermore, DeSoto County continues to enjoy a reputation as a pro-business suburb of Memphis which offers property tax abatements that are easy to understand and easy to obtain.”

During 2013, construction deliveries totaled more than 2.8 million square feet, which is about 1.2 million square feet more than 2012 and the largest year-end delivery total since 2007, according to CBRE Memphis.

Construction deliveries should continue in the first quarter of 2014, with IDI expected to complete the 861,252-square-foot Building H at Crossroads Distribution Center and Panattoni Development Co. expected to complete a 554,000-square-foot building at Gateway Global Logistics Center in Marshall County, Miss.

The Memphis retail market closed 2013 with a net absorption of 346,846 square feet, the highest year-end total since 2010, according to CBRE Memphis.

“Retail really came back strong last year,” said Brian Whaley of CBRE Memphis.

Leases and purchases in and around the redeveloped Overton Square accounted for more than 125,000 square feet of transactions during 2013, according to CBRE Memphis.

Grocery activity increased significantly in 2013.

Cincinnati-based The Kroger Co. is investing heavily in the area, pouring around $100 million into new stores and redeveloping older ones. Kroger has replaced its store in the large Poplar Plaza retail center at Poplar and Highland Street and is planning an ambitious new store to replace its existing Union Avenue location. Kroger is also expanding its Olive Branch location at 7427 Goodman Road, increasing the store from 50,000 square feet to 75,000 square feet.

In addition to Kroger, Whole Foods expanded its location on Poplar Avenue in East Memphis and is planning a new store in Germantown, while Fresh Market will convert the Ike’s store on Union Avenue to one of its upscale grocery stores. The Cash Saver grocery store on Madison Avenue in Midtown also underwent a large renovation.

“It was a really busy year for a lot of factors, from increased stand-alone construction, which we haven’t seen in a while, to infill of existing shopping centers,” Whaley said.