VOL. 129 | NO. 13 | Monday, January 20, 2014
By Amos Maki
When Rob Clark and his wife moved into their home in the historic Evergreen neighborhood in 1993, catalog and distribution operations were still active at the Sears Crosstown building.
That soon changed, and for roughly two decades the hulking property stood as a towering, painful reminder of the area’s faded glory.
“You would drive by and look at it and it was just sad to see that building there,” said Clark, president of the Evergreen Historic District Association. “It was such a sad property and that extended to the rest of the commercial properties along the Cleveland corridor.”
That will begin to change in 2014 as the Crosstown development team begins construction on the $180 million effort to transform the 1.5-million-square-foot structure into a vertical urban village with a wide range of uses and tenants that will infuse new life and energy into the neighborhood.
“If it does half of what it’s supposed to do it will be a great benefit to our neighborhood,” Clark said.
The highly anticipated Crosstown redevelopment project promises to be one of the biggest commercial real estate stories of 2014.
The Crosstown team expects pricing on bids for subcontracting work on everything from electrical systems to plumbing to come back in March and construction is slated to begin in the second quarter.
“We are breathing life back into an area that hasn’t seen a lot of life in a while and because of that it’s a transformative project,” said Crosstown co-leader McLean Wilson. “I think once construction starts it will be a celebration, a memorialization of the realization of a dream.”
While the Crosstown building remains shuttered, the anticipated redevelopment has already created momentum in the area. The Visible Music College, Hi-Tone Cafe, the Church Health Center’s graphic design and magazine production group, Jamie Harmon’s Amurica studio, Co-Motion Studio and others have already set up shop in the area.
“Even before we’ve broken ground we’ve seen transformation occur,” said Wilson. “What was once a vibrant area of the city, which was more or less forgotten, is being peopled again. The spark that allowed that to happen was this idea of redeveloping this beautiful building.”
2014 will also bring the one-year anniversary of the rebirth of Overton Square, where Loeb Properties has invested around $20 million to revive the arts and entertainment district.
“Our objectives for 2014 are to continue to grow the momentum we experienced in 2013 and to activate common areas by working with community partners on programming,” said Elizabeth Berglund, Loeb’s community relations director. “We are currently more than 80 percent occupied, with several tenants opening for business in the first half of the year and several prospects in the pipeline.”
While Loeb remains focused on leasing existing spaces at Overton Square, 2014 could bring the addition of new buildings to the district.
“While we are currently focused on filling the existing spaces, we do plan to build new buildings as demand requires it,” Berglund said. “Our primary goal with new construction is to create spaces that fit seamlessly into the Overton Square puzzle and offer more opportunity to assemble the best possible tenant mix.”
Overton Square’s revival should continue to ripple throughout the area in 2014, bringing investment to other properties surrounding the Square.
Redevelopment of the long-vacant French Quarter Suites Hotel near Overton Square could finally become a reality in 2014. In December, California-based NCE Realty and Capital Group LLC bought the 105-room inn at the northeast corner of Madison Avenue and Cooper Street for $1.9 million.
On the retail side, 2014 will bring a makeover and expansion to a popular retail center, the launch of new outlet malls and the development of three high-profile grocery stores.
The Fresh Market will convert the existing Ike’s on Union Avenue, which closed Jan. 10, into one of the chain’s upscale grocery stores. In addition, Whole Foods Market and local development firm Cypress Realty Holdings Co., in conjunction with Ford Jarratt Realty & Development Co., plan on building a 41,000-square-foot, freestanding Whole Foods store in Germantown.
“I think what we’re seeing is a lot of single-tenant stuff, like Fresh Market and Whole Foods, which we haven’t seen in so long,” said Danny Buring, managing partner with the Shopping Center Group LLC. “It’s the best activity we’ve seen in several years.”
Kroger will begin efforts to replace its existing store on Union.
Kroger will begin efforts to replace its existing store at 1761 Union Ave. with one nearly double the size. Kroger will soon begin razing surrounding buildings, including the Belvedere Apartments, and begin construction of the new 50,000-square-foot supermarket, which is expected to open it in early 2015.
Developers plan on launching a $165 million outlet mall, called The Outlet Shops of the Mid-South, at Interstate 55 and Church Road in Southaven. The project will include the outlet mall, restaurants and hotels. The long-planned redevelopment of the Lakeland Factory Outlet Mall site could gain traction in 2014. Late last year, the Lakeland Board of Commissioners approved a resolution expressing support for the project, including asking city staff to explore possible incentives to help jump-start development.
The venerable Shops of Saddle Creek is getting a multimillion-dollar makeover and expansion in 2014.
The Shops of Saddle Creek is getting a makeover and expansion.
(Memphis News File/Lance Murphey)
Texas-based Trademark Property Co. will expand the portion of the 148,000-square-foot lifestyle center on the southwest side of Poplar Avenue and West Street in Germantown. Trademark will demolish 20,000 square feet of existing space before building 40,000 square feet of new development. The project also includes remodeled building exteriors for Saddle Creek South and West.
Buring said the Saddle Creek redevelopment is an opportunity to attract new, upscale national retailers.
“I think if we can continue to see some of the higher-end brands come in and be successful it will show we can be successful and support the really higher-end restaurants and retailers,” he said. “It’s a whole new level of retailer we have not seen do well en masse here.”
2014 could also bring movement to the long-dormant effort to redevelop the Washington Bottoms area near Poplar Avenue and Cleveland Street in Midtown. City officials are working with the property owner to revive the ambitious, 28-acre project, which collapsed following the onset of the recession.
The Class A office market in East Memphis rebounded in a strong way in 2013, a development that will continue to have an impact this year.
“Everybody knows the Class A market in East Memphis has tightened,” said Ron Riley, senior vice president of the office division at Colliers International Memphis. “Generally, there is a flight to quality and as Class A fills up, it kind of trickles down from there. I think what you typically see in these cycles is tenants start looking on the fringes for Class A, where the 385 corridor should benefit, and if they want to stay in the Poplar- East Memphis area, the Class B market in East Memphis will benefit.”
All the activity in the Class A market in East Memphis in 2013 means landlords should be able to increase rental rates in 2014.
“I do think you’ll see some rental rate growth in 2014,” Riley said. “It’s certainly tilted back to a more even playing, if not more to the benefit of the landlord.”
Ron Kastner of CB Richard Ellis Memphis said he believes the Memphis market will see the return of tenants seeking large blocks of space, from 25,000 square feet to 100,000 square feet.
“I think that’s what we’ll see different in 2014 that we haven’t seen in quite a few years,” said Kastner.
Raymond James is shedding employees at its office tower.
(Memphis News File/Lance Murphey)
Two major companies to watch in the office market this year are FedEx Corp. and Raymond James Financial Inc.
Raymond James has been shedding employees and vacating space at its 21-story office tower in Downtown Memphis. The company’s lease there expires in early 2016 and the financial services firm could make a decision on its real estate needs this year. If it decides to leave that location, it would be a devastating blow to Downtown, which was stung by the departure of Pinnacle Airlines in 2013.
FedEx, which has been undergoing a large restructuring and downsizing program, could make critical office decisions in 2014 that could shape the market for years to come. Kastner estimates that FedEx leases as much as 390,000 square feet of space – an amount greater than the 336,000-square-foot Crescent Center – in multiple locations across the city.
“We’re very anxious to see what their appetite is to renew those leases or if they pull them out and absorb them,” Kastner said. “They’re centralizing now versus fragmenting, which they had been doing a lot for the last 20 years.”
The multifamily sector should show steady improvement in 2014, building on the momentum in generated last year.
“Class A properties should continue to perform at a very high level, but the B and C properties have made great strides the last few years in improving rents and occupancies,” said Blake Pera, executive vice president of CBRE Memphis’ multifamily division. “With continued strengthening of fundamentals in the market, all sectors and locations should see improvement.”
In the industrial sector, a new submarket will emerge in 2014 as Panattoni Development Co.’s 1,500-acre Gateway Global Logistics Center industrial development, which straddles Fayette County, Tenn., and Marshall County, Miss., grows into its own and if other large developers exercise options they have on land in the area. Panattoni is building a 554,000-square-foot speculative warehouse that can be expanded to 1.3 million square feet at Gateway.
“I believe Marshall and Fayette Counties will be the next new industrial submarket in the Memphis area,” said Jim Mercer, executive vice president of CBRE Memphis.
The emergence of Fayette and Marshall counties as major players in the industrial sector and the continued focus by developers on DeSoto County means the Southeast Memphis submarket, which was the dominant industrial submarket in Memphis for years, could become an afterthought in 2014.
“I think the Southeast (Memphis) submarket is almost going to become a tertiary market for the big-box segment,” said Kemp Conrad, principal with Cushman & Wakefield/Commercial Advisors.
While areas outside of Memphis will see most of the industrial activity in 2014, Clark, the Evergreen Historic District resident, is looking forward to his Midtown neighborhood buzzing with activity again.
“From the neighborhood’s perspective, it’s incredibly important for us that (Sears Crosstown) goes through to fruition,” he said. “We hope we’ll be faced with some positive issues to deal with, such as increased traffic. That would be a great issue to have to tackle. That would be a major change from the last 20 to 25 years.”