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VOL. 8 | NO. 45 | Saturday, October 31, 2015

Retail Market Boosted by Groceries, Small Business

By Madeline Faber

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The third quarter of 2015 was a busy one for the retail sector with a lot of activity derived from grocery stores and small businesses.

Grocery activity is hot in Germantown, where Whole Foods recently opened a store and Trader Joe's announced plans for its first Memphis-area location.

(Memphis News/Andrew J. Breig)

Fundamentals are trending favorably with the total vacancy rate down to 12.6 percent compared to 12.9 percent in second quarter 2015. Net absorption rose from 134,251 square feet in second quarter to 160,229 square feet in the most recent quarter, and the rental rate increased from $8.62 to $8.72 per square foot, according to CB Richard Ellis Memphis data.

“In retail, we're seeing pretty solid activity,” said Parrish Taylor, vice president at CBRE Memphis. “There's a good little pipeline of development that’s going on. Certainly everyone always asks about Poplar, Goodman Road and Germantown Parkway.”

Up from 220,000 square feet in the second quarter, deliveries totaled 287,634 square feet with the highest concentration of projects in Germantown and Olive Branch. Openings along Olive Branch’s Goodman Road include Academy Sports + Outdoors, Hobby Lobby, Five Below and the Malco Collection.

PARRISH TAYLOR

“On Goodman Road, there's still plenty of green space on that and will be for a while,” Taylor said.

In Germantown, Saddle Creek West opened as well as Whole Foods Market, strengthening the Memphis market’s grocery boom.

“Groceries are bread and butter investment,” said Shawn Massey, partner with the Shopping Center Group, LLC. “People want that little grocery store in their area. If you can buy a center anchored with a Kroger or a Cash Saver, that’s what developers want.”

Grocery activity in the Germantown submarket is hot with Trader Joe’s announcing its first Memphis-area location on Exeter Road. To open in third quarter 2016, the specialty grocery store will be in a to-be-constructed outparcel of an old Kroger building. The Kroger will be renovated and backfilled by one or two tenants currently shopping the market.

Nearby, Kroger reopened its location on Farmington Road. The store expanded from 60,000 to 100,000 square feet.

And just this month, several other grocery-anchored projects were announced.

A mixed-use development at the corner of McLean Boulevard and Union Avenue will have a gourmet grocer. The inaugural class of the Community Builder payment-in-lieu-of-taxes incentives program will go toward attracting grocery stores to food desert neighborhoods. Housed at the Memphis-Shelby County Economic Development Growth Engine, the tax breaks will help the Binghampton and Uptown neighborhoods secure value grocers.

With Tanger Outlets opening in Southaven in November, net absorption will total 500,000 square feet – a threshold that hasn’t been crossed since 2010, according to CBRE Memphis.

“We're absorbing space faster, and it’s good space,” Massey said. “There's a lot of areas like down on Winchester, where there are a lot of vacancies and that's just kind of been left behind. However, even some of that space is starting to be absorbed.”

He added that while sizable projects were delivered during the latest quarter, future retail is going to trend smaller to fit into an urban environment.

The coming year is going to see a lot of small, locally owned businesses opening especially in the suburbs.

“Shop local is becoming more of a trend in the suburbs,” Massey said. “People are realizing that their sales tax dollars need to support the new school system.”

Several homegrown businesses opened second locations in the quarter. Dixie Pickers, originally in the Collierville Town Square, opened another location in East Memphis, at 964 June Road in the former Tommy Bronson Sporting Goods.

Midtown restaurant Fino’s from the Hill announced plans for another location on Brookhaven Circle. Frost Bake Shop is looking to open a second location in Germantown or Collierville.

Massey anticipates that the Interstate 40/Canada Road interchange in northeast Shelby County is the next large development area.

With increased home sales and property-tax hikes going toward school construction, Collierville and Lakeland are poised for retail growth.

The Lake District mixed-use development is planned for the Lakeland Factory Outlet Store, and Massey thinks that the project will bring about more retail growth.

“There’s a lot going on, but Memphis is such a big city and so spread out that a lot of people don't see it.”

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 124 481 17,865
MORTGAGES 127 530 20,565
FORECLOSURE NOTICES 4 48 2,693
BUILDING PERMITS 195 891 36,836
BANKRUPTCIES 52 262 11,426
BUSINESS LICENSES 24 139 5,848
UTILITY CONNECTIONS 26 116 6,830
MARRIAGE LICENSES 26 133 4,049