VOL. 131 | NO. 258 | Wednesday, December 28, 2016
Large Deals, Office Construction Among Memphis' Commercial Real Estate Trends
By Patrick Lantrip
Coming off of a strong year in 2015, the commercial real estate market in the Memphis metropolitan area continued to do well in 2016.
Larry Jensen, president and CEO of Cushman & Wakefield/Commercial Advisors, said his company was tracking approximately 6 million square feet of net absorption in the industrial market headed into the last week of 2016, as compared to 8.4 million in 2015.
“It’s going to be slightly off of last year, but that’s still an incredible number,” Jensen said. “Last year 8.4, I think was the largest absorption number we’ve ever had.”
Looking forward to 2017, Jensen said his company is currently tracking more than 20 potential industrial transactions totaling approximately 8 million square feet.
While development in the outlying counties of the metro continued to shine with deals like the 1.5 million-square-foot lease TBC Corp. signed at Gateway Global Logistics Park in Fayette County – the largest industrial lease ever recorded in the Memphis market – there were significant office deals recorded in 2016 as well.
ServiceMaster’s decision to convert the former Peabody Place Mall into its corporate headquarters was one of the biggest commercial real estate highlights in 2016.
(Daily News File/Andrew J. Breig)
The largest of those, in scope and creativity, was the announced relocation of ServiceMaster’s corporate headquarters from East Memphis to the former Peabody Place Mall Downtown in the city’s core.
ServiceMaster Global Holdings is investing $14.8 million to convert the 328,000-square-foot enclosed mall in a project exceeding $33 million, with related investments coming from mall owner Belz Enterprises ($12 million), a $5.5 million state FastTrack grant and other incentives offered to keep the home services company in Memphis.
Further east, but still in the city, Boyle Investment Co. announced construction of a 155,000-square-foot office building in the Ridgeway Center office park in the second quarter of 2016, which will be Memphis’ first substantial office project with speculative space in many years.
Several blocks east of that project is the 10-acre TraVure planned development in Germantown, which will consist of two hotels, a parking garage, restaurants, retail and roughly 145,000 square feet of Class A office space.
In November, developer Gill Properties applied for a $25 million building permit for TraVure’s five-story office building and the five-story parking garage. Apartment real estate investment trust MAA will occupy 83,265 of the 144,968 square feet of the TraVure office building, according to Gill’s payment-in-lieu-of-taxes application.
One of the hotels at TraVure will be co-branded and is being developed by Ridgeland, Mississippi-based Desai Hotel Group.
Boyle’s new office building – the last undeveloped parcel in Ridgeway Center – and the TraVure office will total about 300,000 square feet, “and that’s the first speculative (office) buildings we’ve had built in the last six or seven years,” Jensen said.
While North Mississippi still dominates most of the speculative and build-to-suit industrial developments, there are many factors, including policy reforms championed by the Economic Development Growth Engine for Memphis and Shelby County and the Greater Memphis Chamber, that are bringing the focus back to the city’s core, according to NAI Saig Co. vice president and business manager Hank Martin.
“It’s still good to be close to your core infrastructure,” Martin said. “For a lot of people, being down in Marshall County is not bad, but there are still some that need to be as close to FedEx and the hub as possible.”
In 2016, EDGE approved a Fast Track PILOT program that streamlines the process for companies seeking to receive payment-in-lieu-of-taxes incentives. Companies that meet Fast Track criteria can move through the process quicker, helping make Memphis and Shelby County more competitive with North Mississippi, where the incentives process has been seamless for years.
International Distributors USA Inc. tapped the Fast Track PILOT in late 2016 to move from a 165,000-square-foot Olive Branch facility it had grown out of into a 510,000-square-foot building in Southeast Memphis that offers space for future growth.
And while land is much less abundant in the city limits, Martin said developers will continue to look for opportunities in the city’s core for future development.
“I like to see all the activity, whether it’s in Mississippi, Tennessee or Arkansas – as long as it’s in the Memphis metropolitan area,” Martin said. “But as a longtime Memphian, I also want to see the core city do well.”