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VOL. 10 | NO. 1 | Saturday, December 31, 2016

Riding Momentum

Memphis-area economy poised to continue on growth trajectory in 2017

By Andy Meek

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Around this time each year, everyone tends to start fetishizing the blank slate a bit, with its attendant allure of reinvention and that sweeping away of the old order to make way for what comes next.

Mistakes, shortcomings, dreams deferred, plans made and not consummated - none of it has to matter now. This is the time to break out, remake yourself. Pursue forward motion. Disassemble or leave behind what we fashioned the past year and leave something in its place that’s new, better - or if nothing else, at least just different.

And so it is with cities, which of course are collectives of people pursuing a million reinventions that will now play out as we stand on the edge and wonder what’s in the cards for us in 2017. In these pages, we’ve already set your expectations a bit. Look, for example, for myriad commercial developments; sports achievement; the turgid dance of politics; health care research; and technology innovations. And so much more.

You know what? Why don’t we just plan to meet back here on Dec. 31, 2017, to celebrate the reward of the coming 12-year span that we already know awaits us - that for all the headlines we put in front of you each week, we may not yet know the details but we do already know we’ll be able to say a year from now - we lived in interesting times.

For now, here’s some of what our reporters are looking forward to and anticipate covering in the weeks and months ahead...


COMMERCIAL REAL ESTATE

One real estate executive sees a year ahead for commercial real estate that looks a lot like the two that came before.

“I think the industrial market will continue to perform as it has,” Larry Jensen, president and CEO of Cushman & Wakefield/Commercial Advisors Partners, said. “This is a prime industrial market on a national basis. A lot of companies want to be here to get access to that global network of transportation and distribution.”

One of the more underrated benefits of a healthy industrial market is job creation. Jensen said most people think of a warehouse as just a big box, and often overlook the amount of office space created.

“It’s somewhat of what I think is a hidden office market that we don’t really get credit for, but the people in there are office workers,” Jensen said. “An 800,000- to 900,000-square-foot warehouse building is very likely to have 40,000 to 50,000 square feet of office.”

As far as the more traditional office market goes, Jensen said 2017 will show how much, if any, pent-up demand is in the market.

“I think there probably is,” Jensen said. “The (Class) A market is very tight and I suspect there is going to be some growth that’s going to occur. There really hasn’t been an inventory, and now we’re going to have an inventory in the A market. 2017 is going to really show how much pent-up demand is sitting in the Class A market."

Several businesses are slated to begin operations in Crosstown Concourse, boosting activity in a once-dormant area of the city.

(Memphis News/Andrew J. Breig)

Demand is there for the Crosstown Concourse, one of the city’s most ambitious redevelopment projects. On May 13, 2017 – about 100 days shy of the 90th anniversary of building’s groundbreaking – the repurposed former Sears Tower officially opens.

The mixed-used urban village is now up to 30 tenants – Madison Pharmacy, Mama Gaia and I Love Juice Bar are the latest additions.

It will house restaurants, clinics and nonprofit organizations, and residents of the Parcels at Concourse will begin to move into their apartments in early 2017.

The Parcels feature more than 250 loft-style apartments with access the building’s amenities including a 25,000-square-foot YMCA that will open within Church Health’s 150,000-square-foot headquarters.

Near the end of 2017, ServiceMaster is expected to complete the long-awaited move into its new corporate headquarters Downtown in the 328,000-square-foot former Peabody Place Mall.

ServiceMaster's corporate offices will house all of its business segments: Terminix, American Home Shield and Franchise Services Group, which includes ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec.

The company will move 1,200 of its 2,200 Memphis employees into the renovated building.


RESIDENTIAL REAL ESTATE

The Memphis residential real estate market, meanwhile, likewise is looking to build on its momentum heading into the new year.

“It’s honestly across the board, it’s in all price ranges, from first-time home buyers to million-dollar homes,” Crye-Leike Real Estate Services sales leader and vice president Chet Whitsitt said of the strength of the Memphis residential market.

Whitsitt noted that traditionally popular areas like Midtown and East Memphis are not the only areas riding a crescendo.

“Even Cordova has been hot,” Whitsitt said. “There has been so many multiple offers in Cordova. Whitehaven has been a hot market. There is no one area that’s been isolated out of the windfall that I know of.”

Low interest rates, combined with the aftereffects of the election, will ultimately dictate how hot the market stays going forward, Realtors say.


AIRPORT

Memphis International Airport already has two new routes coming in 2017 – Air Canada to Toronto, which starts in May, and Southern Airways Express to Harrison, Arkansas, starting in January.

Air Canada’s return to Memphis marks the first daily international service since 2012, when the company last operated here. And Scott Brockman, president and CEO of the Memphis-Shelby County Airport Authority, said the Harrison flight is an important route for the airport, because it’s a location where there are business connections with Memphis area companies. FedEx has freight operations in Harrison.

In 2016 there were seven flights announced. This upcoming year, Brockman expects continued growth in the airport’s passenger numbers, but at a slower rate.

“I don’t know if we can do seven new routes in 2017 – mainly because we’re an origin-and-destination market now,” Brockman said. “We have to earn and defend every route we get.”

In addition to more flights for passengers, airfares dropped 6 percent, or the equivalent of $27 per average round trip ticket, in 2016 alone – another effect of Delta Air Lines Inc. no longer using Memphis as a hub.

“You’re not going to get lower airfares when you have a hub,” Brockman said. “There is tradeoff for having 91 nonstop destinations, which is what we had. There is a tradeoff for having 300-plus flights a day – and that is high airfares.”

Since the de-hubbing by Delta, average airfares have dropped more than $150 per ticket. Additionally, new flights and airlines upgrading the size of airplanes on existing routes added 9.3 percent to capacity during 2016, which is the equivalent of 605 seats a day.


HEALTH CARE

Meanwhile, here’s what’s coming on the health care front in 2017: a continuation of the building and investment boom seen in 2016, as well as an uninterrupted flow of research dollars to institutions like the University of Tennessee Health Science Center. And hospitals, clinics and other institutions will continue to chase and add new technology and other devices to help them improve care.

Redevelopment of the Pinch District will complement the expansion at St. Jude Children's Research Hospital.

(Memphis News File/Andrew J. Breig)

The development boom in the industry will remain one of the bigger stories because it’s the most obvious and easiest to spot. Millions of dollars will be spent in 2017 to improve the infrastructure and immediate vicinity around the Downtown campus of St. Jude Children’s Research Hospital, which remains in a multibillion-dollar expansion.

That expansion is bringing new jobs and top health care talent to the hospital to continue the fight against childhood cancer and other ailments.

Programs like the ZeroTo510 accelerator will continue seeding medical device startups, helping cement a culture of health care innovation in Memphis.

One reason the industry remains preeminent in the city is the comprehensiveness of the ecosystem. Talent keeps coming here, new technology is rolled out here, investment and construction dollars freely flow precisely because the flywheel can’t help but keep spinning.

Institutions big and small keep drawing that talent. Competition and the chase for better treatments and cures means the latest technology is prized. And the biggest institutions are the ones most mindful of obsolescence, so providing the best patient experience means investment and new construction.


SPORTS

Hoops City, meanwhile, has two new coaches in the 2016-17 season in the Grizzlies’ David Fizdale and Tubby Smith at the University of Memphis.

While Smith has a national title on his resume from his days coaching at Kentucky, Fizdale is a first-year head coach.

The Grizzlies had overcome early injuries – what else is new? – and jumped out to an 18-10 start, setting up a run toward a potential seventh straight playoff appearance this spring. Center Marc Gasol has added a 3-point shot to his game and the Grizzlies have mixed in more young players while still remaining one of the top defensive teams in the league.

“We have a group that still has a lot of room to grow,” Gasol said.

Smith’s Tigers don’t have much depth, but they do have a one-two Lawson punch in brothers Dedric and K.J. The former was the American Athletic Conference Co-Preseason Player of the Year and has matched, if not exceeded, those expectations heading into league play.

The University of Memphis football team has inspired great hope for 2017 after making a third straight bowl appearance. Mike Norvell won eight regular season games in his first year as head coach and the Tigers earned a berth in the Boca Raton Bowl. Riley Ferguson shined as Paxton Lynch’s successor at quarterback and is expected back for his senior season. Next year’s home schedule features UCLA on Sept. 16.

The Memphis Redbirds, Triple-A affiliate of the St. Louis Cardinals, will become the fourth local team to have a new leader as fan favorite Stubby Clapp returns in the role of manager.

On June 3, NASCAR returns to Memphis International Speedway with the NASCAR K&N Series, which is the top step in the sport’s developmental ladder for drivers.

The FedEx St. Jude Classic, the annual PGA Tour stop, will be held from June 5-11 at TPC Southwind. It will be the tournament’s 60th year and FESJC director Darrell Smith hopes to bring back some legendary past winners, including Jack Nicklaus, Lee Trevino and Gary Player.

The annual St. Jude Memphis Marathon is scheduled for Dec. 2. The AutoZone Liberty Bowl will finish out the year’s sports calendar in late December.


POLITICS AND GOVERNMENT

2017 may be the closest thing Shelby County voters have had in quite a while to an off-election year. The only regularly scheduled elections are the Arlington municipal elections.

But you will see a lot of maneuvering for the 2018 statewide and county elections during 2017. That means those interested in running for governor and Shelby County mayor, as both incumbents are term-limited.

U.S. Sen. Bob Corker will lead Senate confirmation hearings for Secretary of State nominee Rex Tillerson in Washington, and Corker is likely to be an important barometer on the administration of President Donald Trump.

U.S. Rep. Steve Cohen of Memphis is certain to remain a vocal critic of Trump. But Cohen will also play a central role in 2017’s coming reformation of the Shelby County Democratic Party. The party was disbanded by state Democratic Party leaders before the presidential general election because of the local executive committee’s pursuit of an arrest warrant for former local party chairman Bryan Carson.

Cohen again served as the primary local contact for turning out the Democratic vote for presidential nominee Hillary Clinton. Clinton carried Shelby County in the general election.

Republicans are with Democrats in seeking to heal some of the internal wounds from a fractious 2016 presidential campaign. In the GOP’s case, the party’s state establishment for the most part backed Florida Sen. Marco Rubio. But Trump had an appeal to rank and file Republicans and some new voters in the Republican tent – the latest indication in the last three presidential elections of a split between the establishment and where most of the Republican base went in the primaries.


EDUCATION

The further public education in Shelby County gets from the 2012 merger and the 2013 demerger of school systems the more of a desire there is to see longer-term changes in Shelby County Schools.

SCS superintendent Dorsey Hopson has been the architect of most of the short-term changes and all of the long-term changes that have followed.

In the coming year, Hopson will be seeking to establish a more specific relationship between the school system and charter schools as well as the Achievement School District. Gov. Bill Haslam’s administration is now seeing the need for more specific guidelines and overhauling the ASD’s method of selecting failing schools for a state takeover.

In higher education, the reforms are different but no less significant, with the independent board governing the University of Memphis beginning its work as the state Board of Regents oversees only community colleges and Tennessee Colleges of Applied Technology.

The U of M board will seek state funding through different means, and the autonomy of it and other four-year state universities have been moving toward this day for some years now.

Marjorie Hass becomes the new president of Rhodes College in the summer as Bill Troutt exits the liberal arts college after 18 years of opening up its borders.

Christian Brothers University opens a new center for the arts on its campus as it continues a capital campaign that promises to change the physical look as well as scope of a college known for its engineering program. CBU wants to “blow up” its education program, as president John Smarrelli told our editorial board this fall, and 2017 will see its plans for Crosstown High School become more specific.

_____

Senior reporter Bill Dries and reporters Patrick Lantrip and Don Wade contributed to this article.

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 55 55 20,821
MORTGAGES 44 44 24,405
FORECLOSURE NOTICES 0 0 8,610
BUILDING PERMITS 0 0 42,337
BANKRUPTCIES 51 51 13,953
BUSINESS LICENSES 22 22 6,423
UTILITY CONNECTIONS 0 0 13,511
MARRIAGE LICENSES 23 23 5,092

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