» Subscribe Today!
More of what you want to know.
The Daily News
X

Forgot your password?
TDN Services
Research millions of people and properties [+]
Monitor any person, property or company [+]

Skip Navigation LinksHome >
VOL. 9 | NO. 9 | Saturday, February 27, 2016

Numbers Show Memphis’ Commercial Real Estate Market Stable in 2015

By Madeline Faber

Print | Front Page | Email this story | Email reporter | Comments ()

Across all sectors, the Memphis market was stable in 2015.

That’s according to the latest data from Integra Realty Resources, a national appraisal and advisory firm. At its annual Viewpoint local market presentation Wednesday, Feb. 24, local Integra leaders spoke on the industrial sector’s banner year, multifamily’s expansion cycle, what’s next for an office market without any remaining Class A space, and growth in the retail sector.

Integra Realty Resouces said the market is seeing more quality, affordable housing projects than in recent years. This year, Memphis' last public housing complex, Foote Homes, will be razed to make way for new mixed-income apartments.  (Memphis News File/Andrew J. Breig)

“We’ve gone through the very bad part of the recession when we had properties being given back, we had a lot of REO sales, we had a lot of foreclosure sales and we cleaned out that inventory,” said J. Walter Allen, senior managing director of Integra-Memphis. “So now what we’re dealing with is basic product that’s doing better, in my opinion, almost across the board.”

Multifamily

The multifamily sector is strong and expanding, with consistent construction deliveries, stable occupancy and rent growth. Currently, asking rents range from $1,248 for urban Class A to $645 for suburban Class B product. Rental rate growth averaged 2.4 percent per year between 2010 and 2015.

Last year, sales of multifamily property totaled $453 million, a 21.02 percent increase year over year.

In her presentation, Integra-Memphis director Michelle Alexander noted the increase of affordable housing developments supported by low-income tax credits. In 2014, two such developments came online, and that trend continued in 2015. For 2016, there are four submitted applications for developments supported by low-income tax credits.

In 2010, the Dixie Homes public housing project was replaced with the mixed-income Legends Park apartments. According to Integra research, occupancy has stayed at 95 percent for the past three years while rents have increased. With the redevelopment of Foote Homes, Memphis’ last public housing project, to get underway this year, more Memphians will have access to greater housing quality.

“It helps to bridge the gap between market value and what it costs to develop,” said Alexander.

Office

The office sector is in recovery mode with few prospects of new product. According to Integra research, the Memphis market is in the bottom 10 among cities nationwide in terms of office transactions.

The highly desired East Memphis submarket has reached a market equilibrium with Class A properties at 96 percent occupancy and no vacant spaces in excess of 5,000 square feet.

View PDF

In turn, prospective users are looking to Class B properties. Landlords are bringing on capital improvements and raising rents to compete with the tightened Class A market. The 385 corridor also is seeing a boost.

Last year’s biggest sale was i-bank Tower, located at 5050 Poplar Ave. adjacent to Clark Tower in East Memphis. The building went for $19.3 million and is 81 percent occupied. Allen said that rents have been at the same price point for the past 10 years. Now, both properties are under the ownership of In-Rel Properties, which wants to renovate and enhance the surrounding area to create a walkable business park.

Upcoming office projects include 160,000 square feet as part of the TraVure mixed-use development in Germantown. Boyle Investment Co. has announced plans to build a 175,000-square-foot office building in the last remaining lot in Ridgeway Office Park. And Crosstown Concourse in Midtown will bear 620,000 square feet when it opens in 2017.

Retail

Strong housing growth and consumer confidence are supporting a growing retail market. Total absorption in the market was 1 million square feet, marking the city’s fourth consecutive year of positive absorption while rental rates remain flat. Asking rents in Memphis come in at $11 per square foot for community retail and $14 for neighborhood retail, both below the national and regional average.

New construction deliveries were focused in the DeSoto submarket, with offerings such as the Tanger Outlet Mall and the Olive Branch Commons. Both were substantially pre-leased prior to construction starting, and several retail centers have developed in proximity to the major retail centers.

Most of retail activity is coming from grocery stores and fast-casual dining.

Industrial

Memphis’ best sector is industrial, and 2015 was no exception. In terms of construction, Memphis is a leader among mid-sized markets, with 3 million square feet delivered in 2015.

DeSoto and Marshall counties in North Mississippi likely will continue to lead the way in snagging industrial users, but Memphis did secure the 1.3 million-square-foot Nike distribution facility and the 900,000-square-foot distribution facility last year.

According to Integra, new deliveries are leasing up quickly, rates are increasing and concessions are becoming less common.

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 64 151 1,493
MORTGAGES 45 105 1,152
FORECLOSURE NOTICES 5 19 209
BUILDING PERMITS 201 410 3,466
BANKRUPTCIES 35 119 872
BUSINESS LICENSES 9 32 361
UTILITY CONNECTIONS 0 0 0
MARRIAGE LICENSES 0 0 0