VOL. 10 | NO. 44 | Saturday, October 28, 2017
Clicking on All Cylinders
By Patrick Lantrip
Memphis is a city on the precipice of change as projects that were once deemed impossible – like ServiceMaster’s Downtown headquarters or Crosstown Concourse – have emboldened developers and city officials to shoot for the moon.
(Memphis News/Houston Cofield)
Which is exactly what they did on Oct. 19 when representatives from various governing bodies around the Greater Memphis area banded together to make a collective pitch to land Amazon’s highly-sought after second headquarters.
And while the city’s pitch will be one of dozens from eager metropolitan areas nationwide, the opportunity to apply couldn’t have come at a better time for the Bluff City, which by most accounts is headed on an upward trajectory whether Amazon comes or not.
“The thing that I think is the best story to come out of this is the cooperation,” said Greater Memphis Chamber president and CEO Phil Trenary. “The fact that the community is behind this and actually has an optimistic attitude that it is a possibility that Amazon can come to Memphis really says a lot about where we’ve come.”
Trenary will be among several guests who will make presentations at The Daily News’ Commercial Real Estate Review & Forecast Seminar, which will be held Thursday, Nov. 2, at the Memphis Brooks Museum of Art.
The seminar will feature a panel of local real estate experts who will discuss both the national and local trends that are shaping their respective sectors and what it means for the Greater Memphis area.
Besides Trenary, this year’s panelists include Tom Hutton, vice president of Boyle Investment Co.; Tony Argiro, vice president of CBRE; Shane Soefker, principal with Avison Young; and Shawn Massey, partner with The Shopping Center Group.
Additionally, Anita Kramer, vice president of the ULI Center for Capital Markets and Real Estate, will give a presentation prior to the seminar. Kramer will discuss the 2018 Emerging Trends Report, which is a joint venture by PwC and the Urban Land Institute that provides an outlook on real estate investment and development trends throughout North America.
But arguably the biggest news in commercial real estate this year is the city’s bid for Amazon’s second headquarters, which has the entire metro area champing at the bit.
“We looked at locations that fit Amazon’s criteria and we have those from Downtown to Collierville, Millington, Bartlett, Arlington and Germantown,” Trenary said. “All of those cities have locations that have applications.”
The future home of Amazon's new distribution facility at Holmes and Tchulahoma in South Memphis. (Memphis News/Houston Cofield)
While the results of the process won’t be revealed by Amazon until early next year, Trenary said the city will begin to address some of the areas in the request for proposal (RFP) where they felt they came up short.
“We’ll continue to work on that regardless because it’s not just Amazon, it fits into our overall effort to attract good jobs and good companies to Memphis,” he said. “So that will be going on regardless of what happens with Amazon.
“Going through this and putting together such a comprehensive response in short period of time has produced some very good work that we’ll be able to use for multiple organizations for a couple of three years to come at least.”
Prior to Trenary’s presentation at the seminar, Kramer will kick off the event at 2:15 p.m. with the ULI report.
“This year we have nine trends,” Kramer said. “We’ll pull out ones with the most interest and connections to the local market and then we’ll discuss what these trends are all about.”
The ULI report is the culmination of three types of research: one-on-one interviews with top national experts, group meetings with experts at each local ULI chapter, known as district councils, and an “extensive” online survey.
“The one-on-one interviews are with the more national, if not global, players,” she said. “There are more than 800 of those people participating. Then our district councils pull together the experts in their market and they answer a series of questions.”
This data is then combined with the results of the in-depth online survey.
“As one participant once told me, it’s grueling, but we get a lot of information about what people are thinking and how they view the market,” she said. “We had about 1,600 responses this year, and that goes out to our senior-level members.”
The online survey, she said, included a lot of market-specific and locally oriented questions that will be discussed at the presentation.
“What’s unique about this publication is that we’re really pulling from the experts,” Kramer said. “What they are thinking and how they are looking ahead.”
Following a 15-minute break, Trenary will discuss the Amazon bid, followed by Argiro, Soefker and Massey.
“I want to communicate to the audience just how robust the Memphis industrial market is and how well Memphis is thought of, throughout North America for sure, when it comes to companies considering where they should open their next distribution operation,” Argiro said.
To convey this, Argiro will give a high-level explanation of the market and how it compares to that of some of our peer cities, why the market is strong, how it got strong and what to expect for 2018 and 2019.
One of the major themes he plans on discussing is the effects of the rise of ecommerce on not only the retail sector, but on the industrial sector as well.
Yehuda Netanel, president of Gilad Development, speaks to a attendees of the Lakeland Outlet Mall demolition. (Memphis News/Houston Cofield)
“So as we’re seeing retail back up and reconfigure, I think Memphis is benefitting from that,” he said. “So while we might be losing storefronts on the retail side to some extent, we are gaining square feet on the industrial side.”
“A big warehouse building in southeast Memphis isn’t as exciting as high-end retail in Carriage Crossing, Saddle Creek, or East Memphis, but the fact of the matter still remains – we are benefitting because of that.”
Hutton of Boyle will share his insights on the Memphis office market, including his company’s highly-anticipated 949 Shady Grove building, which will be anchored by Pinnacle Bank.
“We’ve been lucky to land a couple of big deals this year,” Hutton said. “And obviously that has to do with ServiceMaster moving Downtown. Even though we are losing them as a tenant in a couple of years, we are very thankful that they stayed in Memphis.”
Hutton also said he plans on discussing what the deliveries of the aforementioned 949 Shady Grove building and the neighboring TraVure development will have on the East Memphis Class A market.
“It will probably take some time to absorb what we have,” he said of the new space. “It depends on how quickly we can lease our new building and Ray (Gill) finishes up leasing his building.”
After that he said there isn’t a whole lot of Class A space left in the East and only a few sites left to build.
“It’s hard to say what’s going to happen in the future, but we have to continue to develop and build office buildings,” Hutton said.
“Even though we just finished our final developable site, we have plans,” he said. “If the demand is strong, we could potentially tear a couple of our buildings down and do a redevelopment where our current office is and right next to it. We could do a mixed-use development at some point.”
The new Pinnacle building off Shady Grove Road is one of several new office properties that has the market doing well in 2017 and looking strong heading into 2018. (Memphis News/Houston Cofield)
Massey of The Shopping Center Group, will give a report on retail real estate.
Massey will take the audience beyond a typical market report and will focus on the disruptions, trends and survivors of the retail market on both a macro and micro level.
“Brick and mortar is not dead, it’s very much alive, it’s just evolving and transforming,” he said. “And it has forever.”
He cited the transition from Main Street to malls, from malls to big boxes, and the current rise of ecommerce as examples of this.
“Ten years ago most developers wouldn’t let a fitness user into a shopping center because they dominated parking, now they are an integral part of a shopping center,” he said. “Optometrists used to almost exclusively be in offices, and now they are moving into retail shopping centers. Those are the kinds of trends that are taking place.”
Looking to the future, Massey said that projects like Edge Alley in the Medical District are integral to developing the next generation of local and regional retailers.
“It’s that micro-retail that’s got to develop, we have to continue incubating, through pop-up shops or micro retail, small retailers who can develop into larger retailers,” he said. “That’s really important for brick-and-mortar developers, because we can’t always just bring in food.”
Tying all of the sectors together will be Soefker of Avison Young, who will be discussing commercial real estate investments.
“The bottom line is that the market has been pretty hot,” he said. “It has taken a while for us to get to this point, but everything seems to be just clicking on all cylinders.”
During his presentation Soefker will dive into where the opportunities and risks are, and take a look at who’s active in the market in terms of buyers, sellers, lenders and developers.
“We have lots of new buyers in our market creating new opportunities for growth and improving fundamentals across the board,” he said. “And that really does apply to every single product type here in the market.”
Soefker also will show the audience how Memphis stacks up to other markets, particularly other secondary markets in the Southeast.
“I think we’re just as competitive as the others,” he said. “It’s always is hard to convince investors of that, but when you look at the stats, I think we match up to those guys pretty well. It’s going to be an interesting story, and I think the numbers are going to be pretty compelling to indicate we’re just as a competitive market as some of these other markets.”