Like many communities across the country, Memphis, Tennessee, endured a year of economic downturns in 2002 but ended with good news. For the sixth consecutive year, capital investment in the Memphis area exceeded $1 billion, resulting in 8,352 new jobs and causing more than 8.4 million square feet of real estate activity in 2002. Economic growth and investment from both national and international business remains a top community priority, and Memphis expects to remain the world’s Number 1 cargo airport for the 10th consecutive year.

Downtown, the renaissance continues. Downtown Memphis’ vitality revolves around entertainment, sports and musical culture, including AutoZone Stadium’s record-breaking baseball success, the development of Peabody Place, the opening of the convention center, the remake of the Cannon Auditorium and Beale Street. Construction is well underway on the new 18,400-seat FedEx Forum, which will house the Grizzlies, Memphis’ NBA team, when it opens in 2004. In addition, the FedEx Forum will be home to the Smithsonian’s Rock ‘n’ Soul Museum.

Voted the fastest growing downtown in America in 2000, the Memphis central business district is experiencing phenomenal growth in apartments and condominiums with more than 10,000 new residents. Trendy loft apartments dot the South Main gallery district and new restaurants and retail projects continue to be developed. A new $19 million downtown elementary school will open its doors in August. The Third Street and Union Avenue block that boasts the AutoZone Stadium and bustling Toyota Center won the Urban Land Institute’s 2002 Award of Excellence. This Ballpark District, once a site for empty lots, abandoned buildings and X-rated movie theatres, won for its tremendously successful revitalization.

A $160 million Uptown Project is underway to develop more than 1,100 new residences in an area much in need of renewal. The city’s Pinch District, also located downtown, is preparing for an economic boost as a result of the new convention center, Cannon Auditorium and the $1 billion expansion that St. Jude first began in 1999. First Alliance Bank is building a new branch in the same downtown area. Developers are extremely optimistic that their redevelopment efforts will be successful.

- Larry Jensen, president, Commercial Tennessee, Inc.

Retail

Memphis’ retail landscape experienced a healthy 2002, and 2003 is poised for similar growth due to ongoing new development and interest in the market from national retailers.

New grocery operators entering the Memphis market include Aldi, The Fresh Market and Wal-Mart’s Neighborhood Market. St. Louis-based Schnuck Markets Inc. bought 12 Albertsons-owned Seessel’s supermarkets and has announced plans to build two new stores and replace an existing location with a new store. The new locations will be in Collierville at Poplar and New Byhalia at Stage Road and Fletcher Trace Parkway.

Another retailer new to Memphis is Kohl’s, which has announced plans to open at least three stores next year. Target Corporation is said to be interested in expanding in Memphis as well, with the possibility of three new stores, one of which could be a SuperTarget.

Downtown/Midtown is once again becoming a viable area for retail. Home Depot has purchased the Center City Shopping Center at Poplar and Avalon as a possible location for a store site.

Southeast Shelby County is a hot new area for retail development, especially along the eastern section of Winchester Road. The demographics of Memphis are known to shift to the east approximately every 10 years, and this is fueling retail growth in southeast Memphis.

A number of malls in the Memphis area are on the market — including Hickory Ridge and Southland. Raleigh Springs Mall is losing one if its anchors. After Goldsmith’s leaves, Raleigh Springs will have only one remaining anchor. The retailer announced it will close its Raleigh Springs Mall location in mid-April.

New retail developments to be completed in 2003 include the Wal-Mart Neighborhood Market at Hickory Hill and Mt. Moriah roads. Collierville will be the focus of attention in 2003 as Carriage Crossing, a $100 million lifestyle center, is developed by Jim Wilson & Associates and Cousins Properties. The companies will begin construction this summer and the center will open next year. Carriage Crossing, which will have six multi-tenant buildings and three anchor stores, will be developed on 93 acres at Bill Morris Parkway and Houston Levee.

Olive Branch and Southaven in DeSoto County are also attracting developers. CBL & Associates Properties is planning to build a 1 million-square-foot mall on 150 acres just south of Goodman Road and east of Interstate 55.

Ford Lurie Commercial Realty Associates will begin construction on a new 65,000-square-foot shopping center in May. The shopping center will front Germantown Parkway in Cordova.

- Lynn Leonard, NewBridge Retail Advisors

Medical/Office

The dramatic change in medical services delivery has created a strong medical office market in Memphis over the last several years.

“Patient convenience and insurance are the two driving factors in the move to bring care to the patient base. Insurance companies are shortening hospital stays and ambulatory healthcare facilities are the order of the day,” says Larry Henson, vice president of research and information for the Memphis Regional Chamber.

Construction activity in medical real estate was the bright spot for commercial real estate when speculative office development slowed. Strategic repositioning and expansion among the city’s premier practices has resulted in a surge of build-to-suits in the Wolf River medical corridor. Following the lead of The Campbell Clinic’s landmark 60,000-square-foot facility on Germantown Parkway at Wolf River Boulevard and the West Clinic at Humphreys Center North, major new medical developments include Semmes Murphey (50,000 square feet), Stern Cardiology (55,000 square feet), Boston Baskin Cancer Group (97,000 square feet) and a 12,000-square-foot ambulatory surgery center addition for The Campbell Clinic. In addition, Baptist Memorial Healthcare relocated its corporate headquarters to a new 180,000-square-foot building in the east Memphis area.

“Although many of the larger firms are now positioned in east Memphis, we expect the trend toward freestanding facilities to continue, alongside the historically viable alternative of medical office space adjacent to the major hospitals,” says Steve Bowie, senior vice president at Commercial Tennessee.

As a result, many of the large practices have relocated significant facilities from the central medical district, including the closing of the 1,700-bed Baptist Memorial Hospital (BMH). BMH made a gift of its facilities to the University of Tennessee (UT) Health Science Center and a newly created Memphis Biotech Foundation (MBF). MBF has assumed the role of developing the biosciences and research industry cluster for the Memphis region, and its efforts are well underway. Architects and engineers have already been selected to begin Phase I, a six-story, 165,000-square-foot facility to hold biotechnology research activities for multiple tenants. Up to 1.2 million square feet of research space can be developed on the former BMH site.

“The development of the UT-Baptist Research Park represents an important step in establishing the infrastructure of this next economic development engine for the Memphis community,” says Stephen Berger, AIA. Berger is with architecture firm TRO; he is principal in charge for the Biotech project. “It will be the heart of research and commercialization for the biotech industry in Memphis.”

Like many other cities, Memphis carries a large inventory of sublease space in the speculative office market. Office sublease inventory totaled 500,099 square feet at the end of 2002, which represented a drop from the more than 600,000 square feet at the end of second quarter 2002, although a slight increase over the third quarter’s 471,254 square feet. Tenants found that landlords were willing to make significant concessions to help fill their empty spaces, and in many cases, cheaper rates allowed tenants to upgrade to Class A buildings. Completion of International Paper’s Tower III and the first building in the Tournament Trails development added a total of 275,000 square feet of new space to the market. Year-end absorption for the overall office market totaled 108,369 square feet, a significant improvement from fourth quarter 2001’s total of negative 234,315 square feet. Also up from fourth quarter 2001 was the overall Memphis area average asking rental rate, $16.56, representing a 3-cent increase over fourth quarter 2001.

- Larry Jensen, president, Commercial Tennessee, Inc.

Industrial

The largest single industrial lease in the city’s history, a 922,500-square-foot space for Thomson Multimedia, could not keep the Memphis industrial market out of the red for 2002’s absorption figures. Fourth quarter statistics showed that the industrial market suffered negative 408,791 square feet in absorption. Though construction slowed, 220,000 square feet of new space was added in 2002. Sublease offerings totaled 3.49 million square feet by year-end, an increase of more than 1 million square feet over the third quarter. Asking rental rates for new space experienced a decline at year-end. Overall bulk rates averaged $2.32 per square foot, overall standard distribution rates were $2.25 and service center rates were $5.86. Despite a dismal year in the industrial real estate market, many brokers expect a turnaround by the end of 2003.

“There are a lot of major users in the market currently looking for big box space, and the first quarter has seen a lot of activity. Hopefully, by the end of the fourth quarter the poor industrial market will seem just like a bad dream,” says Wyatt Aiken, senior vice president for Commercial Tennessee.

- Larry Jensen, president, Commercial Tennessee, Inc.

 

NEO-TRADITIONAL CENTER TO OPEN IN COLLIERVILLE NEXT YEAR Jim Wilson & Associates and Cousins Properties are working on a new open-air center in Collierville, Tennessee, a suburb of Memphis. Carriage Crossing at Collierville, designed by CMH Architects of Birmingham, Alabama, is an 810,000-square-foot specialty retail center scheduled to open in fall 2004. Carriage Crossing’s design embodies the Main Street concept with features such as raised pedestrian crosswalks paved with brick, as well as seating areas defined by low brick walls and lush landscaping. The center will have a strong village-type atmosphere capturing the feeling of small town America and will include details derived from historic downtown Collierville. The tree-lined sidewalk areas will incorporate brick paving, traditional street lights, courts, fountains and sculptures. The two Main Street areas will form a cross, the intersection of which will be a large circular village green. There will also be a separate children’s park located near the child-oriented merchants. Buildings along Main Street will be neo-traditional with varied façades and storefronts, incorporating brick, Renaissance stone, stucco, concrete details, wood, standing seam metal roofs and ornamental light fixtures. Towers and turrets will accentuate major street corners and provide visual landmarks for shoppers. The tenant roster will consist of local and national retailers — department stores and specialty shops — that will appeal to the upscale demographics in the market. The use of the Main Street concept will allow shoppers to park in front of the shops, while having easy access to the department store at the “end” of the street. There will also be parking fields around the perimeter of the project to serve the three major anchors as well as the shops.

©2003 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.