SOUTHEAST SNAPSHOT, SEPTEMBER 2005

Memphis Industrial Market

Charles Sevier Chief Manager & Partner Crump Commercial, LLC CORFAC International

Indianapolis-based Lauth Industrial Properties recently entered the market on the west side of Getwell Road and south of Holmes Road in Shelby County. The company is developing an 885,000-square-foot speculative warehouse building that will be available in the fourth quarter of this year.  Also in Shelby County, ProLogis recently completed a 600,000-square-foot distribution facility called State Line Park Building 100, which is located at Stateline and Getwell roads. 

However, a majority of development in the Memphis industrial market is taking place in DeSoto County, Mississippi, where tax incentive programs are more simplistic than Shelby County and real estate taxes are 50 cents to 70 cents less per square foot than on the Tennessee side of the market in Shelby County.  In addition, Panattoni, Hillwood, IDI and H&M all are under construction on speculative buildings in this emerging submarket.

Several major leases have been closed recently, most of which took place on the Mississippi side of the Memphis industrial sector.  In the first quarter of this year, Panattoni leased a 520,000-square-foot warehouse located within Southeast Distribution Phase I to Go Dan Industries; the space is located at Airways Boulevard and Stateline Road in Southaven, Mississippi, in DeSoto County.  In addition, H&M leased 720,000 square feet on Polk Lane in Olive Branch to two different tenants; Excel Logistics leased 520,000 square feet at 8631 Polk Lane, and Prime Automotive has leased 150,600 square feet.  Furthermore, PFS Web signed a 5-year lease for 309,000 square feet in the last vacant building in Southaven’s Airways Distribution Center; the company also has the first option on the 250,000 square feet of vacant space that remains in the building.  Also in Southaven, Helen of Troy has closed on a lease that will relocate the company at the end of this year to 1.2 million square feet at DeSoto Trade Center. An interesting aspect about this development is that the establishment of Foreign Trade Zone (FTZ) at DeSoto Trade Center provides advantages to the company that other locations would not have, in addition to the tax advantages that are inherent by locating in DeSoto County in the first place. Among the advantages for being in a FTZ-designated location are: goods entering FTZs are exempt from tariffs until they leave the FTZ and formally enter into U.S. Custom’s territory, no time limit is placed on items stored inside a FTZ, certain foreign and domestic goods held in FTZs may be exempt from state and local inventory tax, and quota restrictions often are waived for items entering an FTZ.

In Shelby County, on the Tennessee side of the industrial sector, Jabil Circuit has entered into a 5-year lease for 366,000 square feet at 4880 Tuggle Rd.; and at Memphis Trade Center III, J&J signed a lease for 330,000 square feet.

In the future, development will continue to gravitate toward DeSoto County as well as Fayette County, Tennessee, due to the increasing real estate taxes in Memphis and Shelby County.  Planned improvements to Highway 72, Nonconnah Parkway and Goodman Road will increase accessibility to these areas, further perpetuating their popularity.  Marshall County, Mississippi, also is seeing new development, as Excel Logistics is planning to open a 700,000-square-foot distribution facility there.

Overall, net absorption continues to increase, which is an encouraging sign for the Memphis industrial sector.  With heavy leasing and increasing development occurring mostly on the Mississippi side, the market will continue to move in a positive direction.

— Charles Sevier, chief manager & partner, Crump Commercial, LLC, CORFAC International

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