Memphis Industrial Market Continues Positive Trend in 2017

Thursday, April 20th 2017

The Memphis area industrial real estate market closed the first quarter with positive net absorption, a strong start to 2017 that builds on a nearly four-year streak.

The market closed with 1.3 million square feet of positive net absorption and a total vacancy rate of 8 percent, according to commercial real estate company CBRE’s Q1 2017 Memphis Industrial MarketView report. It is the 15th consecutive quarter the market has closed with positive net absorption.

“Memphis has significant market activity and low available inventory, which means developers would benefit from capitalizing on the lack of supply in order to keep business in Memphis,” Jacque Beeson, an associate with CBRE’s Industrial & Logistics team, said. “Luckily, developers are proactively constructing speculative buildings. Big-box companies want to be in the Mid-South because of favorable incentives, quality of Class A spaces, cost effective lease rates, and the accessibility to the river, rail, roads and air connectivity Memphis offers. And we want them here, too.”

The CBRE report shows that a little over 1 million square feet of new space was delivered in the first quarter, while total vacancy increased 100 basis points to 8 percent.

The DeSoto County submarket continued to lead the way by significantly outpacing the Southeast submarket in terms of leasing activity. Even though the Southeast submarket experienced 230,000 square feet of positive net absorption in the first quarter, DeSoto County enjoyed six times that amount.

There were three notable construction projects delivered in the DeSoto submarket during the first quarter, Prologis’ 716,080-square-foot build-to-suit warehouse at 8500 Nail Road for an undisclosed tenant, and Hillwood’s two speculative buildings totaling approximately 360,000 square feet in Hacks Cross Logistics Center, which were leased to Kenco and Autoliv upon completion.

Of the market’s 3 million square feet of speculative developments, 60 percent were within the DeSoto submarket, the report stated.

“DeSoto County grows in popularity as large tenants continue to flock to the Memphis area and large bulk warehouse leases are signed,” research analyst Lee Wright said in the report. “This is a sign of continued demand for new space in the market and will continue to drive speculative development as tenant needs increase, particularly in the DeSoto County submarket, where 60 percent of the current speculative development is taking place.”

Meanwhile, developments under construction include Panattoni Development’s 554,040-square-foot speculative building at Gateway Global Logistics Center, which is expected to be completed in the second half of 2017. Developer Core 5 also began construction on two speculative warehouses in the DeSoto 55 Logistics Center in Horn Lake that will encompass 582,400 and 301,320 square feet.

By Patrick Lantrip