Overall, real estate locally reflects a sturdy economy

By Amos Maki
December 29, 2006

The real estate industry experienced a tale of two years in 2006 with residential chugging along earlier in the year and commercial -- particularly industrial -- picking up steam in the second half of the year.

Although it thundered along for most of the year, the local housing market is showing signs of cooling, which should create opportunities for buyers.

According to the Memphis Area Association of Realtors, 1,369 homes were sold in November, down 4.1 percent from 1,427 last year.

Sales volume for November hit $237.4 million, down 2.2 percent from $242.6 million last year. Meanwhile, the number of homes on the market soared 23.1 percent to 10,910, from 8,864 last November.

"For those who might be unsure of current economic conditions, there couldn't be a better time than now to buy a home in the Memphis area," said MAAR president William Mitchell.

Year to date, sales volume is $3.17 billion, up 10.1 percent from last year. Total sales volume for 2005 was $3.2 billion.

It was a very active year in commercial real estate.

Meanwhile, after a slow start, absorption in the Memphis industrial market, including DeSoto County, has totaled more than 4 million square feet, according to CB Richard Ellis Memphis. The market ended 2005 with 5.4 million square feet of absorption.

"There was about 2 million square feet leased in the last couple months and the momentum is there for 2007," said Jim Mercer, industrial team leader for CBRE Memphis. "The attitude of business is more proactive, there's a lot of investment capital out there and we've got some buildings under construction.

"I think that bodes well for next year," he said. "Memphis is not going to be a home run market, but its going to be a market you can count on."

Nissan North America is launching a 413,000-square-foot parts distribution center in southeast Shelby county, a move that culminated two years of negotiations.

The Japan-based company will take up nearly half of Lauth's 885,000-square-foot Delta Point One building, the Indianapolis-based company's first building in the Memphis market.

Also, Terumo Medical Corp., Imation, Iron Mountain, Jacobson Warehouse Co., and Sharp Electronics all cut major leases this year.

Office developers were in a building mood in 2006, with Boyle Investment Co. and Highwoods properties stepping out with new buildings.

Boyle announced it was launching two, five-story, 155,000-square-foot buildings to finish off Ridgeway Center. Highwoods announced plans to build a seven-story 130,000-square-foot building at its campus at Poplar and Shady Grove.

Tightness in the office market -- particularly in the East and 385 submarkets -- caused landlords to raise rents.

In less than a three-month period, Class A office buildings went from quoting first year rents in the mid-$20 range to a new high of $27-$29 per square foot for the first year of rent.

The overall vacancy rate for the third quarter was 15.2 percent, a three-year low.

"The most exciting thing about the office market is we've been down for years and now we've got solid absorption and decreasing vacancies," said Joe Steffner, president of Grubb & Ellis|Memphis. "That, combined with a strong economy, bodes well for office real estate in 2007."

In 2006, national firms the Staubach Co., Grubb & Ellis and Marcus & Millichap entered the Memphis market.

Looking ahead to 2007, Class B office space will see a lot of activity.

On the retail side, several major projects were announced in 2006.

Poag & McEwen Lifestyle Centers, the Memphis-based development group that has become nationally recognized for creating "lifestyle centers" like the Shops at Saddle Creek, is moving forward with plans to turn the 10-acre Highland Street Church of Christ site near the University of Memphis into a $45 million mixed-use project offering a range of living, dining and shopping options.

Look for other moves by Poag & McEwen in 2007, including the announcement of tenants at the Highland site.

Weingarten Realty Investors is moving forward with plans for a $100 million retail center at Poplar and Interstate 240.

Weingarten plans to raze the 26-acre Ridgeway Trace apartment complex in East Memphis and launch a project with nearly 400,000 square feet of retail and restaurant space. Company officials said the project should be open in late 2008 or early 2009.

Kimbrell: Preparing for growth vital to life

By Ed Kimbrell

Ask any great coach about winning and you'll hear the word momentum before the answer is completed. So, too, is momentum the key to economic growth and prosperity.

The entire Middle Tennessee region seems to show attitudes toward the future I cannot recall seeing until now. At this season of the year, especially, it seems that our time to take the positive forces at play and use them wisely and prudently.

Channel 8 re-ran a documentary this week on downtown Nashville that was not only interesting history (can you imagine telling a teenager the entire area around the Capitol was a slum?) but the awareness of leaders old and new that the idea of a living, breathing, 24-hours-a-day downtown is now emerging, a long hoped-for revival.

From downtown lofts to high-rise condos to a $450 million civic center, with plans already being discussed to use the existing one, the vital mixture of housing, good restaurants, sports (new baseball stadium will work), and entertainment means the end of the old Nashville.

When I came to Nashville and Murfreesboro 35 years ago, they seemed to be so far behind all of the other places I had lived and worked. Nashville seemed a bit seedy around the edges and the downtown was in decline. Ah, those wonderful (?) suburbs were being built while 100 Oaks said you can buy everything you need (everything) under one giant steel tent.

Murfreesboro was quaint. One could even stretch a bit and call it a village. The university was beginning to stretch out, under the controversial leadership of then-President Mel Scarlett, as his vision forced it into new areas, new degrees and expansion.

Franklin was quaint, a toy town. Still wants to be a village (with lots, and lots of money).

Today, these three counties are in the midst of their greatest days. (I will always love a line in one of the fun murder-mysteries of Nick and Nora Charles where a guest cries out how he missed the "good old days" to which Nick observes that "these are the good old days."

Franklin-Cool Springs and the coming of Nissan headquarters means Williamson County must continue its excellent record of planning and expansion of services, especially in schools.

So too, Murfreesboro, now a regional hub of commerce and education, must continue to provide services which match Williamson County, as they do now.

While there isn't the wealth generation in Rutherford to match Williamson County (one of the richest counties in the nation), it provides a fine quality of life. Rutherford, with its location, the largest undergraduate university in the state, and its national ranking in growth, is on a great roll.

Take three announcements: 110 new stores and shops in one complex; a new ultra-modern, state-of-the-art hospital, and the completion of the Medical Center parkway, and it becomes clear.

Murfreesboro, however, must address one part of what must be, with all of the good news comes a cautionary note: transportation and planning. Critics of the city worry about the independence of the city from developers, and they can make a strong case for concern. The city must build permanent lungs: tracts of open space, parks and greenery.

It must realize it is not a country town. A park system is vital. It is also vital to plant trees, greenery, and quiet gathering places. The land must be bought now.

I remember when one of the City Council members chastised then-member Mary Huhta as wanting to make Murfreesboro a Germantown. (Germantown is a beautiful, planned suburb of Memphis, with signage laws.) Business is what matters, he shouted, not signage rules. Well, that is a lost battle. Our main commercial roads are a surreal Chinese dragon on steroids.

But, there are cosmetic ways to improve them and ensure that all new such construction matches the excellent new parkway in design and greenery.

Murfreesboro must be commended for buying buses. It is a decision filled with foresight. The entire city is sprawling outward and buses will help many people go to and from work. It's understandable the city didn't buy electric buses, which are environmental wonders, because they cost about twice what a fossil-fuel bus does. But, hopefully, the city will in the future.

Williamson is wisely buying and integrating parks into its designs. Davidson needs to rethink mass transit. The buses are too large and ponderous and research on new ways to move large groups of people in and out of the core should be done now. I love trolleys. How about it, Mayor Purcell?

Predicting the future is a fool's game. But, at this point in time, it's not too far a reach, as Eddie Cantor exclaimed after starring in the first talking movie, "The Jazz Singer," to say "You ain't seen nothin' yet!"