Jazzing Up Memphis
New commercial developments attract residents and businesses to this Southern city.
Blighted for years by suburban flight and
the subsequent business exodus, downtown Memphis today is experiencing
a renaissance. Bolstered by popular entertainment and cultural venues
such as the new AutoZone Park and the revitalized Beale Street that
have attracted hundreds of new residents, the city has embarked on an
unprecedented $2 billion development initiative to boost economic
growth and tourism. Multifamily and retail projects dominate Memphis'
commercial real estate scene, as office activity stagnates due to the
continuing depressed job market.
Commercial Projects Boost Downtown Vitality
Developers initiating projects in downtown Memphis benefit from
numerous financial incentives. To encourage commercial development, the
city assesses properties in the Central Business Improvement District
65 cents per $100 of assessed value. The Center City Revenue Finance
Corp.'s payment in lieu of taxes, or PILOT, program freezes property
taxes for CBID and nearby buildings that have improvements or new
construction costs equal to or greater than 60 percent of the project's
total cost. Property owners also can apply for $90,000 City Center
Development Corp. low-interest building redevelopment loans and a 20
percent federal historic tax credit.
office and retail tenants in Main Street district ground-floor
properties can take advantage of a loan program that allows them to
borrow up to 90 percent of improvement costs. The city also rewards
commercial real estate brokers with a one-time, $5,000 bonus for
signing new office and retail tenants in CBID properties.
new CBID office buildings currently are planned, but numerous other
commercial developments are underway. The largest public project under
construction is the $250 million FedEx
future home of the Memphis Grizzlies National Basketball Association
team. Scheduled to open in September, the more than 18,000-seat arena,
located near historic Beale Street, includes outdoor entertainment
areas and a 35,000-square-foot plaza.
The remaining new
construction mainly comprises multifamily and mixed-use developments.
For example, the city has teamed with several private companies in the
$150 million revitalization of Uptown, a mixed-income community just
north of the central business district; the plan includes infill
multifamily construction and public housing renovation. Also in that
neighborhood, the $3.5 million Uptown Place will add much-needed
retail, including a gas station, convenience store, and dry cleaner, as
well as 8,880 sf of residential space.
redevelopment projects also abound in the city center. For example, the
$29 million conversion of the Lowenstein Department Store, the Court
Annex Warehouse, and the Lincoln American Tower into the Court Square
Center is scheduled to begin in March. When complete, the project will
include more than 70 apartments, two 7,000-sf offices, and ground-floor
Retailers Flock to CBD and Suburban Developments
Although retail construction slowed a few years ago, "this lag in
additional supply served to keep demand fairly strong, and we are now
seeing development increase with the increase in demand," says Frank M.
Dyer III, CCIM, of Loeb Properties.
redevelopments are giving store owners a reason to move back into
once-depressed areas. "We are seeing more renovations of older shopping
centers within the heart of Memphis, as new retailers enter the market
to fill demographic niches," says Cherie Ganesh, CCIM, of Cresa
Partners Memphis LLC. For example, Bluff City Group is demolishing a
vacant Uptown building and replacing it with 8,000 sf of retail space
and several loft apartments. Recently opened businesses downtown
include women's fashion retailer Muse, South Main Convenience Store,
and Six50, a fitness club.
western-suburb home sales have prompted retail developers to construct
grocery-anchored shopping centers and big boxes, including the
78,592-sf Shops at Kirby Gate, anchored by Kroger, in Germantown and a
219,000-sf Wal-Mart Supercenter and a 175,000-sf Super Target in
Cordova. Despite the new development surge, occupancy in these
submarkets remains more than 90 percent, according to CB Richard Ellis.
Although the region already is home to several thriving
malls, CBL & Associates has proposed a more than 800,000-sf
open-air mall in DeSoto County, Miss. Cousins Properties' planned
Carriage Crossing lifestyle center in Collierville, a far west suburb,
has attracted Dillard's and Parisian department stores to its anchor
positions. "With the entry of Parisian we should see more national
retailers who have not entered the Memphis market take a good look in
2004," Ganesh says.
Reviving St. Louis
Health-care and biotech projects add vigor to weak commercial real estate markets.
the BioBelt, the St. Louis region for years has attracted numerous
research and development companies, adding strength to the city's
industrial market. The region's more than 17 million square feet of
R&D space is expected to expand by 6 percent to 10 percent during
the next year, as companies such as Sigma-Aldrich - which opened the
130,000-square-foot, $55 million Life Science Technology Center and
redeveloped three of its manufacturing plants into the $5 million Life
Science Production Center - construct new facilities.
industrial isn't the only St. Louis commercial real estate market
experiencing activity. A revitalization initiative has launched
numerous multifamily, hospitality, and entertainment projects designed
to help create a vibrant, 24/7 central business district.
Health Care Boosts Ailing Industrial Market
St. Louis' reputation as a health-care hotbed is helping the region's
industrial market recuperate from a painful year of negative absorption
and diminished occupancy rates.
Milken Institute's August 2003 America's Health Care Economy ranked the
St. Louis metropolitan area No. 13 on a national list of
health-care-driven economies, beating out biotechnology hot spots such
as San Diego, Seattle, and San Francisco. The report commended the area
for its plethora of hospitals and nursing and personal-care facilities.
Last year, civic planners announced initiatives to provide improved
physical infrastructure for biotechnology companies relocating to St.
Louis, including Technopolis, a 1,000-acre advanced technology research
district, and a 180,000-sf commercial, office, and laboratory suburban
recognition and government initiatives, combined with the city's
renowned research universities and hospitals, are attracting numerous
biotech companies. Solae Co., a soy-based food products maker, is
consolidating its North American headquarters and research operations
on the Nestlé Purina campus southwest of downtown. Wyeth BioPharma is
undergoing a $230 million expansion of its manufacturing facility.
Pfizer, which acquired Pharmacia Corp. in 2002, recently decided to
maintain and potentially grow its R&D operations in St. Louis.
area's infrastructure and prominence as a regional distribution hub
also are improving its industrial market. For example, the 2,300-acre
Gateway Commerce Center in Madison County, Ill., is exceeding
performance expectations with the addition of Unilever's more than 1.2
million-sf distribution center; Hershey Foods is constructing another
1.1 million- sf facility at the business park.
Multifamily Fuels Downtown Revitalization
In 1997, a coalition of private and public sector representatives
founded Downtown Now!, an organization aimed at raising the central
business district's population and commercial appeal by revitalizing or
constructing housing, retail, and office properties in several
this renewed optimism, downtown St. Louis' office market continues to
falter. "I think we will look back to fourth-quarter 2003 as being the
point that the market hit bottom concerning overall vacancy rates,
concessions, and rental terms," says David Morris, CCIM, SIOR, of
Colliers Turley Martin Tucker. Third-quarter 2003 vacancy in downtown's
more than 12.4 million sf of office space was 20.1 percent, the highest
vacancy rate in the metropolitan area, according to Colliers Turley
Martin Tucker's St. Louis Office Market Report. The high vacancy rate,
combined with increasing sublease space, has kept class A lease rates
around $18 per square foot for the last four years, the report says.
revitalization developments are boosting other commercial real estate
markets, especially hospitality and multifamily. For example, using
Missouri historic preservation tax credits, Historic Restoration, a New
Orleans-based real estate development company, renovated the 1917
Statler Hotel and the 1929 Lennox Hotel, both on the National Register
of Historic Places, into the $265 million Marriott Renaissance Grand
convention hotel, adjacent to the America's Center in the city's
Washington Avenue district. City officials credit the hotel for
increased convention bookings through the next decade. Also in that
neighborhood, Historic Restoration converted the 340,000-sf Merchandise
Mart, a former 19th-century warehouse, into a mixed-use, mixed-income
residential and retail property.
In the Laclede's
Landing district along the Mississippi River, a private developer is
planning the $20 million, 51-unit Water's Edge Condominiums. Another
nearby development should add 26 more units to the area, which
currently has few permanent residents.
City planners hope
the construction of a $646 million St. Louis Cardinals ballpark and
mixed-use village -- which would contain more than 400 residential
units, 400,000 sf of office space, an aquarium, a baseball museum, and
street-level retail -- scheduled to open for the 2006 season, will renew
downtown vitality, as experienced in other similar-size markets such as
Memphis and Cleveland. The Sports Center Redevelopment Authority, a
public entity comprising city, county, and state officials, will own
the park, which the Major League Baseball team is required to lease for
at least 35 years