Cooler industrial market could refire
The hot Memphis industrial market cooled off in April-June, but bigger things are in store, two major commercial real estate firms reported this week.
CB Richard Ellis Memphis calculates that the local market went backward by 302,841 square feet during the second quarter.
The Cushman & Wakefield/Commercial Advisors tally of “negative absorption” — the amount of net industrial space that emptied out — totaled 515,273 square feet.
Either way, both firms say the stage is set for substantial activity in the notso-distant future.
Technicolor shook things up by leaving its 580,131-square-foot space at 5155 Lamar to search for a short-term lease on 400,000 square feet elsewhere in the Memphis region, CBRE Memphis reports in its Market-View publication.
“Other move-outs that contributed to the (Southeast Memphis) submar--
ket’s negative absorption of 448,449 square feet for the quarter are: Schering Plough, 4001 Hickory Hill Road, 200,000 square feet; Jacobsen, 4148 Delp, 102,400 square feet; and Katt Worldwide, 4120 Air Trans Road, 69,251 square feet,” CBRE reports.
The Cushman & Wakefield/Commercial Advisors “Advisor Report” agrees that Technicolor was the city’s largest industrial move-out of the quarter.
But the real estate firm pointed out that the Southeast submarket also scored the largest lease transaction of the period when Bryce Corp. signed for 223,000 square feet in the Eastpark II development.
“The packaging company is undergoing a $21 million expansion which will create 95 new jobs,” the report states.
Despite the new vacancies of the second quarter, a net of almost 500,000 square feet of industrial space was absorbed over the first half of the year, Cushman & Wakefield/ Commercial Advisors reports.
That firm records the city’s industrial vacancy rate at 15.1 percent, up two-tenths of a percentage point from the first quarter.
CBRE Memphis puts the vacancy rate at 11.7 percent.
Cushman & Wakefield/ Commercial Advisors spotted a new trend in the second quarter: a shift of demand from smaller spaces (less than 200,000 square feet of Class Bplus/Class A) to a demand for 400,000 to 600,000 square feet.
The firm reports a second type of shift. Early in the year, companies searched for space that totaled under 6 million square feet. “We are now tracking more than 10.9 (million square feet) of tenants seeking space in the market,” the Cushman & Wakefield/Commercial Advisors report states.
The CBRE Memphis report is also upbeat, stating “Despite a negative absorption ... for the second quarter, things are looking up for the Memphis industrial market.”
“Investment sales activity has reached levels not seen since 2006,” the CBRE Memphis report states. “Within the past two years, institutional and private equity buyers invested more than $400 million in Memphis (metropolitan area) industrial assets.
“The level of investment activity combined with the caliber of buyers investing significant capital is a positive sign for property values as well as overall market fundamentals,” the report states.
Even though, by CBRE Memphis’ calculation, the industrial vacancy rate climbed two-tenths of a percentage point to 11.7 percent, it stayed below the 12.9 percent vacancy rate from the second quarter of last year.
“A significant amount of bulk distribution users are soliciting proposals in the market currently, which should contribute to a strong finish for the year, as long as a few of the transactions actually close,” the CBRE Memphis report states.
However, the firm expects the vacancy rate to rise in the third quarter because of “a few” tenant move-outs expected to occur.
“... But it is very possible that year-end numbers could look much stronger if the current market activity leads to eventual transaction,” the report states.
Activity by prospective industrial tenants is especially high in the medical/pharmaceutical, e- commerce and thirdparty logistics industries, CBRE Memphis reports.