New office tower, hotel, retail to follow
Hours after the announcement that Fedex Logistics will move into the Gibson Guitar Factory building Downtown, Somera Road, the company that owns the building and the adjacent parking lot, announced more redevelopment.
On the parking lot near B.B. King Boulevard and M.L.K. Jr. Avenue, Somera Road plans to build an eight-story, 250,000-square-foot office tower, a 250-room hotel with conference space, about 50,000-square-feet of retail and restaurant space as well as a parking garage. The project has been dubbed “The Clipper.”
“The Fedex tenancy at the former Gibson site, our market research of the supply and demand dynamic Downtown, and the continued support and commitment from our investment committee have affirmed that we truly can rei- Daily $2.00
magine a block of Downtown Memphis by strategically activating and bridging this valuable corridor between Beale Street and South Main,” said Ian Ross, managing director of Somera Road, in a written statement. “The project will be a dynamic mixed-use, transformational connector.”
Senate Hospitality, the Nashvillebased company that manages the Westin hotel next door to the Gibson Guitar building, will partner on the hotel project. Senate Hospitality CEO Glenn Malone said the company is reviewing franchise brands and deciding what amenities will be included in the hotel.
Also partnering on the project is Memphis father-and-son development team Billy and Benjamin Orgel.
“The Clipper represents the cutting edge of a live/work/play environment,” said Benjamin Orgel. “This is the next wave of energy that Memphis’ residents, employees, and visitors need.”
Fedex move follows Downtown trend
With the Downtown move, Fedex Logistics is following a corporate trend kicked off by Servicemaster and carried out by several other companies large and small.
Since Servicemaster announced its move Downtown in mid-2016:
❚ Autozone revealed plans to expand its footprint along South Front Street.
❚ Agriculture technology startup Indigo Ag decided to open its North American commercial operations headquarters inside the Toyota Center building near B.B. King Boulevard and Union Avenue, bringing 700 new jobs to Downtown Memphis during the next three years.
❚ Orion Federal Credit Union is redeveloping the former Wonder Bread Factory in the Edge neighborhood, Oden Marketing and Doug Carpenter & Associates both found offices Downtown. and new office space has been added with the redevelopments of the Universal Life building, Tennessee Brewery and the former Medical Arts building on Madison Avenue.
❚ The Commercial Appeal will move its offices to Main Street in the heart of Downtown this spring.
With the allure of Downtown for current and future employees, it’s clear why a company would be attracted to the urban core, said Ron Kastner, with commercial real estate firm CBRE.
“There is a shift away from companies building out spaces to please their clients,” Kastner said. “They are building out space to please employees, to retain, recruit and pacify employees.”
For that, Downtown office space can be attractive, offering an “exciting and energetic” work environment.
“Suburban office space in the heart of East Memphis is central, but it’s not exciting,” Kastner said.
Large offices limited in Downtown
Even with the splashy announcements of Downtown moves, CBRE data shows that about 24 percent of Downtown office space — mostly small offices spread across several buildings — is vacant.
Indigo Ag already had a presence inside the Toyota Center. Its decision to grow there meant it would take another 100,000 square feet of the building, the last major swath of traditional office space in the core of the city.
Now, the largest single office space is about 60,000 square feet spread over multiple floors inside One Commerce Square, Kastner said.
That’s likely why companies like Servicemaster and Fedex that need more space to accommodate a large workforce are choosing to redevelop buildings that had other uses in the past. Kastner said reusing old buildings rather than building new ones can make moving into a new office more affordable. It’s a trend that will likely continue. Still, projects like The Clipper and Union Row will add to the inventory of newly-built office space, although neither has announced which companies will use the hundreds of thousands of square feet inside their proposed office towers.
But even as companies trend toward Downtown, East Memphis is still the most desirable place for companies to establish their offices, Kastner said.
About 40 percent of all office space in Memphis is in East Memphis, as opposed to just 14 percent in Downtown, and as companies move toward Downtown, filling the East Memphis spaces they leave empty usually happens quickly, Kastner said.
Desiree Stennett can be reached at desiree.stennett@commercialappeal.com, 901-529-2738 or on Twitter: @desi_stennett.