July 22, 2015

385 Corridor Becoming Prime Market For New Office Projects

By Tara Milligan
– The Memphis Business Journal –

Germantown and Collierville, those residential safe havens, have long benefited from office developments only minutes away.

But the affluent cities to the east are taking baby steps to introduce more office space into that submarket.

Zoning changes and strong-willed developers are creating the best opportunities ever for high profile local and national businesses to have a Germantown or Collierville address. However, office developments immediately to the south of the two cities may have beaten them to the punch after development of the Nonconnah Parkway attracted companies such as FedEx Corp., Thomas & Betts Corp., and International Paper Co.

But in the end, the three key components of Germantown, Collierville and Nonconnah have a symbiotic relationship that has created a submarket widely known as the 385 Corridor. Kelly Truitt, senior vice president with CB Richard Ellis Memphis says office space in Germantown has consisted mostly of low density developments.

“In the Germantown Road and Exeter area, you’ll find office condo or cottage type low-rise offices,” Truitt says. “The population in those areas has been more favorable to residential development instead of commercial development.”

That desire is reflected in the city’s zoning. Historically, the city has kept the amount of land zoned commercial low. “It’s very challenging because of all the restrictions Germantown has,” says Tisha Riddle May, senior associate of Trammell Crow Co. “They haven’t encouraged a lot of commercial development.”

But the leaders of the two cities have gotten more aggressive in encouraging office development.

Jerry Cook, director of community development for the city of Germantown says two new zoning designations have been developed to address the demand for office space in Germantown.

“We have several classifications of office developments now,” Cook says. One even addresses office campus developments and another raises the height restriction to 51 feet, up from 35 feed, which will allow for three stories of Class A office space and businesses such as floral shops, banks and restaurants on the bottom floors.

“The city didn’t prohibit office development, but in order to attract and develop Class A office space, we wanted to get buildings higher so you could get the kind of amenities that class A users demand,” Cook says.

The first developers to take advantage of the new zoning classifications have largely done build-to-suit deals such as medical office buildings for doctors and doctors’ groups like the ones developed in Wolf River Professional Center.

Loeb Properties, Inc., intended to develop the Wolf River Professional Center in Germantown as mostly speculative office space. But, Frank Dyer, vice president of Loeb, says the primary users have wanted buildings for their own use. “It seems from the beginning, that land has attracted medical users,” Dyer says, “It’s been pretty consistent.”

The center currently has four buildings completed, but will consist of eight when built out. Three buildings are under construction. The buildings at Wolf River Professional Center range in size from 6,000 to 40,000 square feet.

In a recently annexed area of Germantown, speculative office buildings are starting to show up. The area known as Forrest Hill heights, which is located in the area of Winchester and Forest Hill Irene, consists of several hundred acres zoned mostly for office use.

Forest Hill Heights already has attracted several companies, including the Better Business Bureau, Orgil, Inc., SCB computers and Crew Training International.

Charles Wurtzberger, managing partner of Forest Hill Associates, the group that owns the land, says 160 of the 360 acres has been sold to developers. CB Richard Ellis Memphis has the exclusive listing on the land.

The land is situated between the FedEx World Headquarters on Hacks Cross and the FedEx Technology Center on Bailey Station. And Wurtzberger says Forest Hill Heights should continue to attract solid users.

“We’re trying to keep it a really nice place,” Wurtzberger says, “We want it to be all office headquarters. We’ve turned down all kinds of fast food people.”

Collierville has kept a tight rein on office development as well. But the corporate executive crowd that lives in the community has a desire for nearby office space.

For a company wishing to develop its own office building, Boyle Investment Co.’s Schilling Farms is basically the only game in town. The 443-acre mixed use development with frontage on Poplar Avenue and Winchester offers 80 acres of zoned office space and already has attracted several businesses.

Boyle developed a 70,000 square foot building for Helena Chemical that was completed recently. The company also developed a 62,000 square foot, one story speculative building known as Schilling Farms Business Center. But it’s the office developments just outside of these two cities that will fulfill most future needs for office space. And the expansion of Nonconnah Parkway or state Highway 385 has made it all possible.

“Because of the available land that surrounds those two communities, it’s allowed Germantown and Collierville to continue their path of emphasis on residential and schools and so on,” says John Mercer, director of leasing for Highwoods Properties, Inc., which is developing speculative office space in Southwind Office Center.

“Before you had 385, you only had small office development in Germantown and Collierville,” says Tracy Speake, a local commercial real estate broker. “Those markets have not been substantial markets.”

Highwoods Properties’ Shadow Creek and Southwind Office Center, Weston Cos.’ Tournament Trails and Belz Enterprises’ Champion Hills are all growing up on the nourishment provided by Nonconnah. This area also is referred to as the technology corridor and stretches as far west as the Lenox Park office development.

Morris Thomas, a vice president with Belz Enterprises, says the Nonconnah Parkway was the “last peg in the puzzle” needed to fuel the explosion of commercial growth in that area.

“And when FedEx went and did what they did, it was obvious there was going to be a demand for Class A office space,” Thomas says.

Thomas predicts that the entire corridor will become the next Poplar Avenue corridor, and others agree.

“I think it’s going to be the primary corridor of Class A office in the future,” says Laura Strand, a leasing agent with Weston Cos. “It could surpass the Poplar Corridor because of the number of developments that are going to be there. 385 is going to open up this corridor to so many more businesses. The access is going to be tremendous. It’s great news to employers who are drawing from the labor pools in Germantown and Collierville.”

And more development is on the way. Clark & Clark which developed Lenox Park, bought 112 acres across from the FedEx World Headquarters and plans to develop 1.6 million square feet of office space there.

Nick Clark says the benefits of the 385 market will attract future business centers.