East Memphis Submarket Gearing Up to Add New Office Space Despite Slowing Economy

By Andy Ashby
– Memphis Business Journal –

Although the economy has slowed recently, the East Memphis submarket is primed to release new office product while other submarkets also could be adding future development.

With Boyle Investment Co.’s 150,000-square-foot building at 999 S. Shady Grove already under construction, the next candidate for new office space is Highwoods Properties, Inc.’s 154,000-square-foot Triad Centre III at 6070 Poplar, an extension of its properties at 6000 and 6060 Poplar.

"We’re still working with several tenants on pre-lease transactions which would probably kick off the building," Steve Guinn, Highwoods vice president, says.

Highwoods is evaluating whether to make its new building LEED certified.

"From an economic standpoint, it makes a lot of sense," Guinn says. "You know good and well that the energy rates aren’t going to be the same now that they will be in 10, 20 or 30 years. As rates continue to go up, why would you not want to start out with the most efficient building you could?"

Highwoods could start construction this summer, which would have it delivered in fourth quarter 2009.

"And if you look at just our inventory, or lack thereof, we need some more product," Guinn says.

The East Memphis Class A office vacancy rate has dipped to 1.8%, according to the CB Richard Ellis MarketView office fourth quarter report.

A slowing economy hasn’t damaged office leasing activity, say local real estate sources. Also, since office development can take 18-24 months, it can outlast recessions, which average 10 months.

"You’re dealing with post-recession, you’re really at the point in time when the recovery is over and you’re back to civilization," Nick Clark, a partner with Clark & Clark, says.

Highwoods hasn’t seen a slowdown. It’s still working on new leasing and expansion in its portfolio.

"We just haven’t seen things dry up," Guinn says. "We still have active prospect lists, we have active deals we’re working. I wouldn’t say the market is booming, but it’s not dead."

Similarly, Boyle is busy trying to fill its 999 S. Shady Grove building, currently under construction, and its 949 S. Shady Grove building, which is still in the pre-leasing stage.

"We’ve actually got more prospects than we could handle," Mark Halperin, Boyle executive vice president, says.

SunTrust Banks, Inc., will take occupancy at 999 S. Shady Grove in November. Boyle hasn’t signed a second tenant, but has some promising prospects.

"Some of the people we’re talking to are kind of in a wait-and-see mode," Halperin says. "They seem to be very happy with our building, but the mortgage meltdown, the credit crisis or the different buzz phrase for the particular crisis du jour has people more cautious. I think they’re still planning, but they’re just slower to commit."

Boyle has some prospects for new office space in Collierville.

"I think ultimately we’ll build a lot of space in Schilling Farms," Halperin says. "I just think it’s going to be the next key location in the growth of the Memphis business community. It has Poplar Avenue, it’s in the middle of a lot of high-end residential and a lot of decision makers live in that neck of the woods."