July 12, 2016

Joint Effort To Develop Tech Corridor Paying Dividends

By Tara Milligan
– The Memphis Business Journal –

Of all the office submarkets in the Memphis area, the 385 Corridor seems the most providential. It has been favored by strong corporations.  Its future has the interest of three large municipalities and some of the city’s most elite real estate developers.  And it is fortunate to have established a strong identity associated with technology.

But the submarket’s potential will be determined by the evolution of all those elements. Local real estate experts say the 385 Corridor is the most interesting office submarket in the Memphis area, because much of it is still largely in its infancy.

“The challenge is that the market is in its early stages of development,” says Mark Halperin, executive vice president of Boyle Investment Co.  “It’s just a matter of having it grow and more people finding it attractive.  It’s limited only by the general market conditions.  I think it’s just another great asset to the community.”

The submarket has the second largest volume of inventory among the seven submarkets, with 41 buildings totaling 3.4 million square feet of space.

By comparison, the East submarket has 97 buildings totaling 78 million square  feet.  The entire Memphis market consist of 18.8 million square feet of office space.

Located in the far southeastern portion of Shelby County, the submarket is bordered to the north by the Wolf River and east by the county line.  The western end of the submarket is bordered by Germantown Road and then juts out several miles in a section that is bordered roughly by the Nonconna Parkway (Highway 385) to the north and Mendenhall to the west.

The 385 Corridor is actually the end result of a merger between the previously named Germantown/Collierville and Southeast submarkets. Hollie Dargie, with commercial real estate research firm Peer Market Research, Inc., says the formation of the submarket was spurred by new building development in the Nonconnah area.

“Before we can have a submarket, we have to have enough inventory to make it meaningful for analysis,” Dargie says.  “It’s not something we took lightly.” Dargie says creating the submarket boundaries meant reassigning some buildings that were in the Germantown/Collierville and Southeast submarkets to the Airport, East and Northeast submarkets.”

It took a long time to establish those boundaries, but I think it made sense to everyone once it was established,” Dargie says.

The result is a submarket that includes property in three municipalities (Germantown, Collierville and Memphis) as well as unincorporated areas of the county.  But it’s the area within the submarket dubbed the Technology Corridor that stirs the imagination of real estate pros and economic development officials.

The Technology Corridor is a large swath of land that extends west to Kirby Parkway, taking in Clark & Clark’s Lenox Park office campus, north to Poplar Avenue, and south to Winchester Road, and Nonconnah Parkway.  The corridor’s eastern boundary ends just east of Boyle Investment Cos’, Schilling Farms development in Collierville.

Developers and companies have been flocking to the area for years, with the first major office development launched by Raleigh, N.C. based Highwoods Properties, Inc.

According the Mike Harris, senior vice president for Highwoods, the company’s developments of Southwind Office Center and Shadow Creek, which are just off of Hacks Cross Road, now consist of seven buildings totaling 500,000 square feet.  Harris says the company has the ability to build another 325,000 square feet at those sites.

But most everyone agrees that it was FedEx Corp.  that spurred a lot of interest in the area.  The company developed its world technology center at Bailey Station in Collierville and then developed its world headquarters campus at Hacks Cross and Winchester.

Since then, Belz Enterprises and Kemmons Wilson Co. have launched speculative office developments on Winchester Road.

Belz has completed one 80,000 square-foot building of its Champion Hills development and has signed leases for 16,000 square feet. The 14 acre project will eventually consist of five office buildings totaling 240,000 square feet.

Weston Cos. is developing Tournament Trails for Kemmons Wilson Co.  The first 73,000 square foot building of what will be a four-building development is already complete.  It is about 60% leased.  Tournament Trails will eventually consist of 400,000 square feet.

And Clark & Clark owns 112 acres across from the FedEx World Headquarters.  The developer could build as much as 1.6 million square feet of office space on the site, and Nick Clark says the company is working on a master plan now with the hopes of beginning development in 2004.

Clark calls the Technology Corridor the “third generation growth shed” for office development in Shelby County.  He identified Downtown as the first and East as the second.

Clark says marketing the area as the Technology corridor, either by attracting high tech or bio-tech companies to the submarket or by becoming known as the submarket with the most high-tech amenities available to companies, is a key component of economic development and community development in the area.

“It’s influencing the quality of the growth for the betterment of all,” Clark says. To that end, Clark organized the Technology Corridor Association in order to bring interested parties together to make sure the corridor develops to its fullest potential.

That’s most important for the city of Memphis, which after annexation will have nearly 50% of the Technology Corridor.

“We have learned through hindsight that what is critical, particularly for land in the city of Memphis, is that the city encourage and take a role in the quality of development because it enhances its tax base.” Clark says.

And the other municipalities with a stake in the corridor know that what Memphis does will effect their interest. Germantown, with about a 20% stake in the corridor, supports the chance to work with other municipalities and developers to collectively come up with cohesive development guidelines.

“It’s an opportunity to put together not just isolated prime office developments but one that could occur over several miles,” says Germantown Mayor Sharon Goldsworthy.

“We want to try to have continuity so that when you drive from Hacks Cross eastward you immediately understand that you are in a special place.”

Goldsworthy says she’s been pleased with the enthusiasm of the parties involved.  One of the first ideas that came out of the collaboration was don’t set the standards too low for the corridor.

“We were just thrilled to hear that.  It’s one of the first times that I’m aware of that there’s been an effort to bring cohesion to an area, especially across jurisdictions,” Goldsworthy says,  “We would never expect total agreement from developers about all the issues, but certainly their interest and support has been very, very helpful.”

The Germantown area in the Technology Corridor includes the Forest Hill Heights site, which consists of several hundred acres of land zoned for office use.  Germantown has already attracted several companies to Forest Hill Heights, including the Better Business Bureau; Orgill, Inc.; SCB Computer Technology, Inc.; and Crew Training International.

But most real estate professionals agree that the area around the Nonconnah Parkway would have grown regardless of the marketing strategy of dubbing it the Technology Corridor.