Shawn Massey, CCIM, SCLS

Memphis Retail Market – Southeast Real Estate News!

As published in the Southeast Real Estate News!

Memphis Retail Market

It’s 2012 and still no sign of Elvis walking the streets of Memphis. Yet there are signs of the Memphis retail market stabilizing and even recovering from the recent recession.

The region’s conservative retail expansion when other major markets were overbuilding is proving to be the key to its recovery. The super-regional trade areas of Wolfchase, Southeast Memphis/Collierville and Southaven, Mississippi, continue to perform well. There is little retail space available, creating competition among retailers and enabling landlords to secure leases at higher rental rates and better terms.

According to CBRE’s “Market View Memphis Retail,” the retail vacancy rate is 15.3 percent with a direct lease rate of $9.51 per square foot. This vacancy rate combines Class A, B and C retail — much of which may never be re-leased as retail. If the study considered only viable retail space, a more accurate estimated vacancy rate for Class A and B retail would be much lower.

The entry of new retail and restaurant players, particularly in the big-box, fast casual and casual dining sectors, along with the expansion of some of the market’s most recognizable brands, is driving market activity. Ross Dress For Less, Michaels and T.J. Maxx are opening locations in Olive Brand, Mississippi. Staples opened its first two Memphis locations in Weingarten’s Ridgeway Trace in East Memphis and on Germantown Parkway in Wolfchase.

HomeGoods is also setting up shop in Wolfchase with another store planned for Collierville at Gallina Centro, a 350,000-square-foot infill development completed by Ryan Commercial Properties. Michaels is also joining the Gallina Centro lineup, which includes Kohl’s, Kroger and Stein Mart. Mattress Firm and Vision Works also continue to expand throughout the Memphis region.

More fast casual concepts are entering the Memphis market. Chipotle Mexican Grill and Five Guys Burgers and Fries opened their first Memphis locations in 2011. Cheddar’s Casual Café is set to open its first Memphis location at Centennial Commons, a 300,000-square-foot power center developed by Michael Lightman. Cheddar’s also plans to open a second location in Wolfchase in 2012, while Dunkin’ Donuts continues to expand its market footprint.

Kroger’s acquisition of eight Schnucks was one of the most significant retail events in Memphis during the past 12 months, fueling the region’s ongoing grocery competition. The acquisition not only eliminated Schnucks as a competitor, but also enabled Kroger to reposition some of its existing stores in a market where the company has invested more than $70 million since 2007. This event also created prime, big-box vacancies allowing grocery competitors opportunities to enter the market. Memphis-based SuperLo Foods leased the former Schnucks on Goodman Road in Southhaven, Mississippi, and one additional grocery box remains in Collierville.

Several Memphis markets present strong retail opportunities. Southeast Memphis/Collierville continues to grow with big-box retailers and restaurants showing interest in the submarkets of Hacks Cross, Winchester and Poplar. High-profile retailers are taking note of Midtown Memphis’ dense population and high household income. The redevelopment of Overton Square by Loeb Properties appears to be creating further interest in Midtown investment.

Indications are that Memphis is reaching a point of stabilization and a semblance of growth is occurring.

— Robert Sloan is an associate in The Shopping Center Group’s Memphis office.

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