Memphis Industrial Market Shows Resilience With Increased Lease Renewals Despite Economic Challenges

Memphis Industrial Market Sees Steady Activity Amid Economic Shifts

Memphis has become quite the interesting case study in the industrial real estate market lately. As we head through 2024, data from national commercial real estate firms has shown that the local industrial scene is not only holding its ground but is also experiencing noticeable activity especially in the Class A space. With everything that’s going on—with rising interest rates and a pivotal election season—it seems Memphis is navigating these waters relatively well.

Lease Renewals and Expansions Lead the Charge

During the third quarter of this year, Memphis saw a boost primarily fueled by lease renewals and expansions. Reports from CBRE, JLL, and Cushman and Wakefield detailed that the market remained generally steady. Even though vacancy rates appeared consistent, the overall atmosphere could be characterized as a bit quiet as various economic factors play a role in shaping the industry.

The biggest highlight came from JLL and CBRE, both of which pointed to a major lease renewal by McKesson in DeSoto County. This healthcare giant renewed its lease for a whopping 829,180-square-foot facility located at 8745 Forest Hill Irene Road in Olive Branch. That’s no small feat! Likewise, Cushman noted that MCR Safety had a sizable expansion in Fayette County with a new 460,000-square-foot facility.

A Look at Market Trends

Interestingly, the Memphis market is leaning towards leasing instead of new activity. JLL’s findings show that half of the market activity in Q3 was made up of renewals and expansions. This is further supported by the idea that companies are waiting to see how the broader market reacts post-rate cuts and during the unfolding political landscape of the 2024 elections. Cushman’s report noted that the number of renewals in the last quarter was nearly equal to the total number of renewals from the previous quarters combined, showcasing a trend of caution amongst businesses.

Positive Signs for Class A Industrial Space

This year, it seems there’s a slight upward trend in Class A industrial space activity. The lack of new construction might be contributing to this dynamic. With fewer new developments on the horizon, experts believe that this could lead to lower vacancy rates down the line. According to CBRE, there are currently no new speculative developments in the pipeline, which might mean that as new leasing activity picks up, the overall vacancy rates could gradually decrease through 2025 and 2026.

What Does This Mean for Tenants?

More tenants are actively searching for available spaces, though many are cautious about making decisions quickly. Delays in lease agreements might indicate that businesses are watching the market closely. The general consensus among experts suggests a growing confidence, but a wait-and-see approach still prevails as external factors continue to influence their plans.

Upcoming Events and Awards

CFO of the Year Awards on October 22, 2024, at Theatre Memphis. Not to mention, nominations have just opened for the annual Building Memphis Awards, which recognize exemplary commercial construction projects from 2024. This is a wonderful opportunity for contributors to the city’s economic footprint to shine.

Overall, the industrial market in Memphis showcases a unique blend of cautious optimism amidst significant economic transitions. It’ll be interesting to see how the rest of the year unfolds as all eyes are on the city, its lease activity, and the larger market trends that impact business decisions. For local businesses, this might just be the right time to either renew or expand as they navigate this evolving landscape.