Q4 2022 Industrial Real Estate Report: Memphis, TN
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Memphis is well-known for its music, with its blues, rock, gospel, rap, and soul scenes attracting visitors & new residents alike. Transportation and warehousing, retail trade, and manufacturing also support the city’s economy.
Unemployment in Memphis declined from 4.1% in Q3 2022 to 3.7% in Q4, yet remained higher than the nation’s average of 3.5%.
The metro area’s population increased by 0.6%, seeing only 7,000 new residents from 2021 to 2022.
Memphis’ industrial real estate market saw vacancies decline, rents hold steady, and absorption remain positive as 2022 came to a close.
General Area Overview & Demographics
Memphis is one of the most populous cities in the United States, with over 652,000 residents. African-Americans make up nearly 60% of the city’s population, followed by Caucasians at around 34%, Latinos and Hispanics at 4%, and Asians making up 2%.
Memphis Median Household Income & Population
The median household income in Memphis is approximately $38,822 per year, which is lower than the national average of around $57,652.
Around 13% of the city’s population is under 18, and 12.5% is 65 or older. The median age in the city is 35.3 years, slightly lower than the national average.
The University of Memphis is the largest in the city and serves over 22,000 students annually. Rhodes College and Christian Brothers University are other major universities in Memphis.
The National Civil Rights Museum, located at the Lorraine Motel, where Dr. Martin Luther King Jr. was assassinated, is one of the city’s major attractions. Graceland, the former home of music legend Elvis Presley, is another major attraction.
The weather is generally temperate during June, July, and August. In these months, temperatures typically reach highs in the mid-90s. The coldest months are January and February when temperatures can dip into the low-30s.
Summary of Memphis Industrial Real Estate Performance in Q4 2022
Overall vacancy for Memphis industrial real estate was 4.6% in Q4. Northeast and Southwest tied for lowest vacancy at 3%, with Southeast closing Q4 2022 at 3.1%.
The highest vacancy was in DeSoto County, at 7.9%. Northwest was second with 5.8%.
Q4 2022 saw overall positive absorption of 2.3 million square feet for Memphis’ industrial real estate, bringing 2022’s total to 12.1 million.
DeSoto County had the most space absorbed at 1.2 million square feet and was the only submarket in Q4 to post an absorption above 1 million.
Southeast was right behind Desoto at 800,000.
Northeast and Northwest were the only submarkets to record negative absorption in the fourth quarter at -67,000 and -100,000, respectively. However, every submarket ended 2022 with positive annual absorption.
What are industrial rents like in Memphis?
Average rents were steady quarter-over-quarter for Memphis’ industrial real estate at $4.17 per square foot in Q4 2022. Tennessee itself is one of the more affordable states where investors can buy commercial real estate.
Northeast had the highest rents at $6, while Northwest was lowest at $2.60. Class A rents were around $4.30 per square foot.
Purchase & Leasing Activity
Marco Entertainment Management purchased 87,000 square feet of industrial space in the Southeast submarket from ABGMPH 26 LLC.
The deal closed at $4.3 million, approximately $49 per square foot.
In DeSoto County, Ruan Transportation signed a new lease for 7111 Woods Blvd, a 147,000-square-foot industrial space.
Leasing activity in the fourth quarter helped drive net absorption up.
Notable Industrial Real Estate Deals in Memphis in Q4 2022
There were several notable deals that took place for Memphis’ industrial real estate in Q4 2022:
- Via Del Rio purchased 202,000 square feet for $23.5 million.
- Cornerstone Investments purchased 60,000 square feet for $4.7 million.
- Chadwell Supply leased 249,000 square feet.
- DHL Supply Chain leased 234,000 square feet.
These are select examples among other activity.
New Industrial Real Estate Development Activity in Memphis in Q4 2022
There were 1.8 million square feet of new industrial space deliveries for Memphis in Q4 2022. Approximately half went to Southeast (860,000), while the rest went to DeSoto County (940,000.)
At the end of Q4 2022, Memphis saw around 6 million square feet of new industrial product come online. Around 10.2 million square feet currently remain in the pipeline, with Marshall and Fayette County accounting for 5.4 million of that.
Market Forecast for Memphis’ Industrial Real Estate Market
Industries such as logistics, manufacturing, and energy are driving demand for Memphis industrial real estate.
While over 10 million square feet are under construction, new build development has slowed.
Lease rental rates will rise as vacancies continue to decline due to demand outpacing supply.
Takeaways for Industrial Real Estate Investors
Memphis is an active market in high demand. As vacancies continue to decline, rents will likely rise.
DeSoto County holds promise as it has the highest vacancy but also the highest absorption, showing that its unoccupied space is desirable.
Do your research, stay diligent, and happy investing.
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