Q4 2022 Office Space 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 known for its vibrant music roots in blues, jazz, and rock n’ roll. In addition to its rich musical heritage, the city is home to various major businesses such as FedEx, AutoZone, and International Paper.
Unemployment in Memphis declined quarter-over-quarter from 4.1% to 3.7%, remaining higher than the national rate of 3.5%.
Its metro population increased by 0.6% from 2021 to 2022.
In Q4 2022, Memphis’ office space market saw vacancy increase, rents hold steady, and positive absorption.
General Area Overview & Demographics
Memphis has 628,127 residents, making it the 29th most populous city in the United States. The population is 60.4% African American, 33% White or Caucasian, and 6.2% Hispanic or Latino.
Memphis, TN Median Household Income & Population
The median household income is $38,822. This is significantly lower than the national median of $57,652, making it one of the poorest large cities in the country. In 2017, 20.4% of Memphis households lived below the poverty line. Tennessee, however, does have one of the lower costs of living compared to others in the nation.
According to the US Census Bureau, the median age is 35.3 years old, 3.2 years lower than the national average of 38.7 years old. Nearly one-third of Memphis’ population is between the ages of 18 and 34, making it the largest age group in the city.
Several universities, including the University of Memphis, Rhodes College, Christian Brothers University, and LeMoyne-Owen College, provide higher education in Memphis. The University of Memphis is the largest in the city and enrolls more than 21,000 students annually.
The National Civil Rights Museum at the Lorraine Motel is a popular destination that honors and commemorates the civil rights movement and Martin Luther King Jr.
Memphis experiences all four seasons. In summer, temperatures typically range from 80–90°F. In the winter, temperatures usually stay above freezing, with lows reaching the mid-30s. The city averages nearly 50 inches of rainfall annually, and snowfall is rare.
Summary of Memphis Office Space Performance in Q4 2022
Overall vacancy for Memphis office space was 16.3% in Q4 2022.
The Airport submarket reached a vacancy rate of 37.9%, the highest across all submarkets. Northeast was second at 19.9%.
North was lowest at 1.3%, and Downtown followed at 5.5%. These were the only two submarkets with a vacancy below 10%.
Net absorption for Memphis office space was positive in the fourth quarter, with 89,700 square feet. That brings 2022’s total to 394,000.
Northeast was the only submarket with negative absorption (-1,770) in Q4.
While East recorded the most square feet absorbed in Q4 at 30,000, it had the overall lowest in 2022, the only submarket reaching a negative annual total.
What are office space rents like in Memphis?
Asking rents for Memphis office space held at $19.39 per square foot from Q2 through Q4 in 2022.
East recorded the highest of $21.80, the only submarket above $20. North had the lowest at $15.32
Overall average rents for Class A space reached $23.98 per square foot.
While rents for Class A in nearly every submarket were below the average, East’s submarket posted asking rents of $31.12.
Purchase & Leasing Activity
Lubono Capital’s $6.2 million purchase from Hackmeyer Properties was the largest sale for office space real estate in Memphis in Q4 2022.
The sale was for 126,000 square feet at 2500 Mount Moriah Rd. Price per square foot was $49.22.
Guaranty Bank subleased 27,000 square feet in the East submarket at 4894 Poplar Ave.
There were over 800,000 square feet of leasing activity in 2022. East and Downtown accounted for more than half of that, 232,000 and 287,000, respectively.
Notable Office Space Deals in Memphis in Q4 2022
There were several deals that took place for Memphis office space in Q4 2022:
- Sumitomo Mitsui purchased 122,000 square feet for $28.5 million.
- Intensity Interactive purchased 28,500 square feet for $4.1 million.
- Armstrong Shared Services leased 16,800 square feet.
- Christ Community Health Services leased 16,400 square feet.
These are select examples among other activity.
New Office Space Development Activity in Memphis in Q4 2022
There was no new development activity to report for Memphis office space in Q4 2022.
Deliveries for 2022 totaled 150,000 square feet. By the end of Q4, 36,400 square feet were in the pipeline.
Downtown accounted for 30,000, while East accounted for the remaining 6,400.
Market Forecast for Memphis’ Office Space Market
While Memphis did see its first year of positive absorption since 2018, rising vacancies indicate a weak market.
Rents will likely decline. A low-volume construction pipeline will further tamp down market performance.
Takeaways for Office Space Investors
Memphis’ office space market struggled in Q4 2022. Indicators point to stalled momentum for 2023.
Investors should consider other options for an office space market with solid performance.
Do your research and invest wisely.
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