Commercial Sales Maintain Steady Pace

International Paper's recent decision to relocate its global headquarters to Memphis could be viewed as an overall reflection of the city's commercial real estate sector. Memphis is experiencing a steady level of commercial investment activity, led by a surge in retail transactions.

From Aug. 1, 2004 to July 31, 2005, the Memphis area saw 1,033 commercial property sales, according to Chandler Reports, www.chandlerreports.com. The number marks a decline from 1,195 sales in the 12-month period ended July 31, 2004, but signs are encouraging that Memphis remains a strong investment market, analysts said.

A lot of activity. Total square footage in the market has increased from 19.3 million to 19.5 million.

"There is a lot of activity right now," said Tucker Beck, a broker with Crye-Leike Commercial. "It seems to be recently picking up. The train has gained momentum insofar as I think people would speculate that interest rates may be on a marginal rise over the long term. There is a lot of activity going on in commercial and residential."

One reason for strong activity is that real estate has become the vehicle of choice for many investors.

"The existing funds that have been buying real estate for years are now more capitalized because individuals are willing to invest with them," said John Lamberson, senior vice president of investment properties with CB Richard Ellis. "There are new funds, a lot of private equity funds that have been developed."

Retail investment. Another factor impacting the market is the burgeoning retail sector. Retail transactions increased to 185 for the year ended July 31, 2004, from 156 in the prior-year period. This year's increase was more modest, at 198, but the rise in price was significant. Retail investment activity totaled $278 million for the year ended July 31, compared with $145 million a year ago.

"In general, investment activity is as busy as it's been in recent memory," said Scott Barton, vice president of retail services with CB Richard Ellis. "My impression is it's busier than it's ever been, even busier than last year. Cap rates, I think, are still near all-time lows. To some extent, I think there's almost a frenzy now."

Lamberson said retail properties generally tend to attract the most interest in the commercial sector, particularly from private investors. Strip centers are usually at the top of the list.

"Street retail in this market or any market, I think it's consistent," Beck said. "I think a lot of people thought 10 years ago that the Internet would soften it, but there's more retail being developed in this county right now than has ever been done. There are big boxes and multiuse and lifestyle centers going up everywhere."

See full article in The Daily News.