A large parcel being developed by Panattoni will be home to phase two of the Thomson expansion, with room for another 500,000 sq. ft. (46,450 sq. m.). Thomson just moved into an existing 900,000-sq.-ft (83,610-sq.-m.) spec building, built by Dallas-based Champion Properties. Altogether, the company is occupying 1.7 million sq. ft. (157,930 sq. m.) of space on both sides of the road.

Between Worlds

If you approach or leave Memphis by air – like nearly 3.4 metric tons of goods do every year – you'll see so many acres of nearly contiguous flat roof that you'd swear you could just walk over to the Mississippi River without ever touching the ground.
        When a rare storm carrying 100-mph winds struck hard in July 2003, you might well have accomplished that feat. But the city known as the continent's distribution capital was back up and running in no time, with even the heavily damaged Gibson Guitar factory downtown getting back its twang in mere weeks. As for that 100 million sq. ft. (9.3 million sq. m.) of warehouse space, it didn't miss a beat.
        In fact, the Memphis airport is second only to Phoenix in being unaffected by weather, according to the FAA. And not all of those flights are FedEx, although the company's fleet of 881 planes do tend to fill some air space. That economic engine (12,000 area employees, including 3,500 at its technical development center in Collierville) just keeps growing, having completed a $250-million expansion one year after a professor declared that the hub had reached capacity.
        Larry Henson, vice president of research and information technology for the Memphis Regional Chamber, points out that incentives were paramount back in 1973, when Fred Smith, FedEx founder, originally sought out concessions from Little Rock, Ark. He didn't get them.
        Now Memphis is the world's busiest cargo airport for 10 years running, including a 29-percent increase in 2002. The facility's advantages are bolstered by a Premcor petroleum refinery near downtown, purchased from Williams early in 2003 for $465 million. The facility processes around 170,000 barrels of petroleum a day. It also refines and pipes jet fuel directly to the airport via a seven-mile pipeline, while also refining a large amount of diesel fuel. Thus the transportation community of Memphis is afforded fuel handling savings and reliability in equal measure.
        Such is the momentum of a metro that saw just over $1 billion in industrial and office projects that same year. Among the largest, United Technologies subsidiary Carrier invested $27.7 million in its Collierville expansion. And in 2003, the surge continues, with 29 office and industrial expansions and locations worth some $253 million thus far, headed by the 600 jobs Medtronic-Sofamor Danek is bringing to its new $50-million campus. The medical cluster is also benefiting from a $45-million, 250-job investment by Hamilton Eye Institute and a $26-million, 440,000-sq.-ft. (40,876-sq.-m.) medical products distribution operation from Johnson & Johnson that will employ 268 people.
        Multimodal is the core competency of Memphis. Witness the fact that two-thirds of the city's corporate prospects are logistics or air-shipment-related. Or look at the Memphis-Little Rock highway corridor, surpassed only by the Pennsylvania and Ohio turnpikes for truck traffic. There are more major metros (156) within 600 miles of Memphis than any other U.S. city, and it's also at the exact midpoint of the forthcoming I-69, which will stretch from Montreal, Quebec, to McAllen, Texas.
        While FedEx is indeed everywhere, its 2.2 million sq. ft. (204,380 sq. m.) of sorting space are matched by an equal amount used by Sears Logistics Services. Both are outmatched by the 2.7 million sq. ft (250,830 sq. m.) at Nike's distribution operation and the 3.7 million sq. ft. (343,730 sq. m.) used by Williams-Sonoma in its combined space in Memphis and in nearby Olive Branch, Miss. Nine other companies have more than 1 million sq. ft (92,900 sq. m.) of distribution space.
        Used to assist 20-35 deals a year, the city's PILOT program (payment in lieu of taxes) is just as pivotal to $2-million deals as it is to blockbusters. Many W/D projects have seen 7-10 years of tax savings, with larger projects scoring out close to the program's upper limit of 15 years.
        Newest on the list of incentives offered by the Memphis metro is an extension of its PILOT program called the Community Reinvestment Credit. Designed to lessen the tax disadvantages of the city's earlier waves of distribution and other facilities, as well as not-so-old spec facilities, the program offers companies the same tax abatements, according to a matrix of job creation and investment numbers.
        "Our second-generation distribution facilities, after their five to eight years of tax breaks, would then go back on the books," explains Eddie Saig, president of NAI Saig Co. "A lot of people at that point would say 'I'm going to Mississippi, because I can get a new program.' So Memphis, to combat that, came up with this new program."
        "Tax abatements are critical," says Roger Cook, senior vice president of Jackson-based construction firm H+M Co. "The Memphis area has such a varied mix of both sophisticated and bulk distribution that I believe there will always be a market for virtually any type of distribution facility."
        Thomson Multimedia's Technicolor division was the first to take advantage of it with its August 2003 expansion announcement. The Memphis expansion is just one move by the multifaceted Thomson, which recently opened new post-production facilities in Rome, Italy, and in New York for the same Technicolor division, as it straddles the entertainment industry's gradual shift from film to digital media.
        Even in a tough economy that's seeing empty space everywhere – including new emptiness created by 450 layoffs at the Memphis offices of International Paper – the city is succeeding overall with both existing and spec space. Hewlett-Packard is moving more than 600 jobs into a 700,000-sq.-ft. (65,030-sq.-m.) spec building. Panattoni just finished a 378,000-sq.-ft. (35,116-sq.-m.) project, and IDI and ProLogis also are quite active.
        "For a number of years, our developers would build 5 million to 6 million square feet [464,500 sq. m. to 557,400-sq. m.] of spec space each year and lease it up," says 40-year area corporate real estate veteran Eddie Saig. That trend vanished in 2001. But Memphis is not much the worse for wear.
        San Antonio, Texas-based USAA Real Estate Co. owns nearly 10 million sq. ft. (929,000 sq. m.) of industrial product in three states, and about one-third of that total is in the Memphis metro. As Dirk Mosis II, USAA's vice president of real estate investments, told a recent NAIOP audience in San Diego, "We are constantly looking at how we integrate ourselves into this food chain of transportation and brokers." One way is to push into second- and third-tier cities like Memphis and Columbus.
        But when it comes to the city's reputation as the continent's distribution capital, the population may be second-tier (661,000), but the rankings are not.
        "If we ranked cities according to the BCS [college football] ranking system," says Jim Apple, president of the Memphis Area Chamber of Commerce, "we'd be in the championship game every year."