Q2 2012 Memphis, Tennessee Commercial Real Estate Economy

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Q2 2012 Memphis, Tennessee Commercial Real Estate Economy


The Memphis economy continues to add jobs, but unemployment remains high as in the rest of the country. According to Current Employment Survey (CES) data from the U.S. Bureau of Labor Statistics (BLS), total non-farm wage and salary employment was up by 8,600 jobs (1.5%) from June 2011 to June 2012. Private sector employment increased by 1.5% as well, growing by 7,800 jobs. Household-based data from the BLS on the number of employed residents of the Metropolitan Statistical Area (MSA), including the self employed, show a similar increase of 8,500 (1.5%) from June-to-June. After having fallen earlier, the labor force grew slightly, slowing the decline in unemployment. Moody’s Economy.com reports the population continues to rise by about 11,000 (0.9%) per year.


The locals are putting their hopes on decreasing productivity, according to Southeast Real Estate Business, since it is employment that drives the demand for commercial real estate. “The Bureau of Labor Statistics reported on May 3 that productivity (output per hour) in the U.S. fell at an annual rate of 0.5% for the first three months of 2012, after steady growth during 2011. This is the first sign that corporations have achieved the efficiency they desired and needed to weather the latest economic storm. As demand increases, corporations will be forced to hire to fill the gap between demand and capacity.” But this assumes that consumer spending, weighed down by past debts and an accelerating shift from work to retirement, resumes its growth, not just in Memphis but nationally. As a major distribution center, local employment here is driven by national trends.

Disappointingly, employment in the industrial sectors remains weak here. During the most recent June-to-June period, according to CES data, the number of jobs in the distribution-based sectors, Wholesale Trade and Transportation and Utilities, decreased by 400 jobs (1.2%) and 1,100 jobs (1.7%), respectively. Manufacturing lost 300 jobs (0.7%). There office-based sectors added jobs, with an increase of 2,500 (3.1%) in Professional and Business Services and 400 (1.5%) in Financial Activities. Office-based growth was centered in the sorts of back office activities that are generally in local “Class B” space, as all of the growth in Professional and Business Services was accounted for by its Administrative Services component.

The consumer-based sectors remain mixed, with Retail Trade employment up by 1,500 jobs (2.4%) year-over-year in June but Leisure and Hospitality was down by 200 (0.3%). Each is far below its pre-recession highs, as is Construction and related sectors, which added 900 jobs (4.5%) in the year to June. The strongest employment growth sector during the latest June-to-June period was Educational and Health Services, with an increase of 4,300 jobs (5.3%). Establishments in this sector generally occupy purpose-built institutional space, although falling prices for commercial real estate sometimes attract adaptive reuse.

Memphis continues to tout its transportation infrastructure, its “four Rs” according to Southeast Real Estate Business. “Runway: Memphis is home to North America’s busiest cargo airport. Rail: We are served by five Class I railroad systems. River: Memphis has the second largest inland port on the Mississippi River. Road: Memphis is home to more than 200 common carriers with four major interstate systems passing through Memphis (I-40, I-55, I-69, and I-22).” While the transportation system has plenty of capacity, however, so does the real estate market and the labor market. These remain depressed as a result.