2023 North America Industrial Big Box Review & Outlook: Memphis

The local warehouse labor force of just over 53,000 is expected to grow by 7.4% by 2032, according to CBRE Labor Analytics. The average wage for non-supervisory employees is $16.76 per hour, 1% below the U.S. average.

Figure 2: Memphis Warehouse & Storage Labor Fundamentals

Source: CBRE Labor Analytics, Q4 2022.
*Median wage (1 year experience); non-supervisory warehouse material handlers.

Location Incentives

Over the past five years, there have been 139 publicly economic incentives deals totaling over $505 million for an average of $28,192 per new job in metro Memphis, according to Wavteq.

CBRE’s Location Incentives Group reports that top incentive programs in Tennessee include the Job Tax Credit, offering a one-time corporate income tax credit to business that create at least 25 new jobs within three years and make a minimum capital investment of $500,000. The tax credit may offset up to 50% of franchise and excise taxes. Any unused credits may be carried forward for up to 15 years.

Among the top incentive programs in neighboring Mississippi is the Advantage Jobs Incentive Program, offering a rebate for 90% of Mississippi payroll taxes withheld to businesses that create at least 25 new high-quality jobs in the state. To qualify, the new jobs must pay at least 110% of the state or county average wage.

Figure 3: Memphis Top Incentive Programs

Source: CBRE Location Incentives Group, Q4 2022.
Note: The extent, if any, of state and local incentive offerings depends on location and scope of the operation.

Logistics Driver

Memphis is one of North America’s most logistics-friendly markets. The region has an integrated transportation system of highways, rail mainlines, river ports and the world’s second-busiest cargo airport. More than 27,000 companies have operations in Memphis, including over 400 trucking companies.

Memphis is one of only four U.S. cities served by five Class I railroads. Single-system shipment is available to all 48 contiguous states, Alaska, Canada and Mexico. Trucks leaving Memphis can reach 35% of the U.S. population overnight and 68% in two days. I-40 runs coast-to-coast, I-55 intersects Memphis and allows direct access from Chicago to Louisiana, and I-69 connects Canada to Mexico.

The Port of Memphis is 400 river miles from St. Louis and 600 from New Orleans, where cargo can be transferred to ocean liners. The region’s top logistics advantage is Memphis International Airport. Home to the world’s largest FedEx hub, Memphis International is the world’s second most-active air hub and by far the top in North America.

Memphis International is the world's second most-active air hub and by far the top in North America.

Supply & Demand

Despite seeing four of 2022’s largest 100 leases, a slow H2 dropped 2022 leasing activity to 9.3 million sq. ft, significantly lower than 2021’s total. But net absorption was robust, at 8.9 million sq. ft., lowering the vacancy rate 50 bps to 6.2%. Lower vacancy rates created a new Memphis trend: double-digit rent growth. First-year base rents grew 32.4% to $4.59 PSF per year. Still, Memphis remains one of North America’s most cost-efficient big-box markets.

Unlike most markets, development has not accelerated in Memphis. Only 11.1 million sq. ft. was under construction by year-end, with 34% already pre-leased. This may result in lower vacancy rates, maintaining double-digit rent growth despite a possible economic downturn.

Figure 4: Share of 2022 Leasing by Occupier Type

Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research, 2022.

Figure 5: Lease Transaction Volume by Size Range

Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research, 2022.

Figure 6: 2022 Construction Completions vs. Overall Net Absorption by Size Range

Source: CBRE Research, 2022.

Figure 7: Direct Vacancy Rate by Size Range

Source: CBRE Research, 2022.

Figure 8: Under Construction & Percentage Preleased

Source: CBRE Research, 2022.

Figure 9: First Year Taking Rents (psf/yr)

Note: Includes first year taking rents for leases 200,000 sq. ft. and above.
Source: CBRE Research, 2022.