Late last year, California-based Panattoni Development announced it was shutting the doors on its Memphis office and handing responsibility for its significant industrial portfolio there to Hayne Hamilton, senior development manager at the company's Nashville office.
Hamilton, who said Panattoni is not exiting Memphis, recently sat down with City Paper reporter Kyle Swenson to discuss the differences between Memphis and Nashville and the challenge of juggling two very different markets.
What are the main differences in the two cities’ industrial markets?
The differences in the markets are you see a lot more large tenants in Memphis. In other words, a 750,000 square-foot deal in Nashville — there have been three of those in the last three years. There are five to 10 of those a year in Memphis. It's because you've got a rail hub, you've got FedEx, you've got the port with the river and you've got the interstate.
It's also a lower-cost market than Nashville, so the tenants for whom labor is not an issue and low cost is an issue will tend to go to Memphis. The people who are labor-focused will go to Nashville.
How does that change what you do recruit different types of tenants? Do you sell and manage Memphis properties any differently than you do ones in Nashville?
No, not really. The way we approach out buildings is very similar. We outsource like we do [in Nashville]. We outsource our leasing and we have third-party management of the properties. Colliers is doing both.
The other thing that helps us is a guy named Al Andrews — our former partner in Memphis, who ran the office — now is working for Colliers and is teaming up with a guy named Brad Kornegay, who runs the Colliers managing and leasing office there, to lease our properties. So we've got the guy who built all the buildings still a part of the team, and that helps.
Because of its low cost, will Memphis become a more attractive location for companies looking for a foothold in the Southeast?
It’s determined by what the tenants are looking for. If it's a large distribution center, if labor is not a major component and cost is really the driving factor, then Memphis clearly has a leg up. Also, if you've got a tenant that's very reliant on FedEx, well Memphis is the hub.
But if labor is a major factor, then the additional cost of renting the space in Nashville is far overcome by the quality of the labor. So really it depends on what's driving the tenant’s decisions.
Do you have different long-term strategies for Memphis?
We've got 200 acres of land in Memphis, so we will continue to, as the market dictates, look for opportunities. Probably something we'll do in Memphis that we haven't done in the past is being willing to build smaller buildings, like we're doing here in Nashville.
Really, all we've done in Memphis in the last seven or eight years is build really large buildings, minimum size 700,000. Going forward, you'll see us looking to attract those smaller tenants.