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Build Out

The Daily News
By Amos Maki

Boyle Investment Co. is building a 52,000-square-foot office building at its Schilling Farms community in Collierville in which Helena Chemical Co.’s Southern Business Unit will lease half of the space.

Additionally, several new office projects in Germantown have been announced and are awaiting groundbreaking.

While there is some new office development beginning to take place in the Memphis area right now, the vast majority of office construction occurring in the Memphis market happens with build-outs at existing buildings.

“I would say probably 80 percent or more of the office space we build out are renovations of previously leased space,” said Brett Grinder, vice president of Memphis-based Grinder, Taber and Grinder Inc.

Chris Woods, owner of Memphis-based Chris Woods Construction Co., said that while he’s seen an uptick in smaller office projects, renovations to existing spaces still dominate the market.

“We’re seeing an increase in smaller, owner-occupied office projects but the majority of what we’re seeing is the renovation of existing buildings,” Woods said.

Grinder said the company likes to have a mix of new construction and upgrades to existing spaces.

“We’ve always tried to have both pipelines full, which has helped us during and after the recession,” Grinder said.

There have been several important office announcements this year, all involving the renovation of existing space.

In one of the biggest new jobs announcements so far this year, Connexion Point, a Salt Lake City, Utah-based company that represents large insurance companies, is opening a contact center that will employ nearly 400 people at an existing building inside Nonconnah Corporate Center in Southwest Memphis.

Sullivan Branding will be occupying around 17,628 square feet – most of the first floor – at the Toyota Center building adjacent to AutoZone Park.

And Looney Ricks Kiss is taking over a portion of the sixth floor at Toyota Center, expanding from around 22,000 square feet to 35,000 square feet.

Total Quality Logistics is investing $1 million to open a sales office in the 100 Peabody Place building Downtown, a move that will produce 100 new jobs over the next five years.

“Every year, consistently, we’re seeing more tenant improvements,” said Paul Winter, a senior vice president of the project management team at CB Richard Ellis Memphis.

Business officials said several factors are contributing to the trend, including the speed with which companies can move into a repurposed space in an existing building, costs and the ability to design the office space as they see fit.

“The build-out of existing office space is much less expensive, more convenient and less time consuming, and is a trend we are seeing, not only Downtown, but out east, as well,” said Andy Groveman, senior vice president of Belz Enterprises, which prepared TQL’s space for occupancy.

“It is much more economical for companies looking for office space to choose existing space, rather than being part of a new, ground-up to-be-constructed office building,” Groveman said. “For businesses where timing and the speed of a move or expansion play important factors, relocating to or expanding into an existing space is preferable.”

Waiting for a developer to obtain financing and then build a new office building can simply take too long for some companies, Groveman said.

“In today’s world, a substantial percentage of any new office building must be pre-leased in order to obtain financing,” he said. “The amount of time to develop a new office building from the ground up combined with escalating costs are variables that many tenants seeking to meet their office space needs are not willing to take on.”

The trend has helped keep contractors busy.

“Over the last several years there has been quite a lot of activity in office build-outs in existing buildings,” said Rusty Linkous, president of Linkous Construction Co.

Because most local companies looking for an office aren’t that large – the average size for Memphis tenants is around 5,000 square feet – it can be difficult to launch a large new office building and businesses seek out existing spaces, a long-running trend.

“I think a lot of it has to do with our tenant size,” said Kevin Clarkson, executive vice president on the project management team at CBRE Memphis.

Another factor is the scarcity of available land. Unable to secure enough land in the right location, many businesses simply turn to existing buildings.

“There aren’t many places to build Downtown, frankly,” said Brian Sullivan, founder of Memphis-based Sullivan Branding.

Sullivan said having the ability to design from scratch the type of environment the company would occupy was critical, and he wasn’t sure that would be possible with a developer’s new office building.

“We wanted to be able to build what we wanted and not feel like we have to retrofit something,” Sullivan said. “It will be unlike any space we’ve been in, either for ourselves or anyplace we’ve visited.”