Memphis Retail Market Report

Lower costs and mild development reinforce sector. Following a 170-basis-point vacancy reduction spanning 2021-2023, Memphis’ rate entered this year at nearly half its historic average. Progress is slowing as the broad impacts of inflation and the fight against it come to light, however, with higher interest rates impacting both consumers’ propensity to spend, as well as businesses’ willingness to expand. This has a compounding effect on tenant demand this year, with metrowide net absorption sliding to its second-lowest measure this decade. Despite that trend, vacancy will rise by a modest 10 basis points, aided by a small and highly pre-leased construction pipeline. Supply additions in 2024 represent just 40 percent of what has typically delivered in a year, and less than 20,000 square feet is finalizing without a tenant signed on. The metro should also avoid significant retailer downsizing in a challenging climate, as it offers the lowest average rent of any major Southeast market. Exemplifying this, more affordable areas like South and Southeast Memphis had some of the greatest vacancy drops last year.