Commercial Development in the Age of COVID

The pandemic has put the brakes on some endeavors and let others go full speed ahead.

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Memphis and its environs have been amping up commercial developments in recent years. It looked like nothing would stop the boom until 2020 came along and flipped everything over. In a matter of months, the world experienced a pandemic, an economic collapse, and a growing social justice movement. But don’t underestimate momentum and hope. As of this writing, the stock market is humming merrily along and the builders are still building.

We take a look at a couple of local commercial development projects that are moving along, undeterred by the upheaval. And we examine what’s been going on in the hospitality industry, which Memphis relies on heavily and did take a big hit.

The Edge District

By Jon W. Sparks

Gary Prosterman likes to get into his projects quietly. “Keep your head down and do your thing,” he says.

And so it’s been with his development in the Edge District. His Development Services Group (DSG) started acquiring properties there five years ago — quietly — and has been taking it a step at a time, looking for the best solutions to make the neighborhood as vital as possible.

Prosterman is quick to acknowledge that he wasn’t the one first on the scene with big ideas. “There were pioneers there even before we were,” he says. Pinkney Herbert’s Marshall Arts. Mike Todd’s neighborhood association, calling the area “The Heart of Memphis, the Edge of Downtown.” The High Cotton Brewing Company. The Edge Alley coffee shop and restaurant.

The area extends roughly from Sun Studio on the east end to AutoZone Park on the west, and Jefferson Avenue to the north and Beale Street to the south. The street configurations were long ago determined by railroads and rail spurs, most gone now although one still runs up next to the old Memphis Publishing Company building that used to deliver huge rolls of newsprint to The Commercial Appeal and the Memphis Press-Scimitar.

In the middle of the twentieth century, the Edge was packed with automobile dealerships. Elvis Presley got his start in the neighborhood at Sun, and spent many dollars at the nearby Cadillac dealer.

But the Edge has been looking for a new identity and some people, such as Todd and Prosterman, see how it can deliver as a residential, commercial, retail, and cultural center. 

“We’re probably most proud that there are so many projects beyond the pieces of property that we’ve acquired that have developed and are continuing to develop,” Prosterman says. Already in the neighborhood are a mix of businesses, including PKM Architects, the Edge Motor Museum, Chef Tam’s Underground Café, Karen Adams Designs, Holliday Flowers. And looming large is the old Memphis Publishing Company building that recently underwent a $51 million build-out into a hospital facility for potential COVID-19 patients.

But Prosterman’s plans are doing much to define the area. One of his most significant and earliest contributions was the Orion Federal Credit Union headquarters where the old Wonder Bread Bakery had been for years.

“We had acquired the entire bakery and intended to do adaptive reuse of the part that we thought was architecturally significant,” he says. The idea was to develop it for Orion and be the landlord, but to accommodate the credit union’s vision would have meant charging rent well above market, so it was agreed that Orion would buy it. “It frankly exceeded everyone’s expectations,” Prosterman says. “It’s probably the coolest office space in Memphis.”

The Rise — the nearby 199-unit apartment building — is complete along with the 481-space parking deck. Although most leasing tours are virtual due to the pandemic, the leasing has gone better than expected and DSG hopes it will be fully occupied by fall. The tenant breakdown is about 60 percent to 70 percent working or studying at one of the nearby healthcare facilities, and the rest, as Prosterman says, see it as a cool place to live. He calls it a very current high-end suburban type property but in the middle of the city with a club room, fitness center, and swimming pool that he says is rare for this part of town.

Across the street from Orion is LEO Events, which wanted to own its space. LEO is on the ground floor and Montgomery Martin general contractors has an office on the second floor.

What may be the most intriguing part of the development is what will be the Ravine Park. It’s an abandoned rail easement that runs from about Madison and Lauderdale south to Union Avenue. “We acquired the old Glass Factory building [on Madison],” Prosterman says, “which included the easement.” Construction has begun on converting the easement into a public park.

The 30,000-square-foot Glass Factory building will become a brewery and tap room for Memphis Made Brewing Company. This will be in addition to its plant in the Cooper-Young area that it will keep.

The Memphis Cycle Shop building sits on Monroe at Lauderdale. It’s not in good shape but has fine architecture and DSG is looking to list it on the National Register of Historic Places and develop it with opportunity zone funds. Prosterman hopes to get that project under way in the fourth quarter of this year.

Throughout the year, he’s had to deal with the pandemic in one fashion or another. “We definitely have hit a bump in the road with COVID,” Prosterman says, noting that the neighborhood won’t reach full potential until what he’s doing is supplemented by more retail, restaurants, coffee shops, and other such enterprises now most severely affected by the crisis. He, however, is able to continue with what he’s been working on in the Edge for five years. 

“We’re going to keep doing what we’re doing,” he says. “We’re fortunate to have the capital partners that we have and fortunate that I’m not at the beginning of my career, or we wouldn’t have the staying power to keep going.”

The Hospitality Business

By Samuel X. Cicci

The coronavirus has wrought havoc across the country, but the sucker punch delivered to the hospitality industry hit especially hard. “In the month of May, we ran a 17 percent occupancy,” says Wayne Tabor, president of the Metropolitan Memphis Hotel & Lodging Association (MMHLA). “That month normally runs up in the 80s.” 

Downtown Memphis has borne the brunt of the hospitality storm. With tourism, meetings, and conventions all significantly reduced, large hotels have a surplus of space, and few visitors to fill it. Smaller economy and mid-scale hotels farther east have been performing better, but the overall numbers are still low. The percentages have been creeping back up, however, with a few twists along the way.

At the end of June, hotel occupancy rates sat at around 50 percent — still not great, but significantly better than nearby markets like Nashville and New Orleans. According to Tabor, the uptick came when Beale Street and restaurants were allowed to reopen. “Demand has started building back up a little bit,” says Tabor. “But Downtown, in June and July, we need to be at 80 percent.”

“I think we’re in a plateau period right now,” Tabor said in an interview in mid-July. “We started trending upward, but with everything going on, it’s difficult. I’m trying to make sure we stay in business, but I don’t want anyone to catch the virus.”

With the number of Shelby County cases surging in recent weeks, as of this writing (mid-July), the path back to where hotels need to be might be further away than anticipated. With bars shuttered once again in July and restaurants at a reduced capacity, hotels look to an influx of small meetings. 

“In Phase Two [of the reopening stages], we’re only allowed to host meetings of up to 50 people,” Tabor says. “You’re not going to see a lot of meetings with only 50 people. Phase Three will take us up to 200, and that’s what we’ll need to start getting back to where we need to be.”

Hospitality has one major advantage: a long history of innovative sanitation practices. “Cleaning and sanitation is our business,” says Tabor. “And that holds whether we’re in a pandemic or not. Even before this came along, we were always looking at ways to keep people safe from everyday viruses and sicknesses.” 

Along with cleaning procedures, some safety strategies may see an accelerated implementation. Most major brands were already experimenting with these innovations, says Tabor, but something visitors should get used to seeing is an app that can handle most guest functions: Think mobile check-in, scanning a phone to open a door, or settling the bill remotely. Other approaches rehaul the mini-fridge concept. Instead of snacks and liquor in their rooms, guests now have a full complement of sanitation products. At economy hotels, breakfast buffets are replaced by pre-packaged goods. If a tourist has concerns about any aspect of the hospitality experience, it’s a safe bet that hotels will have come up with a countermeasure or alternative to keep the experience as safe as possible. 

Downtown has been the strongest market for Memphis traditionally, and Tabor expects it to get back to the top. “I don’t know if we’ll have that V-shaped recovery we want, but we’ll get through it.”

One Beale

By Samuel X. Cicci

When the pandemic hit, Carlisle Corp.’s One Beale Project found itself well-poised to weather the storm. The 2019 trade tariffs on China had caused the developer to explore alternate supply chain options for necessary materials, so by the time international industry ground to a halt earlier this year, One Beale was in fine shape. The project’s first phase, the 232-room luxury apartments, is ahead of schedule, with pre-leasing expected to begin this fall. Meanwhile, the 227-room Hyatt Centric at Beale and Front is set to open in February 2021.

“We were in the process of moving and sourcing a lot of stuff pre-COVID that became very beneficial when COVID did hit,” says CEO Chance Carlisle. “When China shut down for its new year [in February], we were worried that they weren’t going to re-open. Meanwhile, our partners in Hyatt also have an extensive hospitality footprint, so we were attuned to what was going on and could minimize those effects on our process.”

And with construction green-lit as essential when the lockdown began in March, Carlisle Corp. went full steam ahead. “It was a boon to this economy and our project specifically,” says Carlisle. “We were able to actually accelerate some of our schedules as other parts of the country shut down.”

Carlisle Corp. will soon announce phase three of the One Beale project, a yet-unnamed boutique hotel. In the meantime, the developer is also putting plans together for the old Nylon Net building at 7 Vance Ave. The proposed apartments would leave Carlisle Corp.’s fingerprints all over the riverfront. 

“We’ve always considered the Memphis waterfront to be an untapped asset, for everything from public use to generating tourism taxes” says Carlisle. “Looking at the One Beale footprint, 7 Vance, and the Kemmons Wilson headquarters [the old Spaghetti Warehouse at 40 West Huling], there are five great parcels to develop. You can really build a close connection between Tom Lee Park and the rest of Downtown, and we see it as a natural extension to continue the residential and hospitality density there.”