With its transportation assets, Memphis is gaining a reputation as a great place to build a distribution center.
When people think of Memphis, Tenn., they undoubtedly think of Elvis Presley, the king of rock `n' roll. The city on the muddy Mississippi River also has carved out a reputation as a mecca for those seeking great barbecue. But in the commercial real estate world, the city is known as a distribution center locale of rare quality.
Billing their city as North America's distribution center, Memphis officials boast that, long before e-commerce was cool, Memphis-based companies kept the world's cargo moving. Now, the e-commerce world has caught wind of Memphis' transportation assets and is capitalizing on them with a passion. From its world-recognized airport, sophisticated rail systems and abundant interstate access to its downtown river port, Memphis is equipped to become the Southeast's, if not the nation's, center of commerce and cargo.
"To sum it up, the impact of e-commerce is being felt in a big way," says Bill Ray, vice chair of new and existing business for the Memphis Area Chamber of Commerce. "As of March 1, 2000, several spec buildings were under construction, most of which are being built in anticipation of the continued influx of logistics operations directly related to the Internet phenomenon."
First-class transportation hubs The demographic and logistical advantages Memphis offers businesses help explain why 56 companies in this year alone have decided to relocate to, or expand existing operations in, the Memphis area. Last year, 86 industrial and office construction projects totaling 101 million sq. ft. created 9,798 new jobs and produced $1.7 billion in new capital investments.
For the past six years, Memphis International Airport has been ranked by Geneva-based Airports Council International as the largest air cargo airport in the world, an honor of distinction due in part to the presence of Federal Express' (FedEx) corporate headquarters.
The airport is a hub for Northwest Airlines, notes Chuck Marquis, vice president of the chamber's economic development department.
"Our airport is also the only airport offering daily service to Amsterdam and is the No. 1 on-time airport in the country," adds Marquis.
Memphis also boasts the second largest river port on the nation's inland water system and the third largest rail center in the United States. "When combined with the 200 motor carriers that can reach 65% of the U.S. population in two days, Memphis offers logistical advantages few cities can match," says Ray.
The North American Free Trade Agreement (NAFTA) highway linking Canada and Mexico is designed to run directly through Memphis. Also, the Memphis Port Commission and the city and county governments have announced plans to build a gigantic intermodal terminal.
"Companies will be able to ship a variety of products into Memphis, break out containers according to products and ship them right back out," says Marquis.
"And, if you're lucky or savvy enough to be located adjacent to the facility, think about what you'll save in shipping charges," adds Marquis.
A river runs through it The city's history and future are firmly rooted to the Mississippi River. Walking around the downtown Memphis area, visitors cannot miss how the city has wrapped itself around this historical and geological landmark.
But, at some point in time, city leaders turned their back on the river, which resulted in a hodgepodge of mismanaged industrial endeavors that ultimately left scars on the riverfront. Today, the city is committed to a revitalization effort aimed not only at attracting businesses and industries to the downtown area, but also at giving riverfront development cohesive and comprehensive management.
"Memphis came from the river," says Benny Lendermon, president of Riverfront Development Corp. (RDC), a nonprofit, private agency charged with creating and implementing a 20-year riverfront redevelopment master plan.
"It's hard to deal with a river that fluctuates 50 feet in any given year," says Lendermon. "But, when W.W. Herenton was elected the first black mayor of Memphis, it was his goal as a historian to reconnect the city with the river."
Although plans to revitalize the waterfront began in 1991, they are only now coming to fruition. "Not to say we haven't spent lots of money on riverfront development [before the 1990s]," says Lendermon, the city's former public works director. "We built Mud Island River Park in the 1970s which, depending on who you talk to, either hasn't realized its potential or is a miserable failure."
Currently, the city has commissioned a $4.5 million cobblestone walkway construction project along the river's bank, but Lendermon says this does not scratch the surface of the overall master plan's intent.
"Everybody who comes to Memphis or works in the city wants to see the river or get to it," says Lendermon. "Any office buildings that have river views can sell overnight. The demand for these properties is just incredible. But, we've got limited opportunities. There's only so much riverfront and there are only so many places from where you can see the river. We're blessed with public access to the property along the river. It's just that it may not be the most ideal location.
"Memphis was like a lot of other cities," continues Lendermon. "With the absence of a plan, someone comes in with a whole lot of money to spend. We've jumped on a project and tried to be supportive, but there's not been a cohesive goal."
E-commerce comes calling As Memphis regains an aesthetic grip on its riverfront and its transportation hubs continue to hum with prosperity, the city's overall transportation system has not been lost on the dot.com crowd, says Ray.
"They are increasingly discovering that Memphis offers incredible efficiencies for the physical delivery of e-commerce transactions," says Ray. "That's why so many firms have established or expanded their presence here in recent months."
Consider a few recent highlights: - Last year, New York-based Barnes & Noble.com opened a $30 million distribution center in Memphis to ship books and CDs throughout the eastern United States. In September 1999, New York-based Media Metrix ranked Barnes & Noble.com as the fourth largest e-commerce site in the world.
- Toysrus.com, based in Paramus, N.J., committed to building a 400,000 sq. ft. distribution center to fulfill online orders. The company employs more than 900 people in the Memphis area.
- South San Francisco, Calif.-based PlanetRx.com built a 165,000 sq. ft. facility to fill medical prescriptions over the Internet. The Web site topped a "Top 10 Online Drugstores" report by New York-based e-Marketer, an Internet research company, scoring a perfect score based on selection, price, service, usability, presentation and features.
- LLbean.com has contracted with FedEx to fulfill orders received at the company's Freeport, Maine, headquarters.
- Palo Alto, Calif.-based Hewlett-Packard operates a $25 million, 625,000 sq. ft. distribution center called the HP Shopping Village. A portion of the facility is devoted to supporting the company's e-commerce operations.
- New York-based Mimeo.com, a digital printing company, will invest $25 million in a local production facility to allow the company to reproduce, bind and ship business documents anywhere in the United States.
To accommodate e-commerce companies in Memphis, city and Shelby County leaders have designated a new high-tech corridor around the eastern rim of the county, says Ray.
With the University of Memphis, the city and Shelby County have also formed the Memphis Area High Technology Council to draw more e-commerce companies.
"The chamber also has a work force development initiative under way as part of its 10-year Memphis 2005 plan to attract the best and brightest young people to work in these high-skilled, high-paying jobs," says Ray.
Promising statistics During the past five years, income has been on the rise in Memphis. The metro area posted a 4.8% growth in per capita income from 1996 to 1997. While measuring only 95.5% of the U.S. standard in 1990, the figure had increased to 102% by 1997.
The chamber's "2000 Mid-Year Report of Major Announced New and Expanded Companies" for office and industrial projects is more than promising. Fourteen relocations have resulted in 2,167 additional jobs, 2.7 million sq. ft. of new space and $1.8 billion in new capital investments.
In addition, 42 local expansions will result in 1,325 new jobs, 3.6 million sq. ft. of space and $2.6 billion in capital investments. Approximately 50% of the relocations and expansions are attributable to distribution centers or e-commerce related trade.
"The bottom line is you can't e-mail a Furby," says Lee, referring to a popular toy. "Somebody has to pick the order, pack it, ship it to the customer and track the package every step of the way. In Memphis, that's what we do best."