Fundamentals Steadily Improve As Lease Rates Rise

MARKETVIEW

Greensboro/Winston-Salem Retail, Q2 2019 Healthy demand tightens vacancy rates; absorption rebounds

Vacancy Rate Lease Rate Net Absorption Under Construction 5.2 % $14.26 PSF 63,908 SF 215,377 SF

Figure 1: Weighted Average Lease Rate vs. Vacancy Rate

Vacancy (%) Vacancy Rate Guilford County Asking Rate Forsyth County Asking Rate Alamance County Asking Rate Asking Rate ($ /SF) 20 $25.00 18 16 $20.00 14 12 $15.00 10 8 $10.00 6 4 $5.00 2 0 $0.00

Source: CBRE Research, Q2 2019. CBRE|Triad tracks over 37.5 million sq. ft. of retail • CBRE|Triad is tracking over 215,000 sq. space in the Triad market. The market is divided into ft. of retail construction underway three sections; Guilford County, Forsyth County and within the Piedmont Triad. Alamance County.

• Over 190,000 sq. ft. of retail investment The Triad Q2 2019 vacancy rate is 5.2%, representing a sales closed in Q2 2019. 10 basis points drop from Q1 2019. The vacancy rates • Retail vacancy in the Triad in Q2 2019 is of the three counties include: 5.0% in Guilford County, 5.2%, falling 10 basis points quarter- 5.5% in Forsyth County, and 5.4% in Alamance over-quarter. County. Of these three counties, Forsyth County was the only county with a higher vacancy rate quarter- • The Triad reported a positive 63,908 of over-quarter, rising 10 basis points. net absorption in Q1 2019, representing a second consecutive quarter of positive absorption. Positive net absorption of 63,908 sq. ft. was recorded in Q2 2019, bringing the year-to-date net absorption to 71,174 sq. ft. All counties including Guilford, Alamance and Forsyth County reported positive net

absorption in Q2, with Alamance County Figure 2: Largest Shopping Centers in the Triad reporting over 51,000 sq. ft., largely due to O2 Fitness 30,000 sq. ft. lease in the West Burlington submarket. Raleigh based O2 Total $ / Fitness continues to show its growth in the Rank Name Submarket Sq. Ft. Sq. Ft. Triad with this site being its second opening within 12 months. O2 Fitness now hosts two South locations, one in Guilford County at Friendly 1 Hanes Mall 1,504,116 $30.00 Center and the second in Alamance County at Forsyth New Market Square. Additionally, Trader Joe’s has committed to leasing roughly 14,000 sq. ft. in Brassfield’s Shopping Center with plans to open later this year. Northwest 2 Friendly Center 1,137,636 $34.00 Guilford Over 190,000 sq. ft. of retail investment sales traded hands in Q2 2019, representing over $23 million in sales volume. Significant transactions from Q2 included Hobby Lobby at Oxford Station Way in Winston Salem trading Four Seasons Central 3 1,084,337 $20.50 for $8.0 million ($146 PSF) and the 52,000 sq. Town Centre Guilford ft. DP Business Center trading for $2.5 million ($47 PSF). Although less than the $35,300,000 reported in Q1 2019, the year-over-year change represents a 58% increase in sales volume. Overall, since Q2 2018, the Triad has traded North 4 Alamance Crossing 785,368 $25.00 more than 2.2 million sq. ft., representing over Alamance $194 million.

CBRE|Triad is currently tracking 215,377 sq. ft. of retail space under development, a statistic Central that shows while retail is changing in the face 5 Wendover Place 529,000 $32.00 of technology, brick-and-mortar itself is not Guilford dead. Project Slugger in Greensboro and 275 Elm in High Point will both offer retail at the street level, bringing an additional 25,000 sq. ft. of retail space to Guilford County in support Holly Hill Mall and North of the new office buildings surrounding the 6 412,370 $20.00 ballparks. Additionally, projects including Business Center Alamance Grandover Village and Shoppes at Sedgefield Crossing contribute to over 130,000 sq. ft. or 64% of the total Triad development activity.

Triad wide asking lease rates averaged $14.26 South 7 Elmsley Square 380,000 $22.00 per sq. ft. in Q2 2019, down $0.23 since Q1 Greensboro 2019. In Q2, Guilford County carried the highest average lease rate at $14.96 per sq. ft. due to the help of both NW Guilford and Airport / W Guilford submarkets averaging South above $20.00 per sq. ft. Market volatility for 8 Hanes Point 361,165 $23.00 asking rates within the submarkets remained Forsyth stable quarter-over-quarter, averaging only $0.17 less in Q2 2019. Central Retail fundamentals remain strong in the 9 Landmark Station 353,508 $16.50 Triad as speculative construction and user Guilford occupied developments continue to enter the market. 275 Elm in High Point along with the Burlington Food Hall at 268 E Front Street in Thruway South 10 352,214 $34.92 Downtown Burlington plan to be the first Shopping Center Forsyth locations in the Triad to operate as boutique food halls. Food Halls are on the rise as the Triad host two of the 450 locations in the Source: CBRE Research, Q2 2019. country planning to enter the market this year.

Figure 3: Submarket Breakout

Market Rentable Net YTD Net Under Net Avg. Asking Area Vacant Vacancy Availability Absorption Absorption Construction Lease Rate Submarket (SF) (SF) Rate (%) Rate (%) (SF) (SF) (SF) ($/SF/Yr)

Airport / W Guilford 998,196 30.,911 3.1 5.2 2,450 94,996) 25,000 20.88

Central Guilford 6,283,274 472,299 7.5 9.5 26,935 22,194 138,298 12.43

High Point / SW Guilford 2,928,018 102,234 3.5 5.2 (50) 18,703 12,897 14.62

NE Guilford 1,733,946 145,262 8.4 19.7 0 3,576 0 13.68

NW Guilford 4,281,698 61,291 1.4 2.1 (4,469) 5,737 27,000 22.06

SE Guilford 275,930 50,380 18.3 19.1 0 0 0 13.50

South Greensboro 959,536 38,993 4.1 4.2 (4,056) (9,156) 0 11.92

West Greensboro 358,670 34,230 9.5 10.7 0 12,900 0 10.70

Greensboro CBD 1,323,110 14,620 1.1 3.0 3,484 7,219 12,182 14.82

Guilford County 19,144,928 950,220 5.0 7.3 24,294 56,177 215,377 14.96

Kernersville 1,222,750 80,721 7.2 9.4 (8,640) (13,440) 0 16.07

NE Forsyth 481,887 48,627 10.1 9.0 0 (48,627) 0 11.07

NW Forsyth 2,147,726 109,320 3.5 7.4 3,997 36,989 0 9.45

SE Forsyth 451,025 9,100 2.0 2.0 0 0 0 11.00

South Forsyth 5,920,798 338,943 6.3 4.8 23,836 (24,278) 0 21.32

West Forsyth 1,447,814 50,697 3.5 5.2 2,451 15,777 0 14.76

Clemmons 739,761 26,652 3.6 6.3 (1,172) 228 0 21.55

Winston Salem CBD 1,544,169 99,451 6.4 9.8 (7,038) (3,170) 0 11.98

Forsyth County 13,855,930 763,511 5.5 6.3 16,434 (36,521) 0 $14.65

North Alamance 235,170 18,142 7.7 7.5 (6,820) (6,942) 0 8.76

Central Alamance 769,390 126,192 16.4 20.6 0 (40) 0 8.79

SE Alamance 668,729 1,810 0.3 0.3 0 32,000 0 15.10

W Burlington / Airport 2,905,574 102,534 3.5 4.9 30,000 26,500 0 14.90

Alamance County 4,578,863 248,678 5.4 7.0 23,180 51,518 0 $11.89

TRIAD RETAIL TOTALS 37,579,721 1,962,409 5.2 6.9 63,908 71,174 215,377 $14.26

Source: CBRE Research, Q2 2019.

Figure 4: Top Lease Transactions

Tenant Address Sq. Ft.

3200-3282 Silas Creek Parkway Burlington Coat Factory 45,000 Winston Salem, NC

2727-2751 S Church Street O2 Fitness 30,000 Mebane, NC

3710-3740 S Holden Road Market Furniture Warehouse 26,175 Greensboro, NC

Source: CBRE Research, Q2 2019.

Figure 5: Capital Markets Sales Volume vs. Building Sq. Ft.

Sales PriceChart TitleBuilding Sq. Ft. $60,000,000 800,000 700,000 $50,000,000 600,000 $40,000,000 500,000 $30,000,000 400,000 300,000 $20,000,000 200,000 $10,000,000 100,000 $0 - 2Q18 3Q18 4Q18 1Q19 2Q19 Source: CBRE Research, Q2 2019.

Figure 6: Weighted Lease Rate Asking Rate ($/Sf) Weighted Lease Rate $25.00

$20.00

$15.00

$10.00

$5.00

$0.00

Source: CBRE Research, Q2 2019.

Figure 7: Store Type Quarterly Absorption

CLOTHING AND FITNESS BIG BOX COMBINE 2% Clothing FOR OVER HALF OF THE QUARTERLY 6% ABSORPTION 9% Fitness 31% Furntiture In Q2 2019 52% of the net absorption was in 13% Other fitness and clothing. Combined these tenants Restaurant represent over 75,000 sq. ft. of positive absorption. 18% Bargain Furthermore, Burlington Coat Factory occupied 21% 45,000 sq. ft. in Winston Salem, O2 Fitness opened Health a new 30,000 sq. ft. gym in Burlington and Furniture Market Warehouse occupied 26,000 sq. Source: CBRE Research, Q2 2019. ft. in Greensboro.

Figure 8: Speculative Construction Submarkets CONSTRUCTION CONTINUES THROUGHOUT THE TRIAD C Guilford 6% 6% The Triad currently has over 215,000 sq. ft. of NW Guilford 12% 64% construction underway in Q2 2019, including Airport W Guilford Shoppes at Sedgefield and Brassfield’s Shopping 12% Center combining for over 100,000 sq. ft. Overall, High Point / SW over 100,000 sq. ft. of grocery tenants are under Guilford construction throughout Guilford County as Earth Greensboro CBD Fare, Sprouts, and Trader Joe’s will open in 2019. Source: CBRE Research, Q2 2019.

Figure 9: Unemployment UNEMPLOYMENT RATES RISE AT STATE AND NATIONAL LEVELS (%) Triad NC U.S. 5 As of Q2 2019, the combined unemployment rate for the Greensboro-High Point MSA and Winston- 4 Salem MSA, which comprises the Triad region, fell 3 by 10 basis points to 3.9% quarter-over-quarter. North Carolina’s unemployment increased at a 2 rate of 30 basis points quarter-over-over to 4.1% in 1 Q2 2019. The nationwide unemployment rate noted in Q2 2019 was 3.7%, up from the 3.6% 0 reported last quarter. Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

Source: U.S. Labor Bureau, Q2 2019.

Source: CBRE Research, Q2 2019.

CONTACTS CBRE OFFICE

Matt King CBRE|TRIAD Vice President, Retail Services 101 CENTREPORT DRIVE, SUITE 160 +1 336 544 2724 GREENSBORO, NC 27409 [email protected]

Christy Smith To learn more about CBRE Research, Associate, Retail Services or to access additional research reports, +1 336 544 2726 please visit the Global Research Gateway at [email protected] http://www.cbre.com/research-and-reports

Andrew Dixon Research Analyst +1 336 478 4404 [email protected]

Tom Fritsch Senior Managing Director +1 919 831 8245 [email protected]

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