Research & Forecast Report COLUMBIA, SC | RETAIL Q3 2016
Development Moves Up North Main
Bryana Mistretta Research Coordinator | South Carolina
Key Takeaways >> North Main Street is an emerging retail corridor unique to Market Indicators Columbia. Relative to prior period Q3 2016 Q4 2016*
>> Grocer wars continue. VACANCY North Main: An Emerging Retail NET ABSORPTION Corridor CONSTRUCTION RENTAL RATE** In August of 2015, 224 market rate units and 1,992 beds of Note: Construction is the change in Under Construction. student housing were delivered downtown. This summer, another *Projected 524 market rate units and 1,530 beds delivered. Together, these **Rental rates for current quarter are for CBD. Rent forecast is for metro-wide rents. developments added nearly 5,000 new residents to downtown and are radically reshaping the retail market in and near downtown. Historically, retailers stretched from the State House to Laurel Street, with little interest in going north of Elmwood Avenue. Today, however, the North Main Street corridor is beginning to Summary Statistics see increased interest from developers, retailers and office users. Q3 2016 Charleston Retail Market Market The corridor is surrounded by the recently gentrified Cottontown, Vacancy Rate 9.4% Elmwood Park and Earlewood neighborhoods; is near four colleges; and is within walking distance of the Central Business District and Change From Q2 2016 40 many of the region’s largest employers. (basis points) Absorption 56.4 Several factors are driving growth in this corridor. The cost of (Thousand Square Feet) land and existing properties along North Main is low relative to New Construction 280.1 competing properties downtown. The City and State are providing (Thousand Square Feet) financial help to further incentivize growth in the area through Under Construction reuse of existing buildings and infill development. The City’s Vacant (Thousand Square Feet) 189.4 Abandoned Building Incentive Program awards between $1,000 and $20,000 towards the purchase, preservation and repair of Asking Rents Per Square Foot Per Year qualifying properties. The Bailey Bill encourages the reuse of existing buildings across the city by locking the property tax values Downtown Shop Space $21.93 on qualifying properties at the time of purchase. Additionally, Change From Q2 2016 0% Richland County has begun streetscaping projects to enhance the walkability, safety and aesthetic of the North Main Street corridor Suburban Shop Space $14.18 from River Drive to Columbia College. Change From Q2 2016 1.9%
As is typical for a redevelopment push, food and entertainment Studio 2LR | 2428 Main Street venues are leading the wave of new businesses opening along the corridor, with residential and office developments likely to follow soon. North Main businesses include Lamb’s Bread Vegan Café, Vino Garage, Sweet Temptations Bakery and Main Street Bakery. Most recently, The War Mouth, a southern barbecue restaurant, opened at 1209 Franklin Street in a repurposed, 2,400-square-foot industrial warehouse, and Studio 2LR, an architecture and interior design company, moved into the 3,400-square-foot space at 2428 Main Street. The Cotton Town Brew Lab is expected to open later this year next to War Mouth at 1223 Franklin Street in a former auto body garage. The brewery will share the 12,000-square-foot space with Indah Coffee Company and include a kitchen and tasting room. NoMa Revival, a new restaurant concept by the owner of Bourbon at 1214 Main Street, has purchased the 7,100-square-foot building located at 2510 North Main Street. The concept includes a beer garden and a butcher counter, as well as a 150-seat concert hall. Source: Buchanan Construction Services
All the new businesses are giving new life to existing properties The War Mouth | 1209 Franklin Street within the corridor. While currently, smaller businesses are moving into the corridor, the former Moore Cadillac site at 2222 Main Street provides 5.3 acres for a larger development. Once this property is repurposed, infill development and continued expansion of the corridor will accelerate. North Main Street is a unique area with the potential to see increased property values, rental rates, infill development and occupancy rates over the next few years. Grocer Wars Continue
The growing population in Columbia has led to a boom of new construction of shopping centers and stand-alone grocery stores across the region. These new grocery-anchored centers are receiving robust interest from local and national retailers, who will benefit from the customer traffic the grocers will create. Recent data from ESRI estimates the population of the Columbia market to be 820,000 Source: Cason Development Group, LLC people. It will reach 866,000 people by 2021. The expected growth is a 5.6% increase, or 25 new residents per day, moving to the area over Piggly Wiggly at 4033 West Beltline Boulevard have closed their the next five years. The boom in residential population in the region is doors. Publix has continued to selectively expand its footprint in the the key factor attracting new grocers to the region. region, with its most recent store in Chapin. A new 123,000-square- foot Kroger Marketplace concept opened this summer at Killian’s Over the last decade, the grocery market has evolved into two distinct Crossing, anchoring a new 400-acre mixed-use development in tiers. In the late 1990s, it was dominated by Piggly Wiggly, Bi-Lo, Food Northeast Columbia, and another is planned south of downtown. Lion, Kroger and Publix. Walmart began to enter the grocery market Joining the value-oriented market, the specialty retailer Aldi has with its Supercenter format. Today, Publix, Lowes Foods and Kroger added two new stores, and Lidl has acquired land to open three are actively competing for the upper end of the market. Value-oriented locations in Columbia. Additionally, wholesale grocery stores like stores like Walmart Neighborhood Market, Aldi and Lidl have entered Sam’s Club opened this summer at Village of Sandhill, and Costco the market and are expanding rapidly, causing the dominant chains, Wholesale opened at Piney Grove Road near I-26. Bi-Lo and Food Lion, to consolidate substantially and Piggly Wiggly to largely retreat from the region. The separation of the market has allowed niche grocery chains serving the high-end and specialty markets to expand as well. The Walmart Neighborhood Market has entered the market aggressively, Fresh Market was the first niche grocer to enter Columbia. More opening three stores since September of 2015 in Columbia. These recently, Trader Joe’s opened a location at 4516 Forest Drive, and new stores, combined with the company’s existing footprint of Whole Foods one at 4305 Fort Jackson Boulevard. The Fresh Supercenters, has created tremendous pressure on its chief Market has two new locations under development as well. Nearly all competitors, Bi-Lo, Food Lion and Piggly Wiggly. Most recently, the these chains have chosen to build new locations in established retail Bi-Lo store at 4711 Forest Drive, formerly a Piggly Wiggly, and the corridors with growing demographics.
2 South Carolina Research & Forecast Report | Q3 2016 | Columbia Retail | Colliers International In total, eight new grocery stores have opened in the market since January of 2015. In the third quarter, a 45,000-square-foot Publix Columbia, SC Retail Submarkets Supermarket opened in the new Chapin Crossing shopping center on Chapin Road, Costco Wholesale opened a 153,000-square-foot store at 507 Piney Grove Road and the 41,000-square-foot Walmart 1 Neighborhood Market opened on Old Barnwell Road. The Fresh 8 Market on Sunset Boulevard in Lexington is under construction and expected to deliver in Summer of 2017, with another location under 2 construction on Two Notch Road near the Village at Sandhill. Two 3 Lowes Foods locations are under construction in Lexington and they 7 5 are looking for an additional location. Additionally, Lidl announced 4 plans to open two stores in Columbia, one on Hardscrabble Road in Northeast Columbia and the other on Sunset Boulevard in Lexington. 6 The location at Hardscrabble Road will be built from the ground up, while the Lexington location will backfill a former car dealership near Hope Ferry Road and Sunset Boulevard. This robust development is 1 Northeast Columbia 5 Downtown expected to continue unabated. 2 North Columbia 6 Cayce/ West Columbia 3 Forest Acres 7 Lexington Sales 4 Southeast Columbia 8 St. Andrews/ Harbison
Conditions remain favorable for retail investment in Columbia. Average asking rental rates are rising, interest rates remain low and capitalization rates are moderate. Renovations of anchored shopping centers have proven successful in the Columbia retail Columbia, MSA Demographics market, with several of them near full occupancy. POPULATION >> High Point Centre, located at 800 Lake Murray Boulevard, is a 2021: 976,470 (ESRI Forecast) 62,000-square-foot retail center formerly anchored by Piggly 2016: 929,124 (ESRI Estimate) Wiggly. Florida-based PEBB Enterprises purchased the center 2010: 875,054 (Census) with a vacancy rate of 90.4% for $4.2 million, or $67.74 PSF. AGE (2016 ESRI Estimate) PEBB Enterprises will announce a specialty grocer for the 20-34: 206,151 (22.2%) 27,600-square-foot former Piggly Wiggly space later this year. 35-64: 355,844 (38.3%) >> Gaston Marketplace in Lexington County sold to McAva Real 65+: 128,496 (13.8%) Estate, Inc. for an estimated $2.3 million, or $51.82 PSF. The HOUSEHOLD INCOME shopping center is nearly 44,000 square feet, anchored by a Average: Food Lion and Family Dollar. 2021: $72,261 (ESRI Forecast) 2016: $66,197 (ESRI Estimate) Market Conditions
The growing residential population in the Columbia retail market has created stronger demand amongst retailers to locate in the 800 Lake Murray Boulevard major retail corridors. Overall, the market vacancy rate at the end of the third quarter was 9.4%, compared to 9.8% at the end of the previous quarter. The average asking rental rate for shop space was $14.45 per square foot per year (PSF/YR) triple net (NNN), an increase from $14.09 PSF/YR NNN last quarter.
Cayce/West Columbia
The vacancy rate was 23.9% in Cayce/West Columbia, unchanged from last quarter. The average asking rental rate was $11.44 PSF/YR NNN, a 5.5% increase from the second quarter of 2016. Walmart Neighborhood Market recently opened its 41,000-square- foot store at 1019 Old Barnwell Road. Source: CoStar
3 South Carolina Research & Forecast Report | Q3 2016 | Columbia Retail | Colliers International Q3 2016 Retail Market Summary Statistics Columbia, SC ANCHOR SPACE JR. ANCHOR SPACE SHOP SPACE (GREATER THAN 25,000 SF) (10,000-25,000 SF) (LESS THAN 10,000 SF) AVERAGE AVERAGE AVERAGE INVENTORY VACANCY RATE VACANT VACANT VACANT MARKET BUILDINGS ASKING RENT ASKING RENT ASKING RENT (SF) (%) (SF) (SF) (SF) (NNN) (NNN) (NNN) Cayce/West Columbia 15 1,212,954 23.9% 101,279 $6.00 91,940 $7.38 96,077 $11.44 Downtown 6 405,768 4.7% - - - - 19,207 $21.93 Forest Acres 3 777,296 9.1% 51,728 - 11,754 $18.00 7,523 $17.26 Harbison/St. Andrews 33 3,540,331 9.1% 41,000 - 83,901 $16.25 198,628 $14.75 Lexington 14 1,633,267 2.0% - - - - 32,727 $17.28 North Columbia 5 353,774 23.5% 36,625 $7.50 - - 46,608 $8.65 Northeast Columbia 28 3,741,291 9.3% 93,799 $7.00 50,026 $8.66 203,536 $15.43 Southeast Columbia 8 1,109,461 2.7% - - 18,000 - 12,000 $17.30 Market Total 112 12,774,142 9.4% 324,431 $6.89 255,621 $10.80 616,306 $14.45
Downtown two Lowes Foods are under construction and are set to deliver in the summer of 2017. The vacancy rate was 2.0% at the end of The vacancy rate for shop space in grocery-anchored shopping the quarter, down from 4.1% at the end of the second quarter, but centers in downtown Columbia was 4.7% and the average asking the average asking rental rate for shop space remained steady at rental rate was $21.93 PSF/YR NNN, unchanged from the second $17.28 PSF/YR NNN. Other national tenants leasing space in the quarter. Low vacancy in shopping centers is shadowed in the Lexington submarket are Hobby Lobby, Ulta and Tijuana Flats. low vacancy of ground-floor Main Street retail spaces. A trend in downtown retail is the conversion of first-level spaces traditionally North Columbia occupied by office users to restaurants and showrooms. Many office buildings on Main Street already have ground-level retail The Piggly Wiggly at 4033 West Beltline Boulevard vacated their space with coffee houses, restaurants or soft goods retailers. 36,600-square-foot store in Edens Plaza this quarter, bringing the vacancy rate in North Columbia to 23.5% from 11.3% at the end Forest Acres of the previous quarter. The average asking rental rate was $8.65 PSF/YR NNN at the end of the quarter. The Forest Acres submarket saw little activity this quarter. The vacancy rate was 9.1% and the average asking rental rate was Northeast Columbia $17.26 PSF/YR NNN, unchanged from last quarter. The submarket has seen a large increase in vacancy due to the Bi-Lo at 4711 The Northeast Columbia submarket saw the positive absorption of Forest Drive vacating their 52,000-square-foot space in the Forest 47,500 square feet of retail space, ending the third quarter with a Park shopping center. vacancy rate of 9.3%, down from 10.6% at the end of the second quarter. The average asking rental rate for shop space was $15.43 Harbison/St.Andrews PSF/YR NNN, an increase from $13.99 PSF/YR NNN at the end of the second quarter of 2016. National retailers such as Freddy’s and The Harbison/St. Andrews submarket is one of the largest in the Starbucks are opening locations in the submarket. Columbia retail market, with an inventory of 3.5 million square feet. The average asking rental rate for shop space was $14.75 PSF/YR Southeast Columbia NNN. The vacancy rate at the end of the quarter was 9.1%, down slightly from 9.3% at the end of the second quarter. New tenants The Southeast Columbia submarket had a vacancy rate of 2.7%, leasing space in the submarket this quarter include Painting with a down from 3.2% at the end of the second quarter. The average Twist, which leased 2,400 square feet at the Harbison Center, and asking rental rate for shop space was $17.30 PSF/YR NNN. Hickory Haverty’s Furniture, which leased the 17,800-square-foot former Tavern will soon open at the Shoppes at Woodhill. Foot Action at 234 Harbison Boulevard. Market Average Asking Rental Rate | Shop Space Lexington Q3 2016 $14.45 The Fresh Market on Sunset Boulevard is nearing completion and is expected to be open by Summer of 2017. The grocer will co-anchor Q2 2016 $14.17 the new 143,000-square-foot Lexington Marketplace shopping center. The Lexington submarket is seeing the most activity from grocers and national tenants. In addition to the new Fresh Market, Q3 2015 $14.38
4 South Carolina Research & Forecast Report | Q3 2016 | Columbia Retail | Colliers International Gross Retail Sales & Employment Columbia, SC MSA Employment Trends
Non-farm employment is growing within the Columbia Metropolitan 20 400 Statistical Area (MSA). Per the Bureau of Labor Statistics’ most 18 recent data from September 2016, the Columbia MSA had 396,000 390 non-farm employees. Since September 2015, 8,400 new non-farm 16 jobs were added to the market, a 2.2% growth over one year. Since 14 Number of Non-Farm Jobs 380
May 2014, the Columbia MSA has experienced a 5.6% job growth 12 (Thousands) rate. A strengthening job market correlates to the higher gross 10 370 retail sales for this year comparative to the last two years.
(Thousands) 8
Gross retail sales are driven by a strengthening economy, strong Added Number of Jobs 360 6 job growth and a growing residential population. Data from the 4 South Carolina Department of Revenue says gross retail sales in 350 the Columbia Metropolitan Statistical Area (MSA) reached $2.5 2 billion in June of 2016, an 9.8% increase from a year ago, 17.2% 0 340 from 2014. These sales are a 16.5% growth from two years ago. Jan-13 Jan-15 Jan-16 Jan-14 Sep-13 Sep-15 Sep-16 Sep-14 Sep-12 May-13 May-15 May-16 May-14 Jobs Added Over 12 Months Total Jobs Looking Ahead Source: South Carolina Bureau of Labor Statistics The retail market in Columbia is growing and has potential for expansion along the Upper Main Street corridor. Grocers are Commercial Real Estate Growth Cycle: Where the expected to announce and open new locations through the end of market stands and where it is going. 2016, with more to come in 2017. Recently completed residential developments continue to draw more residents into the downtown NEW CONSTRUCTION RENTAL RATE area, with several more proposed to begin construction soon. EMPLOYMENT Vacancy rates will begin to drop as demand for retail space in OCCUPANCY the Columbia retail market grows stronger, further increasing the PHASE 1: average asking rental rates in all submarkets. RECOVERY
PHASE 2: Around South Carolina EXPANSION COMMERCIAL Growing populations across the state are leading to the expansion REAL ESTATE and strengthening of existing retail nodes in South Carolina’s main retail markets. Grocers are continuing to expand in all markets, GROWTH along with other regional and national tenants. CYCLE PHASE 4: Charleston, South Carolina RECESSION PHASE 3: >> Construction began on BJ’s Wholesale Club in Summerville, HYPERSUPPLY Aldi leased 20,600 square feet in the Plaza at East Cooper on Johnnie Dodds Boulevard, Lidl announced it is actively looking in the market and Publix announced it will open a 45,000-square- foot location in the WestEdge mixed-use development. Publix | West Edge Development, Charleston Greenville, South Carolina >> Construction has begun at the Shoppes at Pelham. The development will be anchored by a 49,000-square-foot Lowes Foods and include 17,000 square feet of shop space. This will extend the Pelham Road corridor, which currently has just three grocer-anchored shopping centers, all of which are at full occupancy. Demand is strong in the corridor and will be met by these new speculative retail spaces and raising asking rental rates to a range between $29 and $30 NNN PSF/YR. For more statewide commercial real estate news, check out our market reports at: www.colliers.com/southcarolina/insights Source: The Post and Courier via Perkins and Will/The Preston Partnership
5 South Carolina Research & Forecast Report | Q3 2016 | Columbia Retail | Colliers International FOR MORE INFORMATION: 554 offices in Liz H. McCary Director of Marketing | South Carolina 66 countries on [email protected] Bryana Mistretta Research Coordinator | South Carolina 6 continents [email protected] United States: 153 Canada: 34 COLUMBIA RETAIL PROFESSIONALS: Latin America: 24 Rox Pollard Vice President & Director of Retail Services Team Asia Pacific:231 [email protected] EMEA: 112 JP Scurry Vice President [email protected] $2.5 Tripp Bradley Senior Brokerage Associate billion in [email protected] annual revenue Danny Bonds Brokerage Associate 2 [email protected] billion square feet Scottie Smith under management Brokerage Associate [email protected]
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