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.