A New Vision, New Life for West Ashley

Key Takeaways

• Population growth, job creation and a booming economy continue to drive Charleston, SC’s retail market.
• Retailers are investing in the market, contributing to declining vacancy rates and rising rental rates.
• A new wetlands ruling hinders ground-up construction by placing limitations on additional land sites.
• Various factors are spearheading a shift in focus from Mount Pleasant and Downtown Charleston to West Ashley.
• Tight market conditions and low interest rates are motivating investment sales transactions.

To download the complete report: Q1 2016 Charleston Retail Market Report.

Retailers Face Limited Options for Space

The Charleston, South Carolina retail market has experienced great activity during recent quarters.  New and redeveloped retail space is successfully attracting tenants and much of the existing, quality space in the market is currently occupied.  Consequently, retailers that are seeking quality space with prime visibility and high traffic counts face limited options for space.

The first quarter of 2016 came to a close with a total vacancy rate of 5.4% for the market, holding steady over year-end despite robust activity and interest.  The market’s vacancy rate has been steadily declining over recent years and does not accurately reflect the market’s strong activity.  Many leases are being signed for space that is currently under construction and will not be reflected in the market’s vacancy rate until construction is complete.  A lack of existing space leaves few opportunities for retailers to enter the market, motivating continued construction and redevelopment of existing centers.

Rising rental rates accompany the declining vacancy rates as the market continues to favor landlords.  Increasing construction costs and land prices are further contributing to escalating rental rates.  At the end of the first quarter of 2016, asking rental rates for suburban shop space averaged $18.62 per square foot triple net (PSF NNN), increasing from $17.85 PSF NNN two years ago.  Shop space along King Street remains the most expensive in the market.  Tenants looking for space along the high street retail corridor are competing for the few remaining vacancies and some are paying more than $95 PSF NNN to secure their spot in the district.

Strong competition among retailers is encouraging creativity and motivating retailers to look at space outside of the traditional retail corridors.  This provides a golden opportunity for previously ignored submarkets to be revitalized.

The Spotlight is on West Ashley

Historically, over the past few years, retail centers in Mount Pleasant and Summerville populated headlines.  As those markets become saturated with Class A retail centers nearing full occupancy, retailers and developers are looking elsewhere to meet their space requirement needs.  Enter West Ashley.

West Ashley has been under the radar in recent years while neighboring submarkets underwent growth and welcomed new retailers.  2016 is the year that West Ashley will shine.  The City of Charleston has a new mayor in office who is focused on revitalizing the submarket, and after just a few months into his term, the Mayor  is focusing his attention on West Ashley.

The City of Charleston is looking for ways to encourage shopping and entertainment in the submarket and plans to open a farmer’s market in West Ashley.  The move is part of a revitalization plan of the area that many locals are calling “DuWap,” a name that comes from joining Dupont and Wappoo roads.

Activity in the submarket is quickly gaining momentum.  West Ashley’s vacancy rate has been trending down in recent quarters, but remains the second highest in the market.  At the end of the first quarter of 2016, the vacancy rate in West Ashley was 6.9%, down from 8.8% one year ago.  Major redevelopment plans and new store openings were announced early in the year, and more announcements are expected before year-end.

Earlier this year, national retailer Whole Foods announced plans to build its second Charleston store in West Ashley.  The national grocer plans to open a 45,000 square-foot store in 2017.  The grocer will occupy an existing center at the corner of Savannah Highway and Farmfield Drive, adjacent to Doschers IGA.  The area’s first Whole Foods is located in Mount Pleasant.

Another well-known grocer, Harris Teeter, also plans to open a new store in West Ashley by year-end 2017.  The new store will be located at Westwood Plaza.  TJ Maxx has relocated within the center and is currently undergoing renovations.  Other tenants in the center include Barnes & Noble and Office Depot.

Charleston’s waterways and wetlands have always created a struggle for developers, but a recently passed wetlands ruling is resulting in additional hurdles for developers looking for land sites. Thus, retenanting retail space is becoming a common trend in Charleston, and given the age and quality of West Ashley shopping centers, the submarket will provide retailers the most economical opportunities with the lowest barriers to entry.

Recycling Old Space for New Retailers

Redevelopments of former big-boxes and anchored shopping centers have proven beneficial throughout the market.  Bowman Place, a former K-Mart redevelopment in Mount Pleasant, is 100% committed and has provided a gateway for J. Crew Mercantile, Designer Shoe Warehouse, Nordstrom Rack and Kitchen & Company to enter the Charleston market.

West Ashley is home to several shopping centers that are prime for redevelopment.  Plans are already in the works for a few centers.

• Ashley Oaks Shopping Center at Wappoo and Ashley River roads traded hands in November 2015 and the new owners are planning to redevelop the center.  Charlotte-based Lat Purser & Associates purchased the approximately 59,000 square-foot center for $5.5 million.  The company plans to invest an additional $5 million towards a redesigned facade, new dining and gathering areas and parking lot and landscaping upgrades, among other renovations.
• Faison Enterprises of Charlotte, owner of Ashley Landing Shopping Center, is planning to retenant the center and build up to 10,200 square-feet of outparcels at the center which is located at 1401 Sam Rittenberg Boulevard.

Robust Sales Activity with Record-High Prices

High occupancy and rental rates, low interest rates and healthy interest in the market is driving robust sales activity.  Retail centers are receiving top dollar and trading hands at the highest sales prices witnessed in the market.

• West Ashley Shoppes, located at 946 Orleans Road, was purchased late in 2015 for approximately $15.5 million, or $110 per square foot, by Dallas-based commercial investor Tabani Group.
• The former Morris Sokol Furniture store sold for $22.5 million.  The 37,000 square-foot building is located on Upper King Street and was purchased by a Connecticut-based investor.
• 342 King Street, a roughly 6,400 square-foot building, was purchased in February for approximately $2.3 million, or $355 per square foot.
• A 4,000 square-foot retail building at 161 King Street has traded twice in two years.  The building was sold for $3.6 million earlier this year and was previously sold for $1.5 million in July 2014.
• Daniel Island Town Center, located at 162 Seven Farms Road, was purchased for $14 million by Florida-based Publix Supermarkets Inc.

 

 

Culinary Scene Diversifies

With new restaurants constantly opening, it’s no surprise that Charleston was ranked among the “Best American Cities for Foodies” by Conde Nast Traveler.

• W. Shucks Seafood Restaurant and Oyster Bar has been reconcepted as Oyster House on Market.  The new restaurant includes a raw bar called O-Bar on State Street.
• Little Jack’s Tavern recently opened at 710 King Street, a reconcept of former St. Alban.
• Pancito & Lefty, a new Mexican restaurant, recently opened at the former Zappo’s Pizza space at 708 King Street.
• Harold’s Cabin opened at 247 Congress Street in March and features a full-time, in-house horticulturist to tend to the rooftop garden that serves the restaurant.
• Lewis Barbecue will soon be opening at 464 Nassau Street.  Pitmaster John Lewis will be introducing his Austin barbecue to the South Carolina barbecue scene.
• Stems and Skins, a wine bar serving light snacks, is open at 1070 E. Montague Avenue.
• Cane Rhum Bar + Caribbean Kitchen plans to open soon at 251 E. Bay Street in the former Big John’s Tavern Space.  The restaurant, which features a tropical décor, will be serving rum beverages and Caribbean cuisine.
• Turquoise Restaurant is open at 357 King Street and serves traditional Turkish cuisine.
• The Darling Oyster Bar, a reconcept of the former Union Provisions restaurant, is open at 513 King Street.
• Home Team BBQ has opened a third Charleston location at 126 Williman Street.
• Former NYC chef plans to open La Farfalle at 15 Beaufain Street this Spring in the former Leaf restaurant space.

Other Retail News

• Trek Cycle has opened a 4,909 square-foot store, its second location in Charleston, at Pierpont Crossing Shopping Center in West Ashley.  The retailer’s first store is in Mount Pleasant.
• Sephora’s King Street store is now open.  The new beauty store is open at 289 King Street in the former Bebe space.
• Lowes Foods Supermarket is planning its first Charleston area store.  The grocer plans to anchor a 78,000 square-foot center in Mount Pleasant to be called The Market at Mill Creek.  The store will include a 12-pump gas station and be located at Highway 41 and Wood Park Drive.
• BI-LO has closed its doors to customers at 1357 Remount Road in North Charleston, vacating 39,000 square feet of retail space at Remount Village Shopping Center.
• Hobby Lobby has opened its second Charleston store at the Promenade at Northwoods Shopping Center on Rivers Avenue.  The retailer backfilled 55,000 square feet of space that was formerly occupied by Sports Authority.
• J. Crew Mercantile has opened its first South Carolina store at Bowman Place in Mount Pleasant.  Urban Cookhouse plans to open on a corner next to J. Crew.  Two Cumberland, a women’s clothing and accessories boutique, plans to open their second Charleston location in the center, bringing the former K-Mart redevelopment to full occupancy.

Gross Retail Sales

Increased retail activity is supported by greater sales.  In 2015, gross retail sales in the Charleston-N. Charleston, SC Metropolitan Statistical Area (MSA) totaled $26.6 billion, increasing 18.4% over the 2014 total, according to the South Carolina Department of Revenue.

Looking Ahead

Charleston’s retail market is poised for continued success through 2016.  West Ashley will remain the market’s focal point and will see continued redevelopment activity with the entry of new retailers into the submarket.  A growing residential population, job creation and a strengthening economy will continue to drive consumer spending and retail growth.  Vacancy rates will decline and rental rates will increase as space continues to be absorbed and demand for space remains strong.  Constraints on developable land sites and new ground-up construction will encourage additional redevelopment of older shopping centers and prime locations.

Around the State

Growing populations and a strong economy are motivating significant development and investment throughout South Carolina.  Grocery stores and fast-casual restaurants are among the most popular retailers.

Columbia, South Carolina

• Downtown Columbia recently welcomed City Bar and Fondue and Twisted Spur Brewing, both occupying redeveloped space.  Quality space in the Congaree Vista was recently vacated by Wet Willie’s and Jillian’s, adding much desired space to the submarket’s existing inventory.  The spaces will likely backfill quickly as the downtown residential population grows and entertainment and dining options expand.  The First Base Building at BullStreet recently completed and offers approximately 26,000 square feet of retail space.
• The suburban submarkets are also seeing growth with retailers such as The Fresh Market, Walmart Neighborhood Market and Kroger Marketplace under construction.

Greenville, South Carolina

• Performance Bicycle plans to open its first South Carolina store at The Gallery Shopping Center located at 535 Haywood Road.  The retailer will join Conn’s and Gabriel Brothers who backfilled the former Steve and Barry’s and Babies ‘R Us spaces at the center.
• The Cheesecake Factory plans to open its first South Carolina restaurant on May 31st at the former Panera Bread location at Haywood Mall.

 

For more statewide commercial real estate news check out our market reports at: www.colliers.com/southcarolina/insights

 

To download the complete report: Q1 2016 Charleston Retail Market Report.