Colliers Report: Columbia non-core centers outperformed core centers

Research & Forecast Report
Q4-2018 COLUMBIA | RETAIL

Key Takeaways

• Two new shopping centers were delivered to the Columbia retail market this quarter, adding 142,736 square feet.
• Core and non-core absorption offset one another; non-core retail space absorbed 54,958 square feet, while core space posted a net negative absorption of 52,079 square feet.

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2018 Market Recap

Over the past year, the overall average vacancy rate increased from 10.16% during the fourth quarter of 2017 to 10.70% during the fourth quarter of this year. The retail market posted a net negative annual absorption of 20,957 square feet. The Cayce/West Columbia, Golden Triangle and Northeast Columbia submarkets posted negative absorption, while the Lexington, North Columbia and Southeast submarkets had positive annual absorption; downtown Columbia retail absorption was flat. Columbia average weighted retail rental rates for the remaining space increased over the past 12 months and is now $17.57 per square foot due to high-quality new retail space being delivered to the market. There were six retail shop spaces delivered to the market during 2018, which added 257,707 square feet.

Market Conditions

Shopping Centers

The Columbia shopping center market is comprised of approximately 13.39 million square feet and absorbed 2,879 square feet during the fourth quarter of 2018. Core and non-core absorption offset one another; while non-core retail space absorbed 54,958 square feet, the core retail sector posted a net negative absorption of 52,079 square feet. Overall average shop space weighted rental rates averaged $17.57 per square foot during the fourth quarter of 2018, down slightly from the last quarter average of $17.88 per square foot. Core average weighted rental rates are up from $19.91 per square foot during the third quarter of 2018 to $20.75 per square foot this quarter; non-core shopping center weighted rental rates averaged $15.66 per square foot. The overall retail market vacancy rate rose from 10.42% last quarter to 10.70% during the fourth quarter of this year. In addition, there were two new retail buildings delivered to the market: Lowe’s Foods at 5222 Sunset Boulevard in Lexington added 86,923 square feet and Publix located at 5441 Platt Springs Road added 55,813 square feet.

Urban Retail

There are 1.93 million square feet of urban retail in Columbia in eight distinct urban areas. Triple net weighted rental rates for the remaining urban spaces averaged $19.34 per square foot. The overall vacancy rate during the fourth quarter of 2018 was 8.91%, with 169,875 square feet of core vacancy and no sublease space available.

Northeast Columbia

The Northeast Columbia submarket has 3.95 million square feet of retail space and is the largest of all of the Columbia submarket sectors. The Northeast submarket posted a net negative absorption of 2,798 square feet; non-core retail space actually absorbed 3,900 square feet, while non-core retail space posted a net negative absorption of 6,698 square feet. The core negative absorption all occurred within Sandhill Station and the Village at Sandhills. Also, the Northeast submarket vacancy rate rose slightly from 10.63% last quarter to 10.70% during the fourth quarter of 2018. The average weighted rental rate dropped slightly from $19.57 per square foot during the third quarter of 2018 to $19.37 per square foot this quarter.

Harbison & St. Andrews

The Harbison & St. Andrews submarket has approximately 3.6 million square feet of retail space, making it the second largest submarket in Columbia. This submarket posted a net negative absorption 39,060 square feet, mostly due to Harbison Court posting a net negative 40,000 square feet within the core sector. The average triple net Harbison & St. Andrews submarket weighted rental rates are low because there were no core rental rates to average; however, non-core weighted rental rates during the fourth quarter of 2018 were $15.18 per square foot for the remaining available space.

Lexington

The Lexington submarket has grown to 1.94 million square feet and has only a few remaining retail spaces available. The Lexington sector absorbed 50,726 square feet this quarter; non-core submarkets absorbed 53,135 square feet of retail space this quarter, most of which was within the new Publix at Platt Springs Crossing located at 5441 Platt Springs Road. In addition, Lowe’s Foods, located at 5222 Sunset Boulevard in Lexington, was also completed this quarter and added 86,923 square feet to the Lexington submarket. The Lexington submarket vacancy rate dropped three basis points from 6.22% during the third quarter of 2018 to 6.19% during the fourth quarter of this year. There are only 11,812 square feet of core retail space remaining in this submarket and the core vacancy rate was 0.95%. The Lexington average weighted triple net rental rates for retail space rose to $23.88 per square foot, up from $22.69 per square foot during the third quarter of 2018.

The Golden Triangle

The Golden Triangle spans two retail corridors on the southeast side of the city, Forest Drive and Garners Ferry/Devine Street, and all 1.25 million square feet of shopping centers within this area are considered core, with limited space for additional development. The Golden Triangle submarket posted a net negative absorption of 10,090 square feet during the fourth quarter of 2018; the negative absorption occurred within two buildings at Rosewood Crossing and Trenholm Plaza. Therefore, the vacancy rate increased from 0.93% during the third quarter of this year to 1.74% during the fourth quarter of 2018. Still, only 21,740 square feet of shop space remains available in this submarket, and the average triple net weighted rental rate rose to $20.52 per square foot, up from $20.16 per square foot last quarter.

Significant Transactions

During the fourth quarter of 2018, there were 46 retail sale transactions. Also, 69 retail leases were signed from October 2018 through December 2018.

Sales

• Airport Square Shopping Center, located at 1604-1638 Airport Boulevard, was purchased for approximately $4 million by M&P Shopping Centers, Inc.
• For $3.1 million, Lopez Levi Lowenstein Glinsky purchased the 10,706-square-foot retail building located at 4310-A Hardscrabble Road.
• The 13,000-square-foot retail shop located at 2945 Broad Street in Sumter was purchased for $2.6 million by Randy Cunningham.
• A 2,727-square-foot Batesburg-Leesville fast food restaurant was purchased by Denise Rusnak for $2.1 million.

Leases

• Piggly Wiggly executed a 21,613-square-foot retail lease at 611-621 Harry C. Raysor Drive in Saint Matthews.
• Craft Axe Throwing leased a 9,016-square-foot retail space at 700 Gervais Street in Columbia.

Construction Pipeline

Construction activity was steady in the Columbia retail market during the fourth quarter of 2018, with 13,000 square feet of retail currently under construction and 142,736 square feet of new retail shops delivered to the market.

Under Construction

• Chapin Crossing Center, located at 1221 Chapin Road, has a 13,000-square-foot shadow space currently under construction.

Completions

• Lowe’s Foods, an 86,923-square-foot grocery store located at 5222 Sunset Boulevard in Lexington, was completed during the fourth quarter of 2018.
• A 55,813-square-foot Publix grocery store was completed at 5441 Platt Springs Road in the Lexington submarket.

Gross Retail Sales & Employment

Per the Bureau of Labor Statistics’ most recent data from October 2018, there were 100 fewer jobs during October of 2018 than there were during October of 2017, and the Columbia MSA had a total of 399,900 non-farm employees. Data from the South Carolina Department of Revenue reports gross retail sales in the Columbia MSA reached $31.42 billion over the last 12 months, which span from October 2017 through October 2018, and there was a growth of 3% from the monthly total of October 2017 compared to the monthly total of October 2018.

Market Forecast

Although the buzz about retail markets struggling across the country may be true in some areas, the Columbia retail market is resilient and continues to exhibit steady performance across most submarkets. The vacancy rate is expected to decrease through the middle of 2019 because no significant construction is currently underway and prime retail space availabilities are diminishing. However, as the best retail spaces are absorbed, the average weighted rental rates for the remaining retail spaces are expected to drop due to the lesser quality spaces remaining. There are 12 shadow spaces proposed to be built and one expansion; if they all come to fruition, it will add 162,342 square feet to the Columbia retail market.

Around South Carolina

Charleston, SC

• The market posted a net negative absorption of 27,389 square feet this quarter. While core shopping centers posted a net negative 28,881 square feet during the fourth quarter of 2018, non-core retail space absorbed 1,492 square feet. The overall market vacancy rate increased from 5.34% last quarter to 5.53% during the fourth quarter of this year. The average market rental rates continue to increase quarter-over-quarter. The overall shopping center vacancy rate in Charleston is low, and, in the areas seeking new tenants, new construction will likely be proposed.

Greenville, SC

• Vacancy rates were slightly lower during the fourth quarter of 2018 and, with no new construction underway, are expected to drop further in the next few quarters. The market absorbed 20,184 square feet of retail space this quarter and the vacancy rate dropped from 10.16% during the third quarter of 2018 to 10.04% this quarter. Average triple net weighted shop space rental rates are increasing across most submarkets: non-core rental rates rose from $10.50 per square foot last quarter to $10.80 per square foot during the fourth quarter of 2018. Likewise, core rental rates increased from $15.24 per square foot during the third quarter of 2018 up to $16.44 per square foot this quarter.