Colliers Report: Discount shops and grocery stores are trending during the pandemic in Charleston

Research & Forecast Report
Q3-2020 CHARLESTON | RETAIL

Key Takeaways

• The Charleston retail market absorbed 134,097 square feet during the third quarter of 2020 dropping the overall vacancy rate down to 4.43%.
• Quick service restaurant structure is evolving to keep up with customer needs.
• Throughout the Charleston market, gross retail sales are higher month-over-month now than they were pre-pandemic.

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Pandemic conditions lead to new fast casual trends

Quick service restaurants were gaining sales momentum prior to COVID-19 due to speedy service, convenience and ongoing upgrades to food quality – beginning the trend from fast food to fast casual restaurants. Aesthetic changes and healthy option upgrades led to increased business velocity. Throughout the pandemic, adaptive quick service restaurants continue to thrive by adding curbside pick-up, call ahead ordering and delivery options. In addition, many are decreasing the indoor dining area square footage and adding extra drive-thrus or outdoor seating to provide an enhanced level of safety to diners. Furthermore, restaurant owners are looking to purchase existing buildings rather than constructing new restaurants due to rising construction prices and difficulty getting necessary construction materials. Suburban locations are popular for adding new stores so they are closer to residential areas where many people are still working remotely.

Market Conditions

The Charleston retail market consists of approximately 14.42 million square feet of retail space and absorbed 134,097 square feet during the third quarter of 2020. Non-core retail space posted 26,136 square feet; likewise, core retail space absorbed 107,961 square feet. Most of the positive absorption occurred within the North Charleston submarket. There are currently 204,694 square feet of retail properties under construction throughout Charleston non-core areas. Overall market weighted shop rental rates continue to hold steady at approximately $18.29 per square foot.

Due to the positive retail activity, the overall quarterly vacancy rate in Charleston decreased significantly from 5.30% last quarter to 4.43% during the third quarter of 2020. Activity from shops providing goods at discounted rates is intensifying due to the current trend for consumers to buy items at discounted rates during the pandemic. Also, grocery stores, coffee shops, home goods providers and car washes are popping up throughout the state and are anticipated to continue their success by adding new stores. These trends are becoming evident; the largest significant lease transactions in Charleston this quarter were from two grocery stores and one discount store.

Market Forecast

In the coming quarters, suburban retail activity will likely increase as shop owners provide convenience by locating near residential neighborhoods while consumers continue working from home. The trend of discount shops and grocery stores leasing property will absorb retail space into next year. In addition, Charleston gross retail sales are higher month-over-month now than they were pre-pandemic. All of these factors raise the potential for Charleston increasing retail activity in the next few quarters due to economic uncertainty, and the tendency for consumers to buy essential items at discounted rates during the pandemic.

A Note Regarding COVID-19 

As we publish this report, the U.S. and the world at large are facing a tremendous challenge, the scale of which is unprecedented in recent history. The spread of the novel Coronavirus (COVID-19) is significantly altering day-to-day life, impacting society, the economy and, by extension, commercial real estate.

The extent, length and severity of this pandemic is unknown and continues to evolve at a rapid pace. The scale of the impact and its timing varies between locations. To better understand trends and emerging adjustments, please subscribe to Colliers’ COVID-19 Knowledge Leader page for resources and recent updates.