Market Gains Momentum with Significant Construction and New Retailers

Key Takeaways

• New construction and development activity is significant despite flat vacancy rate.
• Rental rates are increasing at prime locations, but remain steady in less desirable locations.
• Retailer interest is strong and evident by new retailers investing in the market.
• Downtown residential developments are driving retail growth along Main Street and the Congaree Vista.

 

To download the complete report: Q2 2015 Columbia Retail Market Report.

 

Market Conditions

A growing population, attractive demographics and improving job market is driving the success of Columbia, South Carolina’s retail market.  Announcements from new retailers planning to invest in the market continue to be made while new development projects gain momentum.  The vacancy rate declined slightly to 8.5% at mid-year 2015 from 8.6% the previous quarter.  The significant interest and activity in the market is not accurately depicted in the steady vacancy rate as many leases are occurring in non-anchored shopping centers and proposed or under construction developments.

Rental rates for shop space along prime retail corridors are increasing, but overall average asking rental rates are stable.  As of mid-year 2015, asking rental rates for anchor, junior anchor and shop space averaged $7.16 NNN, $7.83 NNN and $12.93 NNN, respectively.

The improving economy and growing presence of retailers supported an increase in gross retail sales for the Columbia, SC MSA.  As of May 2015, gross retail sales totaled $2.1 billion for the MSA, increasing 6.1% over May 2014 when gross retail sales totaled $1.9 billion.  Gross retail sales in Lexington County totaled approximately $999 million in May 2015, increasing 18.7% over May 2014.  Sales in Richland County totaled approximately $892 million in May 2015, declining slightly from May 2014.  Lexington County has recently seen a growth in residential development creating a greater demand for retailers.

 

Downtown Columbia More Vibrant than Ever

The downtown that many have dreamed of is becoming a reality.  New restaurants, bars, hotels and retailers are filling vacant spaces along Main Street and the Congaree Vista’s Gervais Street, bringing new life and vibrancy to the area.  The dining and entertainment district popular among downtown employees and residents now offers more options and is attracting visitors from the suburbs.  A tight office market and growing residential population is helping drive the success of downtown restaurants and retailers.  The momentum is expected to increase as the downtown population grows and more people are around to enjoy the area’s growing culinary, arts and music scene.

• West End Alley, a redevelopment of the 700 and 800 blocks of Gervais Street, will house Tin Lizzy’s Cantina as well as City Bar and Fondue.  Tsunami, Rocketman, Jillians and Wet Willie’s are currently located at the complex.
• Across the street from West End Alley, construction continues on the City Market redevelopment, which will be home to Columbia’s first Newk’s Eatery and Grill Marks locations.
• Wheeler Development plans to redevelop Columbia’s historic Vista Fire Station.  Plans for the redevelopment include restaurant and retail space with the possibility of an office component.
• Panera Bread recently opened at the former Bluestein’s Wholesale Dry Goods site.
• A 108-room Aloft Hotel will soon be located at Lincoln and Lady Streets, behind the recently opened Hyatt Place hotel.
• Construction was completed earlier this year at the Adluh Flour Mill, which is now home to Old Chicago Pizza and Taproom.
• The growth of the University of South Carolina motivated the development of several student housing projects.  The announcements were followed by plans for additional residential complexes that cater to young professionals and retirees, a growing portion of renter demographics.

 

Suburban Development Activity at Highest Level in Years

New construction and planned openings in the suburban submarkets filled headlines throughout the first half of 2015.  The development of anchored, non-anchored and lifestyle centers is on the rise as consumer confidence regains strength and suburban residential developments increase.

• South Carolina’s first Kroger Marketplace recently broke ground at Killian’s Crossing in Northeast Columbia.  The store will offer bed and bath selections, baby goods, a jewelry counter, home fashion and more, in addition to its fresh foods.  The store will also have Kroger Fuel.  Other tenants locating at Killian’s Crossing include Chick-fil-A, Applebee’s, McDonald’s and Panda Express.  The lifestyle center is located at I-77 and Killian Road and offers 400 acres of retail, residential and commercial space.
• Walmart Neighborhood Market plans to enter the Columbia market with two locations.  The stores will be located at 3533 Broad River Road and in Cayce at Knox Abbott Drive and Charleston Highway.  Walmart Neighborhood Market stores are typically approximately 40,000 square feet, one-fourth the size of Walmart Supercenter.
• Landmark Shopping Center, located at I-77 and Garners Ferry Road, is getting a major face-lift.  The shopping center is undergoing renovations and will be home to Ross Dress for Less and Burkes Outlet in the fall.  The retailers will be backfilling vacant space.  Burkes Outlet will occupy approximately 23,000 square feet and Ross Dress for Less will occupy approximately 27,000 square feet.
• A new retail center is under construction at Forest Drive and Percival Road.  Columbia Development is developing the project, which will include Panera Bread, Petco and Tijuana Flats, according to a site plan on the developer’s website.  The location would be the first in Columbia for Tijuana Flats, which recently opened its first South Carolina locations in Greenville.
• Construction is nearing completion at Rosewood Crossing, the former K-Mart redevelopment at the intersection of Fort Jackson Boulevard and Garners Ferry Road, across from Cross Hill Market in the downtown submarket. The center is being redeveloped into 98,000 square feet of retail space to house national tenants Marshalls, Michaels and PetSmart.
• Sam’s Club plans to open a third Columbia location at the Village at Sandhill in Northeast Columbia.  The 136,000 square-foot warehouse superstore will be located on 23 acres along Fashion Drive at Forum Drive.  Construction is expected to begin later this year and complete in two years.
• Del Taco plans to open their first South Carolina location in the Harbison/St. Andrews submarket.  The California-based fresh American-style Mexican chain restaurant acquired a site at 145 Harbison Boulevard for its new location.
• Cross Hill Market, anchored-by Whole Foods, lost two tenants for the first time since it completed construction in 2012.  Charlotte-based Midwood Smokehouse plans to backfill 3,200 square feet vacated by American Roadside Burger.  The 3,500 square-foot former Charleston Cooks space remains vacant and is expected to backfill quickly given the center’s affluent demographics and high-traffic location.

 

 

Market Outlook

The remainder of 2015 is likely to bring new retailers and construction to Columbia, South Carolina.  Downtown will become more vibrant as residential developments are completed and foot traffic downtown increases.  Restaurants and entertainment venues will continue to spring up.  Rental rates are expected to increase as vacancy declines and new inventory delivers to the market.  Investment sales opportunities exist given the tight market and current low interest rates.  Redevelopment of older shopping centers will continue especially as available land becomes difficult to find and costs increase.  Given the market’s current condition and optimistic outlook, Columbia’s retail market is poised for continued success.

 

Around the State

Retail development is on the rise throughout South Carolina in both the suburbs and downtown submarkets.

 

Charleston, South Carolina

• Earth Fare is currently under construction in Summerville. The specialty grocer will anchor Horizon Square, a planned 63,000 square-foot shopping center, which will also house Petco. Crust Wood Fired Pizza and Dunkin’ Donuts will occupy shop space at the development.
• Nordstrom Rack is set to open September 3rd at the former K-Mart redevelopment in Mt. Pleasant.
• Hobby Lobby will backfill space vacated by Sports Authority at 7800 Rivers Avenue.

 

Greenville, South Carolina

• Lowes Food, which recently announced plans to enter the Upstate market, has found a site at the intersection of Suber Road and Hammett Bridge Road for its new home.
• Walmart Neighborhood Market in Anderson is nearing completion. The 41,000 square-foot store will be the first in Anderson and is located at Highway 81 and Reed Road.
• Demolition is underway at Lewis Plaza, which will be anchored by Harris Teeter’s new two-story, 53,000 square-foot grocery store.

 

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

 

To download the complete report: Q2 2015 Columbia Retail Market Report.