National Tenants Compete for Limited Retail Space

KEY TAKEAWAYS

• Market vacancy rate is down to 6.32%.  Downtown vacancy rate is just 3.56%.  Rental rates averaged $17.72 per square foot for shop space with some tenants seeing rates as high as $77 per square foot in the Downtown submarket.
• The retail market is becoming a landlord’s market as available retail space runs scarce.
• The trend of recycling retail space continues.  New development activity is picking up.
• New restaurants make Charleston debut.
• Job creation is driving the suburban retail market attracting grocers, restaurants and sporting goods stores.

 

CURRENT CONDITIONS

The Charleston, SC retail market ended the second quarter of 2014 on a positive note with a lower market vacancy rate and higher average asking rental rates.  The market vacancy rate was down to 6.32% at the end of the second quarter from 7.14% at the end of the first quarter of 2014.  Activity in the suburbs is gaining momentum and attracting new retailers such as Nordstrom Rack, Walmart Neighborhood Market and Aldi.  Downtown Charleston continues to offer an increased amount of shopping and dining options for residents and tourists.  Suburban submarkets had a vacancy rate of 6.50% and the Downtown submarket had a vacancy rate of 3.56% at mid-year 2014.  Rental rates are trending upwards and averaged $17.72 per square foot for shop space at the end of the second quarter.Nordstrom Rack will occupy the former Barnes & Noble space in Harbison Court along Harbison Boulevard.

 

NEW DEVELOPMENTS

The increase in retailers focusing on Charleston coupled with low vacancy rates throughout the market motivated developers to pursue new construction in the suburban submarkets.

• Horizon Square is a planned new grocer-anchored shopping center in Summerville.  The center will be located at 1101 N. Main Street and is to break ground in the third quarter of 2014.  Earth Fare will anchor the new center.  Up to 10,000 square feet of junior anchor space and 10,000 square feet remain available for lease.  Outparcel lots are available and can accomodate up to 6,500 square feet of space.
• Another new development is coming to Summervile.  The approximately 230,000 square foot center, to be called Summerville Towne Centre, will be anchored by Academy Sports, Hobby Lobby and Aldi.
• Academy Sports will also anchor a new development in Mount Pleasant, The Shoppes at Oakland.

 

RECYCLING RETAIL SPACE

Redevelopment plans were announced for several vacant retail sites as tenants and developers take advantage of existing space in ideal locations to save on construction costs associated with new developments.

• Two major redevelopments, The Cigar Factory and Millennium Music Building, are in the works in Downtown Charleston.

o    The Cigar Factory, a 5-story building on the corner of Columbus Street and East Bay Street, is being redeveloped into a mixed-use property to include office, retail and restaurant space.

o    The Millennium Music Building, located at the intersection of Calhoun Street and King Street, has already attracted major tenants, Walgreens and Carolina Ale House.  Walgreens is to occupy the center, ground retail space and feature a neighborhood market theme.  Carolina Ale House plans to open a rooftop bar and occupy the top two floors of the three-story building.  Carolina Ale House has a location under construction in Summerville in MeadWestvaco’s Nexton development near Interstate 26 and Highway 17A.  Both locations are anticipated to open by year-end.  Chipotle is moving into 3,000 square feet adjacent to Walgreens along the King Street side of the Millennium building.

• Two K-Mart locations have closed in Charleston this year.  The first to close was at Johnnie Dodds Boulevard and Bowman Road in Mount Pleasant with the most recent closure in West Ashley.   Since their closures, plans have been made for both locations.

o    Nordstrom Rack and Dick’s Sporting Goods have announced plans to occupy the former Johnnie Dodds Boulevard and Bowman Road space.  The 131,000 square foot shopping center will be partially demolished and redesigned featuring updated storefronts and landscaping.  Dick’s Sporting Goods will be the first major retailer for athletic apparel and equipment in Mount Pleasant.  Nordstrom Rack is expanding its footprint, and previously announced plans for stores in Columbia and Greenville, which are expected to open this fall.

o    A new Hyundai dealership is coming to the former K-Mart site in West Ashley.  The dealership is anticipated to open by year-end.  The existing Hyundai dealership at 1940 Savannah Highway will be closing.

• Harris Teeter recently opened its doors to customers in the Island Center at 1513 Palm Boulevard, Isle of Palms.  The grocer occupies 25,000 square feet at the former Red & White supermarket space and features a full-service deli and bakery.
• The former Atlanta Bread Co. location at 8966 University Boulevard in North Charleston is being redeveloped into two units and will be home to Starbucks and Firehouse Subs.
• Two former Blockbuster Video stores are now leased to new retailers.  The first, at 111 S. Highway 52 in Moncks Corner, will be home to Hibbett Sports.  Pence’s Liquor and Wine occupies the video store’s former home at 334 East Bay Street.

 

 

 

RECENT ANNOUNCEMENTS

• Tuesday Morning opened a new store at the Belle Hall Shopping Center, 680 Long Point Road, in Mount Pleasant.  The retailer leased 24,305 square feet adjacent to PetSmart.
• TINA Stephens opened its doors to the public.  The 3,000 square foot women’s clothing boutique is located along King Street, Charleston’s high-end shopping and entertainment district.
• BI-LO anchored Sweetgrass Corner Shopping Center attracted two new tenants and is now 100% occupied.  Marco’s Pizza leased 1,600 square feet of space in the center, located at 1909 Highway 17 N. in Mount Pleasant.  The center also welcomed Clemson Sports Medicine & Rehabilitation, which occupies 3,200 square feet.
• Which Wich? is making its first appearance in the Charleston market at the Shoppes at Azalea in Summerville.   The sandwich restaurant expects to open by year-end 2014.
• Starbucks is opening its 7th Mount Pleasant location in the Market at Oakland Shopping Center at Oakland Market Drive and Ironclad Alley.
• Vineyard Vines will welcome its first customers this fall in 5,500 square feet of retail space at 275 King Street.
• Ruth’s Chris Steak House is entering the Charleston market with its first location in the French Quarter Inn at 166 Church Street.
• Taziki’s plans to open its second Charleston location in Mount Pleasant.  The restaurant is filling space that was recently vacated by seafood restaurant, Locklear’s, at 320 W. Coleman Boulevard.  Taziki’s first Charleston location is at 306 King Street.

 

 

 

 

IN THE MONTHS AHEAD

Tourism will continue to be a major driver for Charleston’s Downtown retail market while job growth will drive the suburban submarkets.  The market will continue to welcome more national retailers and support the expansion of existing retailers.  Restaurants and clothing retailers will compete for the few remaining retail spaces along King Street and will continue to move towards Upper King Street.  Redevelopments are likely to continue as retailers recycle existing space and take advantage of lower costs.  New developments will appear as supply for retail space falls short of demand. Rental rates will climb upwards as space becomes more limited throughout the market.

 

AROUND THE STATE

South Carolina’s growing population and economy continue to draw new retailers to the market while providing a healthy business environment for the growth of existing retailers.

 

COLUMBIA, SC

• Anthropologie and J. Crew recently announced plans to enter the Columbia market and will backfill space recently vacated by Books-A-Million in Trenholm Plaza.  The retailers are anticipated to open in the Fall 2014.
• Academy Sports & Outdoors plans to open its second Columbia location in the Harbison Boulevard submarket.  The new 72,000 square foot store will be located at Park Terrace Drive and Bower Parkway and will create approximately 150 new jobs.  The first location is in the Village at Sandhill in the Northeast Columbia submarket.
• Palmetto Moon opened their ninth store and first Columbia location in the Village at Sandhill in the Northeast Columbia submarket.
• Downtown Columbia to welcome a wave of new restaurants.

 

GREENVILLE, SC

• Bass Pro Shops Outdoor World is opening a location between Greenville and Spartanburg on Interstate 85 at Highway 101.
• Orvis, an outdoor gear and apparel retailer, plans to open its second South Carolina at ONE Greenville.
• PDQ’s second South Carolina location is under construction at 3906 Pelham Road.  The first location is in Columbia, SC across from Cross Hill Market.
• Fresh To Order (f2o) is opening its first South Carolina location at Magnolia Park.
• Wal-Mart Neighborhood Market is growing its presence in the Upstate and announced plans to open a Spartanburg location.  The new 41,000 square foot store will anchor a planned 55,000 square foot shopping center in Cedar Springs. The store will be over 120,000 square feet and be the primary anchor for a 75-acre mixed use development to include retail, hotels, and restaurants.

 

Click here to download the complete report.