Report : Retail Development at Highest Level in Years

Colliers International | South Carolina
Research & Forecast Report
Columbia | Retail
Q3 2015

 

Key Takeaways

• The Columbia, SC retail market is booming with strong development activity throughout the market.
• The vacancy rate remains flat despite significant development activity.  New projects are experiencing substantial pre-leasing success.
• Rental rates are on the rise, specifically for newer shop and junior anchor spaces which are in strong demand.
• Columbia’s culinary scene is growing.
• Discount retailers and fast-casual restaurants remain popular.
• Gross retail sales are up in Lexington County over the previous year.

 

To download the complete report: Q3 2015 Columbia Retail Market Report.

 

Retail Market Keeps Heating Up

Retailers are expanding at a faster pace than recent years.  Recovering economies, job creation and population growth are all contributing to greater demand for retail services.  Retailers are responding by expanding their footprints, entering new markets and growing their presence in existing markets.  Columbia, South Carolina is among the markets benefiting from enhanced market conditions.  The area’s improved job market, population growth and favorable demographics are attracting retailers looking to grow.

The Columbia, SC retail market continued to strengthen through the third quarter of 2015, which ended with a total vacancy rate of 8.3%, down from 8.5% at mid-year 2015.  The vacancy rate has remained flat over the past year despite robust new development activity throughout the market.  Most new projects will likely deliver with very little to no vacant space.

Changing retailer preferences are motivating various construction projects throughout the market.  As retailers survey areas for potential locations, they are expressing greater emphasis on visibility and high traffic count intersections.  Vacancy is extremely limited at these prime locations and any vacant space is leasing at higher than average rental rates.  As a result, developers are turning to new construction and redevelopment of older centers to meet the growing demand for space.  Rising construction costs and increased competition among retailers are pushing up rental rates, which are reaching historically-high levels.  Asking rental rates for shop space averaged $14.55 PSF NNN at the end of the third quarter of 2015, up from $13.07 PSF NNN one year ago.  Some suburban landlords are receiving rental rates in the mid-thirties for quality shop space.

 

Retail Development Booms

Retail development is at its highest level in years with several developments under construction throughout the Columbia retail market.  Approximately 650,000 square feet of retail space has been developed in the market since 2008, but in the next two years alone, approximately 1.5 million square feet will be developed.

 

Downtown Developments Bring New Flavors 

Added foot traffic from various residential developments and high office occupancy is drawing interest from retailers.  Restaurants have taken the lead and are occupying space at redevelopments downtown.  The entertainment district appeals to the area’s daytime population while drawing a large crowd in the evenings.

 

Five Points

• Salsarita’s Fresh Cantina recently opened at the former Qdoba space adjacent to Walgreens on Devine Street.
• Rise Gourmet Goods and Bakeshop recently opened along Harden Street.
• Publico Kitchen + Tap will soon be opening along Greene Street in the former Garibaldi restaurant space.
• The City of Columbia and Five Points Association recently announced plans to convert the Exxon gas station located in the center of Five Points to a parking lot.  The 40-space lot will help relieve some of the pressure felt by customers and retailers in the entertainment district.  The additional parking has the potential to attract new retailers as parking availability is important for retail site selection.

 

Main Street

• Starbucks recently opened a new concept store at the Sheraton on Main and Washington Streets.  The 1,500 square foot store occupies the former basement bar space and will serve beer, wine and an expanded food menu in addition to the company’s popular coffee and espresso menu.
• Persona Wood Fired Pizzeria will soon be opening at Main and Gervais Streets in the former Roll Call restaurant space.  The restaurant will be the first location on the East Coast.
• The century-old Arcade on Main Street was recently sold with plans to restore the former mall in hopes of attracting new retailers.

 

Congaree Vista

• Construction continues on the City Market redevelopment.  Grill Marks was the first restaurant to open at the development.  The Wired Goat, a coffee shop and wine bar, recently opened and Newk’s Eatery will soon be opening.  A brewery is also planned for the complex with additional space remaining available for retail or office use.
• West End Alley is underway across the street at the 700 and 800 blocks of Gervais Street.  Tin Lizzy’s Cantina plans to open soon at the complex.  City Bar and Fondue will be joining the new restaurant at the development.  Existing tenants include Wet Willie’s, Tsunami and Rocketman.
• A new Aloft hotel is under construction along Lady Street across from the recently opened Hyatt Place hotel.  AT&T occupies the Gervais-side street level retail space at the Hyatt Place hotel.

 

BullStreet

Activity is gaining momentum at BullStreet, which is officially under construction with the ground-breaking of Spirit Communications Park, the development’s minor-league baseball stadium, and the First Base Building, the first building to be under construction at the development.  The First Base Building will be located at the first base line of Spirit Communications Park and is expected to be delivered in April 2016.  The building offers approximately 26,203 square feet of retail and restaurant space in addition to approximately 85,000 square feet of office space and is expected to receive significant attention.  Upon full build-out of the mixed-use development, there will be approximately 3.3 million square feet of commercial space and 3,500 residential units.

 

Popular Retailers Expand Suburban Presence

Fast-casual restaurants, discount retailers and grocery stores remain among the most popular retailers. The retailers are occupying space in new centers or backfilling redeveloped big boxes that recently sat vacant.

• South Carolina’s first Kroger Marketplace is under construction at Killian’s Crossing.  The 125,000 square-foot store will offer bed and bath selections, baby goods, a jewelry counter, home fashion and more, in addition to its fresh goods.  The store will also have Kroger Fuel.  Other tenants locating at the development 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.
• Another Kroger grocery store is in the planning stages for the former Capital City Stadium location in downtown Columbia.  A growing downtown residential population is fueling the need for more grocers in the submarket.
• Ross Dress for Less and Burke’s Outlet are now open at Landmark Shopping Center, which recently underwent a major face-lift.  The center, located at I-77 and Garners Ferry Road, is also home to Goodwill, which plans to expand at the center.
• Marshalls, Michaels and Petsmart, recently opened at Rosewood Crossing, the former K-Mart redevelopment at Fort Jackson Boulevard and Garners Ferry Road.  The center is also home to tenants Kay Jewelers and Bottles.
• Midwood Smokehouse is backfilling the former American Roadside Burger restaurant space at Whole Foods-anchored Cross Hill Market.
• In addition to Salsarita’s new downtown location, the fast-casual restaurant chain is now located along Park Terrace Drive in the Harbison Boulevard submarket.  Also opening soon in the Guitar Center and Academy Sports-anchored center is Blaze Fast-Fire’d Pizza, the first South Carolina location for the California-based restaurant.
• Dave & Busters is coming to Columbia and backfilling a portion of the former Sears space at Columbiana Centre in the Harbison Boulevard submarket.  The announcement indicates an improving economy and increased discretionary income.  Red Robin also announced plans to open a new restaurant at the mall.
• Walmart Neighborhood Market is entering the Columbia market.  The first stores are under construction at 3533 Broad River Road and at Knox Abbott and Charleston Highway in Cayce.  Another store is planned at the intersection of Old Barnwell and Emanuel Church roads, also in Cayce.
• A new development, Jackson Square, is nearing completion at Forest Drive and Percival Road and will be home to Panera Bread, Mattress Firm, Tijuana Flats and Wing Stop.
• CostCo is making a much anticipated appearance in the market.  The company plans to construct a store at Piney Grove and Fernandina roads near Harbison Boulevard.
• The Village at Sandhill recently welcomed Top Dawg Tavern, which opened their first South Carolina location at the center.  Sam’s Club recently broke ground on its new store at Fashion Drive and Forum Drive at the development.  The 136,000 square-foot warehouse superstore will be the company’s third Columbia location.

 

 

Gross Retail Sales

Combined gross retail sales for Richland and Lexington counties totaled $1.8 billion in July 2015.  Lexington County gross retail sales totaled $1.0 billion, increasing 15.1% over July 2014.  Richland County gross retail sales totaled $792.8 million, down from July 2014.  New developments and more options for shopping will contribute to increased sales in both counties.

 

Market Outlook

The Columbia, SC retail market is poised for continued success through the remainder of 2015 and into 2016.  New construction and redevelopment of older centers will continue.  Downtown entertainment districts will attract more retail, restaurants and breweries.  The overall market will see new-to-market retailers, some opening their first locations in South Carolina.  Rental rates will rise further as construction costs climb and competition for space becomes fierce.  The vacancy rate will remain flat and potentially decline as new construction delivers at high occupancy.

 

Around the State

Retail development is on the rise throughout South Carolina with grocery stores and discount retailers anchoring larger developments.  As employment and population growth continue, the state will attract national tenants to the market.  Mixed-use developments are gaining popularity in both the suburbs and downtown submarkets.

 

Charleston, South Carolina

Charleston’s retail market continues to be influenced by a growing tourism and residential population.

• Earth Fare is now open to customers at Summerville Marketplace Shopping Center, formerly called Horizon Square.  Petco is also open at the center.  Other tenants will include Dunkin’ Donuts, Mattress Pro, Crust Pizza, Tijuana Flats and Lee Nails, which all expect to be open in November.
• Nordstrom Rack recently opened its first Charleston store at Bowman Place, the former K-Mart redevelopment, in Mt. Pleasant.
• BJ’s Wholesale Club recently announced plans for a new store in Summerville.  The 87,000 square-foot store is planned for a site near the Summerville exit off Interstate 26.  Construction could begin in December 2015 with completion late in 2016.

 

Greenville, South Carolina

Grocers continue to show strong interest in Greenville.

• Construction is underway at the Lewis Plaza redevelopment, which will be anchored by Harris Teeter’s new two-story, 53,000 square-foot grocery store.  This will be the first Harris Teeter in the area following the grocer’s departure several years ago.
• Lowes Foods recently began construction on its first Upstate location at Suber and Hammett Bridge Roads.
• The Fresh Market recently opened a new 24,000 square-foot store at 1601 Woodruff Road.

 

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

 

To download the complete report: Q3 2015 Columbia Retail Market Report.

 

 

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