1Q17 CHARLESTON RETAIL MARKET: THE CHARLESTON RETAIL MARKET IS CHANGING ALONG WITH THE TIMES
CHARLESTON, SC (May 8, 2017) Fueled by job growth, consumer spending and tourism, Charleston continues to be on fire in 2017, earning one accolade after the other. Following the significant recognition by Travel + Leisure Magazine as “World’s Best City” in 2016, Charleston ranked number one on Southern Living Magazine’s list of the “South’s Best Cities 2017.” The continuous national and international recognition of this city incentivizes retailers to invest in the market. The saying “when one door closes, another door opens” can be taken literally along downtown Charleston’s iconic King Street, as at least nine retailers prepared to close their doors and nine opened during 1Q17.
Downtown rental rates continue to test new heights, making a jump from $40.54 per square foot (PSF) in 4Q16, to $43.86 PSF, and even reaching as high as $89.00 PSF on lower King Street. Though the peninsula is seeing the most dramatic increase, rental rates across the Charleston MSA are on the rise as well, increasing from $18.57 PSF at the end of 2016 to $20.46 at the end of the first quarter of 2017.
As the rental rates increase, so does the amount of overall vacant space in the market. Sky-high rates and a struggling brick-and-mortar industry are causing tenants to leave their spaces, nudging the vacancy rate up to 3.4% at quarter’s-end. While some property owners are closing on-site businesses, and selling their real estate to hungry buyers, others are choosing to sublease their spaces. Vacant sublet space has trended down, lessening from 36,900 square feet (SF) at the end of 2016 to 12,497 SF, currently.
Although Charleston has seen a slight increase in vacancy rates, the current vacancy of 3.4% is exceptionally low by industry standards. Developers are continuing to feel confident in the Charleston market, filling the pipeline with new retail developments. Since the year began, 13 buildings totaling 101,964 SF were delivered to the market, and 277,784 SF of retail space is currently underway.
By year-end, over 100,000 SF of space is scheduled for delivery. The decline of brick and mortar retail stores has begun pushing developers and tenants to create spaces that offer more than the traditional shopping/dining experience. This trend is reflected in developments including Courier Square, Pacific Box & Crate and WestEdge, as well as in new retail stores like The Skinny Dip on King Street, which takes boutique shopping to the next level, boasting a second-story coffee and wine bar inside.
As creative retail experiences in the area ramp up and e-commerce continues to take over the industry, the national trend of certain big box retailers shuttering their doors is present in Charleston. The dark trend is seen with the departure of Kmart from its space at 8571 Rivers Avenue, and the approaching departures of J.C. Penney from the Citadel Mall and Sears from the Northwoods Mall. However, big box retailers including Costco, Home Depot and Tractor Supply Co. will refresh the market this year, with new locations already in the works.
Aside from big boxes, grocers are also seen coming and going. The most notable grocery store to leave the area during 1Q17 was Bi-Lo, from its 46,000 SF space at Mount Pleasant Square. This follows suit of its previous downtown store closing. Down the street, discount grocer Aldi opened during 1Q17 at 613 Johnnie Dodds Blvd, replacing a former bowling alley. This new store is amongst the 520 stores Aldi plans to open throughout 2019 for its global expansion. Additionally, a new 49,500 SF Lowes Foods is currently underway at the Oakbrook Square Shopping Center in Summerville. This will be the grocer’s first store in the Charleston MSA. Other grocers on the way to the area include:
-Publix at WestEdge
-Harris Teeter at Carnes Crossroads and Nexton
-BJ’s Wholesale Club in Summerville
-Piggly Wiggly in North Charleston
-Lidl in Goose Creek
-Whole Foods in West Ashley
-Fresh Market in Mt. Pleasant
There was a time when a limited number of grocers dominated the region, but it is evident in the variety coming to the area that those days are over. Specialty grocers have taken the reigns.
Many building bricks supporting the retail market are on an incline, such as housing value and consumer spending. With the 55 people moving to Charleston a day, on average, the retail market is bound to reap the benefits. New residential developments on the outskirts of Charleston, like Nexton and Carnes Crossroads are creating retail sectors within the communities, bringing new opportunity to the area. Residential developments downtown, including Courier Square and WestEdge are also incorporating retail spaces. The expanding retail market is also evident along the upper peninsula, with national retailers such as Starbucks and The Athlete’s Foot already in place. The face of Charleston retail, which was once comprised of mom-and-pop-shops, is evolving into regional and national retailers who are capitalizing on the market. As outside investors continue to take advantage of the opportunity the region has to offer, sinking capitol into the market, the local economy will prosper. And, based off the commercial real estate market’s recent track record, it doesn’t appear to be slowing down any time soon.
For more information, contact Andrew Braden, at 843 518 5379 or email@example.com
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Contact: David Grubbs, Managing Principal, Charleston Office, 843-814-6111, or firstname.lastname@example.org