SOUTHEAST SNAPSHOT, AUGUST 2009

Greenville Retail Market

Greenville has joined the list of second-tier markets that have been negatively affected by the recession. While the downturn hasn’t completely paralyzed the city’s commercial real estate industry, the markets — retail especially — have struggled to keep moving. The retail vacancy rate for large centers is holding steady at 8.5 percent. New development is out of the question, and even small retail leases are being delayed.

“It’s very, very slow right now,” says Austin Guest of Colliers Keenan’s Greenville office. “I don’t know that we’ve been hit as hard as the larger markets … but we have experienced a slowdown.”

According to Greenville-based Grubb & Ellis|The Furman Company, the retail vacancy rate has remained somewhat stagnant, with the second quarter number standing at 12.1 percent. Value tenants are about the only retailers that are active in the current market. “The overall theme of the trends is going to be about discount retailers improving their locations due to the struggle of high-end retailers,” says Brian Reed of Grubb & Ellis|The Furman Company.

 An anemic financing market is partly to blame for Greenville’s sluggish retail market. If developers can’t get construction loans, new projects can’t move past the idea stage. When tenants don’t receive help financing an acquisition or a lease, retailers can’t move into vacant centers. But consumer confidence, Guest says, has an even bigger hand in the dysfunctional market. “Consumer confidence is just absolutely abysmal right now,” he says. “A lot of the problems we’re experiencing are because people lost trust in government and banking. Everybody’s pointing the finger at somebody else.”

Throughout the market, tenants, both large and small, are waiting to see how things shake out when the recession lifts. “They’re putting their cash under their mattresses. They’re sitting on the sidelines just trying to get through this period,” Guest says. “Just about every retailer that I’ve talked to is down this year. Their sales are down, and they’re watching their money very closely.”

National retailers are struggling to make sense of the Greenville market as well. Closings by Circuit City and Linens ’n Things reverberated through the area, sending a message to national retailers: avoid expansion. “These big national tenants that are so closely tied to Wall Street, for so many years, they were rewarded for opening new stores,” he says. “Right now, they’re not being rewarded. Their stock price is not going up for opening 200 stores in a year as it was when things were booming.”

Guest believes the recession will change industry practices. Retailers will be more careful about every move they make, and expansion will no longer be automatic. “I don’t think you’re going to see a retailer go out and open up 100 stores just for the sake of opening up 100 stores. They’re going to be more cautious going forward,” he says. “Instead of doing things with reckless abandon, they’re really going to be more strategic as far as their real estate is concerned.”

Ultimately, national retailers are using this year as a time to regroup and look to the future. “It seems like 2009 is an asterisk year for the national tenants,” Guest says. “It’s the year that never happened. They’re all talking about 2010, 2011 even.”

— Jon Ross

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