Hilton Head Island, South Carolina, is approaching build-out, but on-island retail activity is still very much evident. However, in 1996 Del Webb (now Pulte) began selling houses 8 miles off-island at Sun City Hilton Head. This development will have 7,200 homes when complete. It presently has 3,100 houses, two golf courses and is selling at a pace of 600 units per year.

Sun City sparked an off-island boom that has resulted in the purchase and/or development of virtually every commercially zoned lot or parcel on U.S. Highway 278 from Hilton Head Island to Sun City. This momentum has transferred west of Sun City into Jasper County with the development of a Wal-Mart Supercenter, a six-dealership Auto Mall, the new University of South Carolina campus. And, recently announced, Province Medical Center will be located at Exit 8 on Interstate 95, some 18 miles from Hilton Head Island.

The rate of population growth for this area has placed it among the fastest expanding sections of the United States. Hilton Head Island and the off-island area of Bluffton are collectively known as Southern Beaufort County. For the decade between 1990 and 2000, the U.S. Census of Population recorded Hilton Head’s population increase at 4.3 percent annually, the Bluffton portion at 17.2 percent each year and the combined Southern Beaufort County at 7.3 percent annually. These figures compare quite favorably to the 1.3 percent annual population increase for the U.S. and 1.5 percent for South Carolina.

Yet, in 2002 this rapid expansion appears to have accelerated. Residential construction permits through October 8, 2002, ran 54 percent ahead of the same period in 2001. If the current pace continues for the balance of the year, residential construction permits in Southern Beaufort County will reach 2,500. That would be a large number of homes for an area with an estimated current population of 60,000, reflecting the strength of the vacation home market in the area, even off-island.

These vibrant permanent- and vacation-home markets coupled with the 2.5 million annual visitors to Hilton Head (who stay an average of 1 week) have in the past several months attracted the attention of retailers large and small. Big box retailers new to the area include Target, Staples and Lowe’s on U.S. Highway 278 in the Bluffton area. Stafford Properties of Atlanta developed Staples and Lowe’s while Core Properties of Charlotte, North Carolina, handled the Target location. The 154,000-square-foot Lowe’s opened in August and an adjacent parcel is planned for the development of smaller retail tenants. Home Depot opened 3 years ago near the Target site.

In addition, GBT Realty Corporation of Brentwood, Tennessee, developed Hilton Head Village just off-island. This 110,000-square-foot center features Old Navy (25,000 square feet), Marshalls (30,000 square feet) and Bed Bath & Beyond (25,000 square feet).

Publix’s success on-island with two operations spurred the development of the 76,000-square-foot Bluffton Commons at Belfair 6 miles off-island. This project by Horne Properties of Knoxville, Tennessee, features a 54,000-square-foot Publix scheduled to open in December. Also, the lodging market in Bluffton has been busy with a new Hampton Inn, Holiday Inn Express and Hilton Garden Inn joining Suburban Lodge and Fairfield Inns, which were developed within the past 3 years. Hilton Head Factory Stores I & II, a 393,000-square-foot property owned by Rothchild Realty, welcomed several new tenants this year, including Liz Claiborne (10,000 square feet) and Polo (8,500 square feet).

About 2 years ago Stafford Properties developed a Publix- and Staples-anchored center at the site of the old Winn-Dixie store near the Sea Pines Circle on the south end of Hilton Head Island. However, much of the island’s commerce has moved to the north end of Hilton Head around the Barnes & Noble/Pier 1 Imports center (47,500 square feet developed by Ewing Properties) and Festival Centre, an 81,000-square-foot Publix/Wal-Mart complex recently purchased by Edens & Avant of Columbia, South Carolina.

Also on-island, Brookstone opened a store in the Mall at Shelter Cove, while Saks Fifth Avenue is expanding its Men’s Department. A 20,000-square-foot Fresh Market and 7,800-square-foot West Marine have been announced at Shoppes on the Parkway. Home Goods developed a 32,000-square-foot store in October in Northridge Plaza, a CBL & Associates Properties center, joining Stein Mart’s 38,000-square-foot facility on the north end of the island in Pineland Station.

Triple-net lease rates in Southern Beaufort County have remained stable. Major tenants are in the $9 to $13 per square foot range, while small leases fall between $15.50 and $23.50 per square foot. Shopping center tracts sold in the $175,000 to $200,000 per upland acre range, while 1- to 2-acre lots on U.S. Highway 278 sold for $450,000 to $650,000 per upland acre.

Recent residential developments, a result of an increase in national and regional homebuilders in Southern Beaufort County over the last 6 years, point toward a movement to more upscale retail. Crescent Resources is developing a 20,000-acre project called Palmetto Bluff. It has over 20 miles of shoreline on the waters and marshes of the May, Cooper and New rivers and the Intracoastal Waterway. This spectacular tract is zoned for 5,000 home sites and six golf courses. But, density is expected to be much lower. Construction has started on the first golf course by Jack Nicklaus. Also announced is a 32-room inn and spa by Auberge De Soleil of Napa Valley plus a village of 40 cottages. The first phase of estate lots were recently offered for sale in the $1.7 million to $3 million range.

Oldfield Plantation is also being developed by Crescent Resources on S.C. Highway 170 between Hilton Head Island and Beaufort. This 487-unit project is directed at outdoor recreation and sports with a Gregg Norman golf course as the focal point. This exciting and energetic development features houses in the $800,000 to $2 million range.

In addition, the first development by Toll Brothers in this market is a joint venture with a successful local group, RRZ LLC. They will construct 975 homes and home sites around a Pete Dye golf course. The project is called Hampton Hall at Buckwalter and will feature homes in the $400,000 to $800,000 category. These higher income oriented projects continue a pattern began by other off-island subdivisions such as Berkeley Hall, Colleton River, Belfair Plantation and Spring Island.

One retail development appears to be ideally located to benefit from this upscale activity. It is a 238-acre master-planned project called Okatie Center. This undertaking by Crescent Resources is at the intersection of U.S. Highway 278 and S.C. Highway 170 adjacent to Sun City. Marketing started in September and early interest has been strong.

From Hilton Head Island to I-95 retail and commercial markets have recorded 6 years of dynamic growth and change. This is expected to continue with quality retail development evolving to an even more upscale level.

This article was written courtesy of Bill McGill, partner and broker-in-charge with Seaboard Commercial Properties on Hilton Head Island, South Carolina.


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