SOUTHEAST SNAPSHOT, DECEMBER 2007

Charlotte Retail Market

There is still a demand for traditional retail development in the surrounding Charlotte area.  New developments are being planned in adjoining counties to meet the demand.  The bigger developers are in search of sites that will fill the need of the retail tenants and make economic sense.  The price of retail land continues to escalate but it is hard for the developers to make the numbers work. 

 You will also see some more mixed-use retail closer to the center city.  New projects like the mid town Target and Home Depot will fill the needs of the ever booming population in the downtown area.  There is also a need for another grocery anchored project in the downtown area, but with the price of land it will have to be a much larger mixed-use project. 

 In the University area you have the new IKEA project.  This will generate a lot of new activity in a submarket that had run out of space.  Crescent Resources, the developer, has plans on the drawing board for a lot more retailers to come to that market.  This project will get a much needed road built faster than the local authorities could get it built.

 The new Lowes Home Improvement Warehouse in the Southend will stimulate an avalanche of new retail development along the South Boulevard corridor like is happening across from the new Target and Home Depot in the mid town area.  

Most of the development is taking place on the outskirts of Charlotte along the I-485 Outerbelt Loop.  The availability of land and dealing with smaller local Governments make it easier to do a deal.

Some of the development players in the Charlotte Retail market are Lauth Properties, Crescent Resources, American Asset Corporation (AAC), Crosland, Childress Klein and Edens & Avant. And some of the retailers new to the market include IKEA, Trader Joe’s, Home Goods, O’Reilly Auto Parts, Fred’s to name a few.

 According to Patrick Russell, senior vice president at AAC Real Estate, Northcross has signed Marshalls, Home Goods, Staples and Petco.  Marshalls and Home Goods are both owned by The TJX Companies, Inc. TJX’s off-price concepts include T.J.Maxx, Marshalls, HomeGoods, and A.J. Wright.  Dealing with the same corporation made lease negotiations easier for both concepts, since there was one lease with two different users rather than two separate leases.

 According to the Cornerstone Real Estate Funds, vacancy rates have come down. The secnond quarter of 2007 the vacancy rate was 9.2 percent compared to the first quarter 2007 when it was 9.7 percent.

The Northeast, Southwest, South and Northern areas are where the new deals will get done in 2008.

Charlotte has typically weathered any slow down in great shape and 2008 should be no exception.  I see new developers coming into the market looking for deals from other areas of the country that have not been so fortunate.  There are a lot of tire kickers, which makes it harder for all the developers because they are all chasing the same tenants.

— Jim Plyler is a partner with Piedmont Properties/CORFAC International in Charlotte, North Carolina.

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