SOUTHEAST SNAPSHOT, JULY 2008

Columbia Retail Market

Recently, we spoke with a developer who described Columbia’s retail market as boring in a good way, which is remarkably true. While Columbia does not see rampant construction and massive jumps in rental rates in the good times, it still has steady, tempered growth even in down times.

During 2007 and the first two quarters of 2008, there has been a bit of a slowdown in new construction; however, development is still strong in emerging growth areas. A majority of development has consisted of single-tenant, big-box developments and unanchored/junior-anchored shadow centers. Possibly due to the opening of four new Wal-Mart Supercenters in 2007, there are currently no grocery-anchored shopping centers under construction.

Most new construction is occurring in outlying suburban markets such as the White Knoll area, the Highway 378 corridor and Northeast Columbia along Clemson Road extension. As the scope of the slowdown in the housing market has become quantifiable, retail developers and tenants have gained enough confidence to re-examine projects in these areas. The construction of Lexington Pavilion, a 230,000-square-foot shopping center anchored by Target and Best Buy, solidified Highway 378’s retail dominance in the Lexington submarket. Additionally, the opening of the new Wal-Mart and construction of Lowe’s, combined with the road widening projects on both Highway 6 and Platt Springs Road, have brought more attention from local and regional developers to the growing White Knoll area. Urban construction has been sporadic and primarily combined with other uses to create high-density, mixed-use developments. Higher land prices have been the driving force of this trend. This was demonstrated by the Five Points South mixed-use project where the developers paid over $75 per square foot for the land.

On account of Columbia’s demographics, a number of value-oriented retailers have found the market attractive. Wal-Mart’s expansion in 2007 made it one of the top 10 largest private employers in Columbia. While Dunkin Donuts has had a presence in the market for a number of years, they have announced a major expansion in the market, and because of the lower price point of Dunkin Donuts compared to competitors such as Starbucks, they believe that they will do well in this market. Other value-oriented retailers that have opened new stores in Columbia include: Cici’s Pizza, Steve & Barry’s, Burlington Coat Factory, Kohl’s, Direct Buy and Little Caesars.

Despite the reputation for value in the market, the Downtown, Forest Acres and Dutch Fork/Irmo submarkets are attracting higher-end retail stores. Many new boutiques have opened in the past year including: Laroque, Goga, Whimsy, Retail Therapy, Bohemian Home, Pink Sorbet (a Lilly Pulitzer Store) and Cottage and Vine. They have primarily concentrated in the Vista, Forest Acres or Devine Street. Other regional and national stores including Handpicked and White House/Black Market have also expanded in Columbia.

While many tenants are expanding in the market, some have not been as fortunate. Tuesday Morning and Radio Shack left Treholm Plaza in Forest Acres, and Hollywood Video has given back space in five of the six Midlands locations. National economic hardships caused the bankruptcy of Bombay and Sofa Express, both of which were located in the Village at Sandhills. Atlanta Bread Company has also closed two of their four locations.

In spite of these closings and a slowing economy, the retail market continues to perform well. During the first two quarters of 2008, overall vacancy rates declined 30 basis points while prices increased 4.4 percent overall. Price increases are primarily coming from older centers with second- or third-generation spaces rather than new first-generation spaces, whose rates have remained flat. While asking rates have risen, landlords, particularly those trying to lease first-generation space priced on the high end of the market, are having to increase the concessions to tenants in order to fill their spaces.

New developments are expected to break ground in the coming months in suburban submarkets. White Knoll in Lexington will see a few unanchored strip centers break ground as well as a new Lowe’s. Due to the influx of new housing, expansion of infrastructure and development of new retail, this area should continue to attract new retailers. After development stalled for most of 2007, Clemson Road Extension is expected to see a good deal of activity in the coming year. Wal-Mart has opened at Interstate 77 and Killian Road on one end, and Lowe’s is being developed on the other at Clemson and Longtown roads. Expect to see more product take shape between the two points. Finally, the Ballentine area will see an increase in activity because of the combination of a high median household income, increased residential development on Lake Murray and infrastructure expansion.

— Eric Johnston and Will Stork are retail and developmental land specialists with Columbia, S.C.-based Grubb & Ellis|Wilson Kibler.

©2008 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.