COVER STORY, MARCH 2008

CAROLINAS RETAIL UPDATE

CHARLOTTE, N.C.

The Metropolitan, Charlotte, North Carolina

Charlotte is charging full steam ahead with solid gains in economic growth; the Charlotte Chamber of Commerce reported $16 billion in annual retail sales and $1.1 billion in new business investments. Over the past three years, there has been extensive development of mixed-use projects, and the city’s outstanding economic health is reflected in the emergence of those new developments and retail centers, despite the subprime mortgage crunch. “The Carolinas should fare better than many markets in 2008,” says Chris Thomas, a partner in Childress Klein Properties’ Charlotte office. “There will be some thinning of marginal projects, but development will move forward, especially grocery-anchored centers.”

Childress Klein recently completed RiverGate, a 600,000-square-foot center anchored by Charlotte’s first SuperTarget and The Home Depot, in the Lake Wylie area. The center’s innovative site plan provides unique screens to hide big box service areas and promote pedestrian connectivity. Afton Ridge also opened recently in Cabarrus County, northeast of Charlotte. SuperTarget, Best Buy and Dick’s Sporting Goods anchor the 500,000-square-foot center. Childress Klein is also planning The Bridges of Mint Hill, a 1.3 million-square-foot open-air center at the Interstate 485 and Lawyers Rd. interchange. The center will feature a two-level, 140,000-square-foot Belk, and is slated for completion in 2010.

Near the intersection of I-85 and City Blvd., Crescent Resources is planning a Belgate, a 400,000-square-foot, 200-acre lifestyle retail center anchored by IKEA. The 200-acre project will open in spring 2009.

Mixed-use developments continue to be a strong trend pushed by city officials to create sustainable environments. “We have seen a huge burst in mixed-use projects in the past 2 or 3 years because municipal governments are trying to decrease the strain on the local infrastructure and utilities,” says Misaveg. Located in Uptown Charlotte, the Metropolitan is being developed on the site of Charlotte’s first mall and will be the city’s first vertical mixed-use project. The 17-acre development contains condominiums, a 10-story office tower and 450,000 square feet of retail, which is anchored by a Target and The Home Depot Design Center. The first phase opened last October, and the second phase will include a Best Buy, Marshalls, Staples, and Trader Joe’s. According to Andy Misaveg, a partner at The Shopping Center Group, significant investments by the city and developers have improved surrounding roads and a greenway adjacent to the property, thereby transforming the trade area and property values. The project is scheduled for completion in winter 2008.

The Burlington market is experiencing a renaissance spurred by Alamance Crossing, a lifestyle/village concept being developed by CBL & Associates approximately 20 miles from Greensboro. The first phase opened last August and is anchored by Belk, Dillard’s, JC Penney, Barnes & Noble and a stadium seating theatre. The second phase will feature 250,000 square feet of junior box development and traditional outparcel users and shops. “Alamance Crossing attracted retailers to Burlington that had little interest,” Misaveg says. “It reproduced tenants that were existing and placed them outside in an open-air, dynamic environment; thus, their sales volumes increased significantly along with surrounding retailers.” The final phase of Alamance Crossing is projected to open in 2010.

Casto Lifestyle Properties and Joseph Skilken & Co. will redevelop University Place in Charlotte, N.C.

Casto Lifestyle Properties will join forces with Joseph Skilken & Co. on the 470,000-square-foot University Place redevelopment. The retail center’s location in the northeast quadrant of I-85, W.E. Harris Blvd. and Highway 29 places it firmly in the University Research Park, encompassing 52,000 employees and the UNC Charlotte campus trade area. Slated for completion in 2009, the center existing tenants include Michaels, Wal-Mart, Office Depot, Old Navy, Pier 1, Talbots Outlet, Ross Dress For Less and T.J. Maxx.

One of the largest retail transactions in last year was Palm Beach Gardens, Fla.-based Menin Development’s acquisition of Magnolia Park from Gulfside Development for $52 million. An existing Costco, Regal Theatres and Sports Authority anchor the 50-acre development. Menin will build an additional 200,000 square feet of high-end shops, restaurants, and anchors, along with proposed office, hotel and possibly residential components expected to open in 2010.

There have not been a lot of new retailers added to the market, except the recent emergence of Trader Joe’s in the Charlotte area. Kroger and Delhaize gained market share in both North and South Carolina with the opening of Food Lion stores and the high-end Bloom concept. The demand for grocery-anchored centers is expected to increase in answer to Charlotte’s multiplying population. The Charlotte MSA encompassed 1.7 million residents, forecast to increase to 2.5 million during the next 10 years. According to Thomas, though there is some moderation in demand for new retail product, vacancy rates remain low and rents are on an even keel. Charlotte’s bustling metropolis is poised to forge ahead into 2008 generally unscathed.

— Jia Gayles

CHARLESTON, S.C.

Charleston’s active port has laid a strong foundation for the city’s future economic growth. “Charleston is becoming one of the premier ports on the Eastern Seaboard,” says Mark Taylor, director of commercial real estate for Charleston-based The Beach Company. “In the next few years, port activity is expected to more than double.” Charleston’s port is known for its geology, which allows for larger ships to dock than many other well-known eastern ports, such as Jacksonville. The Goose Creek area, in particular, has benefited from the busy port with increased job growth, which impacts residential needs and inevitably the retail that follows. Colliers Keenan reported at mid-quarter approximately 500,000 square feet of retail space was proposed for Goose Creek and job growth was on track to make its highest gain in 7 years.

Several retailers have taken advantage of Goose Creek’s burgeoning popularity. Lowe’s opened a store on St. James Avenue during the first quarter of last year, and the approximately 400,000-square-foot Red Bank Shopping Center opened on Red Bank Rd. in the fourth quarter. Near downtown Goose Creek, the Carnes Crossroads master-planned community by The Daniel Island Company is proposing more than 300 acres of dedicated commercial and office space. “There is a lot of activity within the commercial brokerage marketplace,” says Brian Aiken, a principal of Coldwell Banker Commercial in Charleston. “Most people have clients who are interested in the area.”

Watermark, a mixed-use development in Mount Pleasant, is being developed by The Beach Company.

As mentioned last year, Avtex’s The Market at Oakland continues to make a big impact on the greater Charleston area. The property features 415,000 square feet of retail space, anchored by an 89,111-square-foot Kohl’s and an 184,000-square-foot Wal-Mart Supercenter. Developers are flocking to the burgeoning corridor. “Within a 3 or 4 mile radius, the Mount Pleasant, Highway 17 corridor is the most active region,” Taylor says. A new Mercedes-Benz dealership and a shopping center featuring Dick’s Sporting Goods, Staples and Harris Teeter are planned for the area. Also in Mount Pleasant, Watermark, a mixed-use development by The Beach Company will feature 8,000 square feet of first floor retail and 10 acres of land on which the Mediterranean Shipping Company will build its headquarters. The project is located in the Bowman, Rifle Range corridor at the intersection of Watermark Boulevard and Appling Drive.

Fairfax, Va.-based Republic Land is planning Carolina Park, an ambitious master-planned mixed-use community located in the busy Mount Pleasant corridor. The development is situated on 1,708 acres, adjacent to the East Cooper Airport, and will feature 1.35 million square feet of regional and service-oriented retail surrounded by natural greenways and screened parking. The development will also include a new hospital set to break ground in July, a 3.4 million-square-foot business park and 977 acres of residential land. Negotiations are underway for a department store, home improvement store and pharmacy. The project is valued at $1 billion and scheduled for completion in 2025.

Near the Charleston historic district, Daniel Island has been under development for the past 10 years. Hill Partners is planning The Town Center at Daniel Island, a $200 million mixed-use, open-air lifestyle center geared toward the growing Charleston population and its multi-billion dollar tourism industry. Town Center will feature 420,000 square feet of destination, specialty and lifestyle retail, restaurants and cafes in a pedestrian-friendly setting. There will also be a 480-unit residential component and mid-level hotel. Currently in the predevelopment and leasing phase, the project is proposed for a spring 2010 open.

Centre Pointe Developers are building The Shoppes at Centre Pointe, which will be adjacent to their Tanger Factory Outlet in the mega-successful Centre Pointe development at the intersection of International Dr. and Tanger Outlet Blvd. Phase 1 includes 139,300 square feet of retail and restaurants, with Ashley Furniture and Staples as anchors. Chick-fil-A and IHOP are on freestanding parcels. Phase 2 is projected to have 160,000 square feet of retail with a 10,000-square-foot outparcel building under construction. Hardee’s, First Federal Bank and Jim N’ Nick’s Bar-B-Q will be outparcel users. Currently, phase 2 is preleasing.

According to Mark Taylor, the future of Charleston retail will be greatly impacted by the looming subprime mortgage crisis, “I think [development] is going to slow down,” he says, “and the primary reason is because the debt capital that is available for development is going to slow down.” Charleston previously experienced an explosive amount of growth, and Taylor forecasts that economic growth will slow as real estate liquidity continues to tighten. Conversely, Aiken concedes that Charleston has been on an aggressive pace, but says, “Trends are fairly steady, but I do see developers trying to find a balance between the cost of land, the cost to construct and the rental rates that retailers are trying to absorb in the market. I think land costs will loosen up, which will be a welcome change.” 

Like its Carolina neighbors, Charleston has enjoyed unbridled economic growth as people are drawn to the temperate climate of the Carolinas, the quality of life and job availability. At present, most new developments are moving forward and the port continues to keep a steady flow of new business streaming into the city.

— Jia Gayles

TRIANGLE AREA

As the construction of Interstate 540 encircles Raleigh, developers are discovering a retail gold mine along the new outer beltline. The current trend is to construct retail centers along the newly formed exits, which benefit from heavy traffic and new residential developments geared toward easy highway access. “The opening of I-540 has spurred a great deal of growth,” says Don Traflet, associate vice president of Anthony & Co. with offices in Raleigh and Durham. “We had some negative absorption, but tied fourth place in the nation for the most growth in the retail market in the country.” Raleigh’s vacancy rate is 6.5 percent, as opposed to 6.2 percent in the first quarter of 2007, and the city has the highest level of proposed space on the boards since 2000.

The Western Wake area of Cary and Morrisville is experiencing tremendous growth as I-540 extends through its corridor, which is undeniably the most active area in city’s retail market. Indianapolis-based Kite Realty is planning Parkside Town Commons, a 750,000-square-foot mixed-use development that will include big box retailers, as well as restaurants and entertainment venues in Cary. The project is slated for a spring 2009 opening.

Casto Lifestyle Properties and 1st Carolina Properties are developing Park West Village, a 1 million-square-foot, 95-acre mixed-use development.

In Morrisville, Casto Lifestyle Properties and 1st Carolina Properties will break ground this spring on Park West Village, a 1 million-square-foot, 95-acre mixed-use development featuring 750,000 square feet of retail space. Located at the intersection of Cary Pkwy. and Chapel Hill Rd., the project will be the only one of its size and scale in the local market. More than 20 retail tenants have signed leases for the project, tentatively scheduled for a fall 2009 opening.

Casto will also develop Renaissance Village, opening in Durham this summer. The retail and office development will feature 300,000 square feet, which includes a 30,000 expansion of the existing center. Casto has nailed down SuperTarget, HomeGoods, Michaels and Petco as tenants.

Atlanta-based Cypress Equities, retail and acquisition affiliate of Staubach, completed Plantation Point last December. Located in the North Raleigh submarket at the intersection of I-540 and Capital Blvd., the 388,318-square-foot, Class A shopping center is situated on a 52-acre site across the street from the Triangle Town Center Mall. The property is anchored by a Circuit City, Petco, Marshalls and a 115,000-square-foot BJ’s Wholesale Club.

Charlotte, N.C.-based Faison Enterprises is developing Alexander Place Crossing in the Brier Creek area of northwest Raleigh. The shopping center will feature 107,000 square feet of retail space, inclusive of a 30,000-square-foot Best Buy. The first phase will deliver in October, and the second phase will complete in spring 2009.

In Raleigh’s affluent midtown area, the neo-urban North Hills mixed-use community is undergoing a 1.3 million-square foot expansion effort, inclusive of 145,000 square feet of retail space. Additional office, hotel, and residential space, along with a senior living community are planned. The retail mecca attracted more than 8.4 million visitors last year, and it is currently constructing a 48,200-square-foot Harris Teeter and offices for CapTrust, Ogletree Deakins and CB Richard Ellis. Current anchors include Target, JC Penney, Regal Cinemas, Gold’s Gym and REI. Developed by Raleigh-based Kane Realty, the second phase is projected for completion in 2010. An additional 105,000 square feet of retail will be developed in future phases, and upon completion in 2015, North Hills will boast 1 million square feet of retail.

Many of Raleigh’s retail centers are experiencing a facelift as developers rehab older properties and re-position existing tenants. Town North, located near the Creedmoor Road and I-540 exit in North Raleigh, is a 103,473-square-foot center that was rehabbed by Hunter & Associates. The property is now anchored by a Kroger and Kerr Drugs. “We are seeing [redevelopment] all over town,” says Joaquin Canals, a broker with NAI Carolantic. “People are taking advantage of a good business climate and rehabbing existing centers in order to compete. You’re going to see that trend in 2008.”

According to Grubb & Ellis’ market forecast, two new retailers entered the Triangle market. Golfsmith’s leased a 60,000-square-foot space at Pleasant Valley Promenade on Glenwood Ave., and hhgregg opened stores on Capital Blvd. and at Alexander Place. Whole Foods is redeveloping an existing store in Cary. Also this past year, Hecht’s department stores were rebranded as Macy’s.

Regency Centers recently leased space in the Cameron Village shopping center at Oberlin Road and Clark Avenue in Raleigh for the first Best Buy Mobile store positioned outside of Manhattan. Several other Best Buy Mobile stores are slated to open in North Carolina in the next few months. Cameron Village will also welcome a 6,000-square-foot, two-story Chick-fil-A restaurant in early 2009. The restaurant will be the first of its kind to open in the country.

Downtown Raleigh has seen a tremendous amount of redevelopment, including the reopening of Fayetteville Street, once closed off for use as a pedestrian mall. Condominiums, office buildings, a new Marriott hotel and a convention center set to open in 2008 are altering the downtown skyline, and local retailers are getting in on the action. “Most retailers going downtown are smaller regional retailers,” Traflet says. “There has been some discussion of a Harris Teeter coming down with a metro store. With all the units of condos coming in, that’s the key thing we need to sustain permanent living downtown.”

As I-540 circumvents its way around Raleigh, new opportunities for the retail market will emerge as a by-product of new interchanges and exits. This trend will bode well for Raleigh’s economic growth this year. “As the interstate creeps along and creates new pockets in outlying areas, you’re going to see additional developments coming out of the ground,” Canals says. “Small neighborhood centers will continue to pop up as the population increases, and towns that are 20 or 30 miles away from Raleigh are becoming bedroom communities.”

— Jia Gayles

COLUMBIA, S.C.

South Carolina’s capital city kept a steady course with the arrival of new big box and grocery-anchored centers and the first phase of Sandhill Station, the new expansion of wildly successful Village at Sandhill. The city is expected to maintain its moderate retail climate as the nation heads into a period of economic uncertainty. “Occupancies have held in the 93 to 94 percent range,” says Rox Pollard, principal and manager of the retail services group for Colliers Keenan in Columbia. “We have not seen a downturn in retail on any level including strip variety or freestanding.”  The city reported more than $47 million in capital investments last year and an increase in population and job growth. Colliers Keenan reported 291,626 square feet of big box and big box-anchored spaces were absorbed in the first half of last year, and prime retail space ranged from $17 to $35 per square foot due to escalating land and construction costs in new developments.

The largest player on Columbia’s retail stage is the Village at Sandhill by Columbia-based Kahn Development; the 300-acre behemoth has introduced more than 1 million square feet of retail to the city. The village/lifestyle concept has proven to be extremely popular, and was designated as a finalist for the 2007 International Council of Shopping Centers’ Design and Development Award for “best mixed-use retail center above 500,000 square feet.” The project is currently 70 percent complete, with the option to add approximately 300,000 square feet. “Vacancy rates have not been a problem,” says Alan Kahn, president of Kahn Development. “We are continuing to lease up our existing centers and have enjoyed pretty good occupancy. We haven’t seen any downturn yet. As far as rental rates, we are getting about the same as we have seen during the last two years.”

Kahn recently completed the first phase of Sandhill Station, a 220,000 square foot retail center on the 30 acres adjacent to the Village at Sandhill. The initial phase is a 17,000-square-foot specialty retail center tenanted by Family Christian Bookstore, Sleep King and CiCi’s Pizza. Kahn will also rehab an existing 50,000-square-foot building on the property in Phase 2. Sandhill Station will be completed in three or four phases in 2011.

In downtown Columbia, Charleston-based The Beach Company will introduce a new mixed-use development including commercial space and residences. CanalSide will be located at the intersection of Taylor and Williams St., and the project will feature 35,000 square feet of retail. Phase 1 of CanalSide will include 305,140 square feet of residential and 12,791 square feet of complementary commercial space. The project is expected to complete in December 2008.

Big box-anchored shadow centers sprouted up across the cityscape, including four Wal-Mart Supercenters located in northeast Columbia, northwest Columbia and two in Lexington County. Lexington Pavilion, a Target-anchored center, opened on Highway 378. Walgreens will open a location on Hopes Ferry Road and Interstate 78 in March, with more stores planned for the Columbia area, and Delhaize Group opened a new Food Lion. On the horizon, Costco and Trader Joe’s are reportedly investigating the local retail market.

Restaurant driven retail also made a big impact on Columbia’s retail market, “The small strip development has been very popular in the Midlands for several years,” Pollard says, “It follows a trend that more retailers want to be out on the road versus an inline grocery anchored center.” Restaurants that have headlined smaller centers include Salsarita’s, Shane’s Rib Shack, Moe’s and Five Guys Famous Burger and Fries.

Columbia’s retail market has maintained a positive status that’s expected to continue into 2008. Though retail is tapering off from the extensive development of yesteryear, the capital city is expected to weather the change well. “Our area will be fairly steady,” Kahn says. “…a steady increase, just not extraordinary.”

— Jia Gayles

GREENVILLE, S.C.

Greenville’s retail market is expected to continue on the upswing as its stabilized housing market attracts residents, thus enticing developers to move forward with plans to build new retail centers. “Housing will continue to be priced realistically because the city has not seen the rampant speculation many other markets have experienced,” says Brian Reed, a research manager at Greenville-based Grubb & Ellis | The Furman Co.  “Also, the growing Greenville MSA, which recently eclipsed 1 million, will pique the interests of national and high-end retailers.” Last year, the city experienced more than $1 billion in retail sales. “Greenville is not one of the markets where you are going to see extreme highs and lows,” says Paul Aiesi, chief investment officer of Greenville-based TIC Properties. “It’s a stick market. A lot of [national] markets have seen 5 or 6 percent growth. We’ve seen 2 or 3 percent.”

New to downtown Greenville, McBee Station is a 14-acre urban mixed-use development featuring 80,000 square feet of retail and residences. The project, which opened in the second quarter of last year, created an opportunity to lease high-end space on Main Street in Greenville’s central business district and reintroduced national retailers to the downtown area. McBee Station’s tenants include Publix, Staples, Urban Nirvana Spa & Salon and Great Clips.

Also in the downtown area, TIC Properties is planning a mixed-use development on 2 acres at the intersection of Main and Washington streets. “This project is on the last major site on Main Street in downtown Greenville,” says Aiesi. “It’s known as the ‘Main on Main.’ We have successfully assembled a property that is the best location in the city to build a first class mixed-use project.” Currently in the preliminary planning phase, the project is projected to deliver in the fourth quarter of 2010.

Royal Palm Beach-based Menin Development acquired the Greenville Mall on Woodruff Rd., which had fallen out of favor due to consumer disinterest. A mixed-use lifestyle center, Magnolia Park Town Center, has been proposed in its place, which will include elements of retail, office and high-density residential development. The property’s tenants include Costco, Sports Authority, Old Navy and a Regal Cinemas theatre.

In nearby Spartanburg, The Avenue Easton Market Center is being developed by Centennial American Properties near Hillcrest Mall. Construction is expected to start this year on 500,000 square feet of retail space, in addition to 308 apartments and 140 single-family homes. The project is expected to open in the second half of 2009.

West of Greenville, a joint venture by Easley Commons Retail Associates and Commercial Development Associates will build Easley Town Center, a 125-acre development in the northeast quadrant intersection of Calhoun Memorial Highway and Prince Perry Road in Easley. The project will feature more than 500,000 square feet of retail, inclusive of two unnamed anchors measuring 200,000 and 70,000 square feet, respectively. Two additional phases are being planned for future development. The project is located on the former site of the Saco Lowell Plant, and involves a public-private partnership that will bring approximately $14 million in improvements to the infrastructure of corridors surrounding the project. Construction is slated to begin in early March and deliver in the second quarter of 2009.

Along Clemson Blvd. in Anderson, Realtylink is planning Midtowne Park, a 175,000-square-foot center that began construction in February and is expected to complete in the fall. Signed tenants include a 90,000-square-foot Kohl’s, Staples and a 50,000-square-foot sporting goods store.

Greenville also welcomed Costco to the area, with two new 150,000-square-foot stores on Woodruff Rd. in Greenville and the Westgate area of Spartanburg. Bi-Lo completed several renovations and opened two Super Bi-Lo concept grocery stores. 

According to Reed, retailers will be closely monitoring national trends and consumer spending to determine the validity of long-term commitments in Greenville County, which is the most populous county in the state. Investor appetites are strong across the board, and many developers are betting on the city’s amiable retail climate to support future projects.

— Jia Gayles

©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.