Research & Forecast Report GREENVILLE, SC RETAIL Q3 2016 Pelham Road Heats Up Bryana Mistretta Research Coordinator South Carolina Key Takeaways > > Pelham Road is revamped and expanding. > > Grocers continue to reposition in the Upstate market. Pelham Road Taking Off Pelham Road, a retail corridor currently being revamped and expanding, was traveled by an average 19,500 cars a day in 2015. Pelham Road runs perpendicular to Interstate 85, which runs north to Charlotte and south to Atlanta. The one-mile corridor stretching from Boiling Springs Road to I-85 is surrounded by popular residential neighborhoods with immediate access to many of the region s major employers. Synnex (1,400 employees), Michelin s North American Headquarters (430 employees), Bausch & Lomb (640 employees), ScanSource (600 employees) and the Greenville Health System are located on Pelham Road. BMW is three exits to the north of the corridor towards Spartanburg and General Electric is two exits to the south. It is estimated that 80,300 people live within a ten-minute drive of the densest retail area of Pelham Road. According to ESRI, in 2021, the population living within the same area will be 87,600, 9.1% growth. There are 33,500 households with an average household income of $86,500 in the trade area. ESRI projects the number of households will increase to 36,500 and the average household income will increase by 9.2% to $94,400 by 2021. The Pelham Road corridor recently saw the redevelopment of the Earth Fare-anchored Pelham 85 shopping center, which is now expanding by 44,000 square feet. Additionally, construction has begun at the new Shoppes at Pelham. The development will be anchored by a 49,000-square-foot Lowes Foods and include 17,000 square feet of shop space. These two developments will expand the retail bookend of the Pelham Road corridor, which currently has just three grocer-anchored shopping centers, all of which are at full occupancy. Demand is strong in the corridor and will be met by these new speculative retail spaces and raising asking rental rates to a range between $29 and $30 NNN PSF/YR. Market Indicators Relative to prior period VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE** Q3 2016 Q4 2016* Note: Construction is the change in Under Construction. *Projected **Rental rates for current quarter are for CBD. Rent forecast is for metro-wide rents. Summary Statistics Q3 2016 Regional Office Market Market CBD Suburban Vacancy Rate 9.3% 1.9% 9.4% Change From Q2 2016 (basis points) Absorption (Thousand Square Feet) Asking Rents Per Square Foot Per Year 40 110 40 64.3 1.9 62.4 Shop Space $12.11 $13.00 $12.11 Change From Q3 2015 2.6% - 2.6% Junior Anchor Space $11.17 - $11.17 Change From Q3 2015 10.8% - 10.8% Anchor Space $6.39 - $6.39 Change From Q3 2015 15.8% - 15.8%
Grocers Repositioning in Market Recent data from ESRI estimates the population of the Greenville Consolidated Metropolitan Statistical Area (CMSA) to be 1.2 million people and to reach 1.3 million people by 2021. The expected growth is a 5.5% increase or 37 new residents per day moving to the area over the next five years. The boom in residential population in the region is the key factor playing a role in attracting new grocers to the market. Over the last decade, the grocery market has evolved into two distinct tiers. In the late 1990s, the grocery market in the Greenville/Spartanburg market was dominated by Bi-Lo, Ingles, Winn-Dixie and Publix. At the same time, Walmart was entering the grocery market with its Supercenter format. Today, Publix, Lowes Food and Harris Teeter are actively competing for the upper end of the grocer market. New value-oriented stores like Walmart Neighborhood Market, Aldi and Lidl have entered the market and are expanding rapidly, causing the dominate chain, Bi-Lo, to consolidate substantially, Ingles to reposition, Winn-Dixie to exit and Food Lion to largely retreat from the region. Walmart Neighborhood Market has entered the market aggressively, opening seven stores since 2010 in the Upstate. These new stores, combined with the company s existing footprint of Supercenters, has created tremendous pressure on Bi-Lo, Ingles and Food Lion. Bi-Lo, previously headquartered in Greenville, vacated several of their locations this quarter. The former Bi-Lo at 3033 Wade Hampton Boulevard sold, and the location at 3233 Mall Road in Anderson was vacated. Ingles took a different approach by relocating into larger footprint stores as far from Walmart as possible. Joining the value-oriented market, the specialty retailer Aldi has added new stores and Lidl has acquired land and is grading for construction in Greenville and Spartanburg. The bifurcation of the market has allowed chains serving the high end and specialty markets to expand. Niche grocers Harris Teeter and Lowes Food have entered the market, while Fresh Market, Trader Joe s, Earth Fare and Whole Foods have expanded. Publix has continued to selectively expand its footprint in the region as opportunities have been available. Nearly all these chains have chosen to build new locations in the established retail corridors. Eight new grocery stores have opened in the market since January of 2015. In the third quarter, a 58,000-square-foot Lowes Food delivered at the Riverside Crossing shopping center in the Greer submarket, a Lowes Food is under construction at the new Village Market East shopping center on the corner of Woodruff Road and Sunnydale Drive, a third Lowes Food is under construction at the intersection of Pelham Road and Boiling Springs Road and a 53,000-square-foot Harris Teeter is under construction at Lewis Plaza on Augusta Road, all set to deliver in 2017. Additionally, a 58,000-square-foot Harris Teeter proposed at the Northpointe development near downtown Greenville is planned to deliver in 2018. Expansion of grocers in the Upstate market is expected to continue unabated. New Upstate Grocers Since 2015 26 11! 1 2 Walmart Neighborhood Market Aldi 585 Spartanburg 4 Harris Teeter Under Construction 3 Harris Teeter Proposed! 1 10!! 2 3!! 9 85 185! 4 8!! 5 385! 6 Greenville 7 85 26 12! 5 6 7 8 9 10 11 12 Aldi Walmart Neighborhood Market Lowes Foods Under Construction The Fresh Market Lowes Foods Under Construction Lowes Foods Aldi Walmart Neighborhood Market 2 South Carolina Research & Forecast Report Q3 2016 Greenville Retail Colliers International
Market Conditions The growing residential population in the suburbs of the Upstate has created stronger demand amongst retailers to locate in the major retail corridors. Overall, the market vacancy rate at the end of the third quarter was 9.3% compared to 9.6% at the end of the previous quarter. The average asking rental rate for shop space was $12.11 NNN per square foot per year (PSF/YR) a slight increase from $12.06 NNN PSF/YR last quarter. Woodruff Road The Woodruff Road corridor, the four-mile section of Woodruff Road between Roper Mountain Road to SC-14, ended the third quarter with a vacancy rate of 2.6% overall. The vacancy rate for shop space was 1.3% and the average asking rental rate was $33.31 NNN PSF/YR. Orangetheory Fitness, an international franchise, will open the first Upstate location in a 3,500-square-foot space in the Garlington Station shopping center at 1143 Woodruff Road. Haywood Road The Haywood Road submarket is the area immediately around Haywood Mall, stretching from Pelham Road to Laurens Road. Although a strong retail corridor, it saw little activity this quarter. There was a slight change in the vacancy rate from 11.2% last quarter to 11.0% at the end of this quarter. The average asking rental rate was recorded as $14.34 NNN PSF/YR. Greer Greer is a two-mile stretch of Wade Hampton Boulevard from Brookwood Drive to Artillery Road. The average asking rental rate for shop space in Greer has remained steady at $17.13 NNN PSF/ YR this year, but is up from $13.13 NNN PSF/YR a year ago. Eggs Up Grill, a breakfast franchise that started on Pawleys Island, signed a lease for 3,500 square feet in the Greer Plaza at 805 W Wade Hampton Boulevard this quarter. West Spartanburg Downtown/ West End New mixed-use developments and redevelopments of historic buildings are increasingly popular in Greenville, attracting many new tenants. The West End has seen the majority of these projects including Hampton Station and Markley Station which will add 90,000 square feet and 43,000 square feet of retail space, respectively. Most of the available space in Hampton Station has already been claimed by companies like Birds Fly South Ale Project, White Duck Taco Shop, Dapper Ink, Lucky Penny Creative and Noble Dog Pet Hotel. Markley station is 50% occupied by three companies that have not yet been announced. The asking rental rate for shop space in grocer anchored shopping centers was $13.00 PSF/YR this quarter. The asking rental rate for shop space on Greenville s Main Street/ West End is much higher, usually falling between $25 and $35 PSF/YR. The number of restaurants on Main Street is growing, adding to the attraction of downtown Greenville to employers, residents and tourists. This quarter, seven new restaurants have announced or opened in the submarket s eclectic food scene, Jianna, an Italian cuisine restaurant concept by Table 301 Restaurant Group, Menkoi Ramen House, Caviar and Bananas, Cantina 76, Toast Café, Terrace Café and Crepe du Jour Café & Wine. Market Average Asking Rental Rate Shop Space Q3 2015 Q2 2016 Q3 2016 $11.81 $12.06 Upstate Gross Retail Sales January - June 2016 $12.11 This submarket includes grocer anchored retail centers along Blackstock Road, W O Ezell Boulevard, John B. White Sr. Boulevard and Dorman Center Drive. Aldi leased 23,000 square feet in the shopping center located at 150 E Blackstock Road, bringing the vacancy in the West Spartanburg retail corridor to 7.1%, down from 8.4% last quarter. The average asking rental rate for shop space in the corridor is $12.65 NNN PSF/YR. +2.8% since 2015 Greenville County $8.3 billion Spartanburg County $4.6 billion Clemson Boulevard The Clemson Boulevard corridor is 2.5 miles, running from the Anderson Mall on North Main Street to Phil Watson Road. Bi-Lo recently vacated a nearly 49,000-square-foot space at 3233 Mall Road, bringing the vacancy rate to 6.5% from 1.7% at the end of the previous quarter. The average asking rental rate increased to $12.37 NNN PSF/YR from $9.70 NNN PSF/YR over the same time. Gross Sales $17.4 billion Jan-Jun 2016 +18.2% since 2011 Source: South Carolina Department of Revenue, Colliers International Anderson County $2.6 billion 3 South Carolina Research & Forecast Report Q3 2016 Greenville Retail Colliers International
Q3 2016 Retail Market Summary Statistics Greenville, SC ANCHOR SPACE (GREATER THAN 25,000 SF) JR. ANCHOR SPACE (10,000-25,000 SF) SHOP SPACE (LESS THAN 10,000 SF) MARKET BUILDINGS INVENTORY VACANCY RATE (%) VACANT ASKING RENT (NNN) VACANT ASKING RENT (NNN) VACANT ASKING RENT (NNN) Belton - Honea Path 5 260,281 9.2% 0 - - - 23,950 $4.73 Boiling Springs 8 605,386 20.1% 64,000 $4.00 - - 57,450 $10.06 Cherrydale - TR 5 453,054 13.3% 0-19,100-41,210 $12.00 Clemson Blvd 12 979,631 6.5% 48,912 - - - 15,222 $12.37 Clemson Pendleton 7 380,437 11.3% 34,928 - - - 8,000 $4.50 Downtown 3 169,726 1.9% 0 - - - 3,181 $13.00 Duncan - Lyman 4 219,302 28.0% 44,000 - - - 17,460 $12.55 Easley 4 541,859 26.3% 120,479 $7.00 - - 22,120 $11.00 East Side 12 990,248 10.1% 45,116 - - - 55,381 $12.27 East Spartanburg 13 1,061,468 10.9% 34,928 $7.00 10,870 $4.00 70,109 $9.24 Greer 9 729,617 11.8% 22,705 $13.00 - - 63,084 $17.13 Haywood - Pleasantburg 16 1,420,009 11.0% 38,003-68,714 $11.42 49,216 $14.34 Highway 81 3 175,362 6.6% - - - - 11,525 $10.75 Inman - Lyman 4 222,836 11.9% - - 17,500 $6.00 9,120 $7.00 Mauldin 6 410,608 3.6% - - 10,033-4,760 $15.29 Oconee 8 741,796 3.4% - - 22,400 $5.00 2,800 $9.66 Pelham Road 7 312,856 14.0% 39,200 - - - 4,500 $14.00 Pickens - Liberty 4 204,720 4.2% - - - - 8,680 $6.10 Powdersville 1 141,000 - - - - - - - Simpsonville 10 697,345 1.6% - - - - 11,250 $14.70 South Side 4 159,418 2.8% - - - - 4,500 $8.00 West Anderson 17 854,072 17.6% 34,928 $8.00 60,801 $5.00 54,447 $8.35 West Spartanburg 16 1,521,963 7.1% 29,781 $4.50 21,233 $25.00 57,583 $12.65 White Horse Rd - Berea 10 777,987 10.0% 48,510 $4.75 - - 29,048 $9.72 Woodruff Moore 3 145,400 - - - - - - - Woodruff Rd 32 2,112,629 2.6% - - 28,000 $30.00 27,522 $33.31 Market Total 223 16,289,010 9.3% 605,490 $6.39 258,651 $11.17 652,118 $12.11 *Data represents shopping centers 20,000 square feet or larger anchored by grocery, junior or big box retailers. Notable Transactions Shopping center sales were limited to two Bi-Lo anchored centers, one vacated and one still operating. The closing of several Bi-Lo stores across the state has led to multiple shopping center sales over the last few years and has created opportunity for new large retailers to move into the market. > > Patton Square, located at 345 South Main Street, is a 92,000-square-foot Bi-Lo anchored shopping center. The center sold at 99% occupancy this quarter to ProVest Properties for $7 million, or $75.48 PSF. > > Hampton Point shopping center at 3033 Wade Hampton Boulevard, a 58,300-square-foot former Bi-Lo, sold to Habitat for Humanity for $3.1 million, or $53.17 PSF. > > Five Forks Place, a 61,200-square-foot Publix-anchored shopping center located at 2607 Woodruff Road, was purchased by Publix for $11.7 million, or $190.36 PSF. Hampton Point 3033 Wade Hampton Boulevard Source: CoStar 4 South Carolina Research & Forecast Report Q3 2016 Greenville Retail Colliers International
Local Economy Supports Retail Growth Greenville s retail market is strong, according to data from the Bureau of Labor Statistics and the South Carolina Department of Revenue (SCDR). The growth of jobs year over year in Greenville and increased tourism have created higher retail sales volume. Non-farm employment for the combined Greenville-Anderson- Mauldin and Spartanburg Metropolitan Statistical Areas (MSA) was recorded at 550,800 employees in August 2016, up 1.0%, or 5,200 jobs, since August 2015 and 4.8% from two years ago. SCDR recorded gross retail sales at $3.3 billion for the combined Greenville-Anderson-Mauldin and Spartanburg MSAs in June 2016. Gross retail sales in Greenville County contributed $1.6 billion to the total sales in the Upstate, or 47.7%. The year-to-date (January to June) gross retail sales volume was recorded as $17.5 billion, compared to $17.0 billion for the same time in 2015. Market Forecast New grocers will continue to build new standalone locations and join new shopping centers that are planned or under construction throughout the Greenville/Spartanburg retail market over the next year. The redevelopment of former mills and other historical buildings into new mixed use retail and office spaces will also become increasingly popular. The retail market in Greenville is fueled by population growth and a stable and growing local economy. The local economy is expected to benefit from new capital investments announced this year and attract several new residents to the area. Around the State Growing populations across the state are leading to the expansion and strengthening of existing retail nodes in South Carolina s main retail markets. Grocers are continuing to expand in all markets along with other regional and national tenants. Charleston > > This quarter, construction began on BJ s Wholesale Club in Summerville, Aldi leased 20,600 square feet in the Plaza at East Cooper on Johnnie Dodds Boulevard, Lidl announced it is actively looking in the market and Publix announced it will open a 45,000 square foot location in the WestEdge mixed-use development in 2018. Columbia > > Lowes Foods is building two stores in Lexington County at the corner of Augusta Highway and Charter Oaks Road and another on the corner of Sunset Boulevard and Hope Ferry Road. The Fresh Market is building two locations on Two Notch Road near Village at Sandhill and on Sunset Boulevard in Lexington. For more statewide commercial real estate news check out our market reports at: www.colliers.com/southcarolina/insights Non-Farm Employment in Greenville-Anderson-Mauldin and Spartanburg MSA Number of Jobs Added (Thousands) 21 18 15 12 9 6 3 0 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Jobs Added Over 12 Months Apr-15 Aug-15 Total Jobs Source: St. Louis Federal Reserve, Bureau of Labor Statistics, Colliers International Commercial Real Estate Growth Cycle: Where the market stands and where it is going. NEW CONSTRUCTION RENTAL RATE EMPLOYMENT OCCUPANCY PHASE 4: RECESSION PHASE 1: RECOVERY COMMERCIAL REAL ESTATE GROWTH CYCLE Dec-15 Apr-16 Aug-16 PHASE 2: EXPANSION PHASE 3: HYPERSUPPLY Publix West Edge Development, Charleston Source: The Post and Courier via Perkins and Will/The Preston Partnership 570 550 530 510 490 470 450 Total Non-Farm Employment (Thousands) 5 South Carolina Research & Forecast Report Q3 2016 Greenville Retail Colliers International
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