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Charlotte Forecast 2013: Real Estate – Retail
- December 21, 2012
- Retail Real Estate
One big project and several grocery-led developments in the bag as brokers see rebound
- Will Boye
- Senior Staff Writer- Charlotte Business Journal
- PREMIUM CONTENT: Dec 14, 2012, 6:00am EST UPDATED: Dec 21, 2012, 2:25pm EST
- Charlotte’s grocery wars have changed the dynamic of the area’s sluggish retail real estate market.
The arrival of Publix Super Markets Inc. has put a spring in the step of retail developers. The Florida grocery chain has opened two stores in York and Lancaster counties and has announced a lease in the Ballantyne area.
Peter Pappas, a partner at retail development firm Crosland Southeast, says the market will continue to see single-tenant development in 2013. It will be driven by retailers that didn’t take a big hit during the recession, such as discount stores and grocers. But commercial lenders are now willing to talk about potential retail projects, he says.
“I’m sure they’re tired of waking up and 95% of their book of loans is multifamily,” he says. “I would say it’s a long way from where it was at the peak, but the good news is they’re starting to say, ‘What do you have?’ ”
Crosland Southeast is leading a $6.2 million makeover at retail center Quail Corners, which totals 113,000 square feet and is located at the intersection of Park Road and Sharon Road West.
The firm is also developing Blakeney Square, a 20,000-square-foot retail project at the southeast corner of the intersection of Rea and Ardrey Kell roads. Both projects are close to completion.
The activity in the grocery sector bodes well for future development and for the health of the market in general, says Andy Misiaveg, a partner at The Shopping Center Group. “It’s a sign of the consumer rebound and the growth in the Charlotte region that they feel like they can support more stores,” he says.
Brokers say they’re also encouraged by solid leasing activity in general.
“The in-town properties are starting to fill up, which is driving up rates and development for that matter,” says Bryan Wyker, a broker at The Providence Group. “With the outlying markets, some of them are stronger than others, but I think on the whole we’re seeing good activity.”
The retail vacancy rate in the Charlotte market dropped to 7.8% in the third quarter due to positive net absorption of 589,564 square feet, according to CoStar Group Inc., down from 8% in the second quarter.
At the end of the quarter, the average quoted asking rate was $13.15 per square foot, according to the firm.
In spring, seven new tenants are expected to open at the Belgate Shopping Center at the intersection of Interstate 85 and University City Boulevard in north Charlotte. Earlier this year, real estate investment trust DDR Corp. purchased the project, anchored by IKEA, from Crescent Resources. In June, DDR acquired a controlling interest in Belgate for $9 million and bought Crescent’s noncontrolling interest in the project in July for $10.9 million, according to DDR.
During the past four quarters, a total of 703,087 square feet of retail space has been built in the Charlotte market, according to CoStar. That includes deliveries such as a new Wal-Mart store on East Independence and the new Whole Foods Market on Fairview Road.
Charles Thrift, a broker at Collett, says the market is continuing to tighten due to a lack of new multitenant retail centers. “One thing I think that’s really challenging right now for businesses is the lack of projects,” he says.
Misiaveg agrees that a shortage of new shopping-center space will continue to push up rents. New ownership at retail centers like Park Road Shopping Center, which sold toEdens for $82 million last year, also will boost asking rental rates, he says.
One of the biggest retail developments for Charlotte in 2013 will be the start of construction on an outlet center in the Steele Creek area. Simon Property Group Inc. andTanger Factory Outlet Centers Inc. are teaming to develop the 350,000-square-foot project, which will be called Charlotte Premium Outlets.
Tanger will provide site development and construction supervision to the venture, while Simon will provide management services and marketing. Both companies will provide leasing services and expect the center, with more than 90 stores, to open in 2014.
Will Boye covers commercial real estate and law firms for the Charlotte Business Journal