Retail Review - Volume 1 - 2024 - Lee and Associates

RETAIL REVIEW - Volume 1 - 2024

April 23, 2024

National Retail Overview

The U.S. retail real estate sector is staging a robust comeback in 2024, poised to become commercial real estate’s highest occupancy property type. Despite facing consumer debt headwinds, the fundamentals are improving – fueled by an expanding consumer base, pent-up demand for experiential retail, and disciplined development that is keeping vacancies
near historic lows.

More Openings Than Closings in 2023

The sector recorded over 1,000 more store openings than closures in 2023 as retailers raced to establish urban footprints and capitalize on resilient spending across categories like home improvement, auto sales, and dining out. This year, 36 of the 50 largest metro areas project retail inventory growth under 0.5%, driving positive absorption.

People Are Still Spending

Households are prioritizing essentials and experiences, directing record spending across multiple retail segments in 2023 even as inflation strained budgets. The labor market’s recession-defying strength, with 275,000 new jobs added in February and wage growth outpacing inflation, is boosting consumer finances.

There Are Obstacles, But Opportunity Is More Apparent

While headwinds like $1 trillion in outstanding credit card debt could curtail discretionary purchases, the overall trajectory appears positive. Thriving discount concepts, explosive medical retail growth, and sustained spending on pet services all signal opportunities. By rightsizing footprints to emphasize value and convenience, the retail sector is well-positioned to lead the commercial real estate recovery.

Rightsizing the Retail Footprint

Continuing the narrative from the previous section, the national retail market is undergoing a significant transformation. While some struggling retailers (like Family Dollar and Macy’s) are downsizing by announcing store closures, others (like Target) are actively expanding their footprints. However, this is not necessarily contradictory behavior.

Retailers are strategically “rightsizing” their real estate portfolios—some are favoring smaller format urban locations to better reach population centers, while others are doubling down on larger suburban big-box stores. This rightsizing reflects an effort to provide greater convenience and an enhanced customer experience.

And when we take into account consumer spending patterns, the outlook is varied. Inflation has pinched household budgets, leading to reduced discretionary spending on non-essentials. However, spending on necessary goods and services as well as experiential categories like dining out have remained growth drivers.

Weighing these opposing forces, experts agree that nationwide store openings will outpace closures in 2024. The prevailing narrative is that, through strategic realignment around value, convenience and experiences, the retail industry is adaptively positioning itself for continued growth despite challenges on a national basis.

EXPANDING:

Target

Target has unveiled plans for new store locations, kicking off a 300-store expansion. Locations span the US, with a mix of large stores (over $15 billion in sales projected) and smaller urban formats.

Aldi

ALDI leads the pack in grocery store expansion, with 45 new locations planned for 2024. The company is also moving forward with its acquisition of Winn-Dixie’s parent company.

Take 5

Take 5 Oil Change, which now has a presence across 41 states, has 300 new units in the development pipeline in the rapidly growing quick-service auto sector.

CONTRACTING:

Dollar Tree

Dollar Tree will close 1,000 underperforming Family Dollar stores in a bid to boost profitability. This is the biggest US retail closure so far in 2024, but store openings are still expected to exceed closings.

JoAnn Fabrics

In March 2024, craft store giant JoAnn Fabrics filed for bankruptcy to cut debt, but still plans to keep all 815 stores open despite declining sales and competition.

Macy's

In February 2024, Macy’s announced a major shakeup: closing 150 stores, focusing on luxury chains, and selling properties to generate capital in excess of $750 million

Charleston Retail Overview

Charleston is telling a similar story, albeit a bit more optimistic. Inflation and consumer hesitancy to spend is having an effect on local Charleston retail, but the sustained population growth well above the national average swings the pendulum back into positive territory. We’re seeing above-average growth for well-located neighborhood shopping centers, strip centers, and standalone retail. The brightest spot in our market is our downtown High-Street corridor (King Street). We’ve seen a string of record breaking new leases along King Street as tourists and locals re-emerge with wallets open.

Here is a breakdown of our seven distinct submarkets from a retail perspective:

Retail Project Map

Recently Delivered

Brighton Court

Address: 318 Brighton Park Blvd - Summerville, SC

Available: 8,460 SF

Asking Rate: $38.00/SF NNN

Developer: -

Delivered: Q4 2023

Cedar Grove

Address: Dorchester Road - North Charleston, SC

Available: 1,400 SF

Asking Rate: $34.00/SF NNN

Developer: Cameron Management

Delivery Date: Q4 2023

Notes: Restaurant outparcel space within Cedar Grove Shopping Center

Under Construction

Navy Yard Charleston

Address: N. Hobson Street - North Charleston, SC

Available: 40,000 SF

Asking Rate: RFP

Leasing: Lee & Associates

Developer: Jamestown & Wecco Development

Delivery Date: Q2 2024

Downtown Nexton

Address: 406 Sigma Drive - Summerville, SC

Available: 33,900 SF

Asking Rate: $35.00 - $45.00/SF NNN

Leasing: Bridge Commercial

Developer: Sharbell Properties

Delivery Date: Q2 2024

0 Foundation Street

Address: 0 Foundation Street - Charleston, SC

Available: 8,000 SF

Asking Rate: $35.00/SF NNN

Leasing: Meyer Kapp

Developer: Vulcan Property Group

Delivery Date: Q2 2024

Uptown Carnes Crossroads

Address: North Main Street - Summerville, SC

Available: 6,800 SF

Asking Rate: $33.00/SF NNN

Leasing: Urban Core Realty

Developer: TBD

Delivery Date: Q3 2024

Hunt Club Village

Address: 1198 Bees Ferry Road - Charleston, SC

Available: 5,167SF

Asking Rate: $39.00/SF NNN

Leasing: Adams Property Group

Developer: Hunt Club Properties

Delivery Date: Q3 2024

Proposed

Shoppes at Bees Ferry

Address: Bees Ferry Road - Charleston, SC

Available: 9 Pad Sites - 12.09 AC Total

Asking Rate: TBD

Developer: TBD

Notes: Site is located on the corner of Bees Ferry and Proximity Drive

West Ashley Circle

Address: West Ashley Circle - Charleston, SC

Available: 5 Pad Sites - 8.07 AC Total

Asking Rate: TBD

Developer: TBD

Construction Start: 2026

Hope Landing

Address: Clements Ferry Road - Charleston, SC

Available: 61,240 SF

Asking Rate: RFP

Leasing: Lee & Associates

Developer: Lat Purser

Construction Start: 2025

0 Porchers Bluff

Address: o Porchers Bluff Road - Mt. Pleasant, SC

Available: 10,000 SF

Asking Rate: TBD

Developer: TBD

Notes: 3 outparcel buildings at The Market at Oakland

Maybank Landing

Address: Maybank Highway - Johns Island, SC

Available: 75,574 SF

Asking Rate: $15.00 - $40.00/SF NNN

Leasing: Lee & Associates

Construction Start: 2026

121 Carolina Avenue

Address: 121 Carolina Avenue - Goose Creek, SC

Available: 42,000 SF

Developer: TBD

Construction Start: TBD

Sawmill Outparcels

Address: Berlin Myers Pkwy & Highway 78 - Summerville, SC

Available: 6 Pad Sites - 1-2 AC each

Asking Rate: TBD

Leasing: Lee & Associates

Notes: Part of larger Sawmill Mixed-Use Development near Downtown Summerville

3517 Maybank Highway

Address: 3517 Maybank Highway - Johns Island, SC

Available: 14,000 SF

Asking Rate: $32.00 - $36.00/SF NNN

Developer: TBD

Construction Start: TBD

Sigma Drive

Address: Sigma Drive & Rose Drive - Summerville, SC

Available: 1.0 AC Pad Site

Asking Rate: $120,000/year (ground lease)

Developer: TBD

Notes: Adjacent to Carolina Alehouse in Nexton Village

17 North Village

Address: Highway 17 North - Mt. Pleasant, SC

Available: 4+ AC Total - Pad Sites

Asking Rate: TBD

Developer: TBD

Notes: Approved for 32,470 SF for new retail development

Essex Farms

Address: 0 Essex Farms - Charleston, SC

Available: 10,000 SF For Lease - 2+ AC. For Sale

Asking Rate: TBD

Developer: TBD

Construction Start: TBD

President's Place

Address: 102 President Street - Charleston, SC

Available: 4,047 SF

Asking Rate: $40.00 - $45.00/SF NNN

Developer: TBD

Estimated Delivery: Q3 2026