A combined total of 144.8 million square feet of retail space was located within the Tri-City area at the end of 2013. With a retail inventory totaling approximately 60.7 million square feet, the Charlotte market was the largest of the three North Carolina retail markets, accounting for 42% of the retail inventory. The Triangle market ranked second with 46 million square feet of retail space, while the Triad maintained 38 million square feet of retail space. After declining to a historical low of 541,782 square feet in 2002, retail construction increased to nearly one million square feet in the Tri-City markets during 2013. New retail supply during 2013 was most pronounced in the Triangle region, where 693,982 square feet of new space was delivered. The Charlotte region ranked second with 231,680 square feet of new retail space completed during 2013, while the Triad region reported 38,000 square feet of new retail during 2013. Only the Charlotte region reported a continued decline in new construction from the level reported in 2012. While retail construction in the Tri-City area increased during 2013, the level of new supply remained well below the 2.6 million square feet averaged annually between 2008 and 2011.
The relatively low supply-side pressures from new construction allowed for vacancy rates to decrease in all of the Tri-City markets during 2013. At 8.0%, the Charlotte retail vacancy rate decreased 0.6% of a point during 2013 as net absorption totaling 494,986 square feet outpaced the 231,680 square feet of new supply. Despite the decrease, the Charlotte vacancy rate remained above the 6.9% reported in 2008. The Triangle retail vacancy rate decreased 0.4% of a point during 2013 as net demand totaling 849,391 square feet outpaced 693,982 square feet of new supply. The Triangle’s 2013 vacancy rate of 6.6% was the lowest of the Tri-City markets, but remained 0.1% of a point higher than the 6.5% reported in 2008. New retail supply totaling 38,000 square feet in the Triad market was outpaced by net demand totaling 386,123 square feet during 2013. As a result, the Triad retail vacancy rate decreased 0.9% of a point to 10.1% from the 11.0% reported at the end of 2012. Despite the decrease, the rate remained 0.5% of a point higher than the 9.6% reported at the end of 2010.
With net absorption totaling 849,391 square feet, the Triangle region reported the highest level of net demand during 2013. The Charlotte region ranked second in terms of retail demand during 2013 with net absorption totaling 494,986 square feet, while the Triad market reported 386,123 square feet of net demand. The most significant gain in occupancy in the Triangle was reported at Holly Springs Towne Center, where Target opened a 135,300-square-foot store. Other anchors at the center, which completed in 2013, included Marshalls, Dicks Sporting Goods, and Michaels. The second largest gain in occupancy in the Triangle during 2013 was reported at Harrison Square in the Cary submarket, where Bass Pro Shops opened a 105,000-square-foot store in space that included 82,550 square feet vacated by Carolina Pottery. The Charlotte market’s largest new retail tenant during 2013 was Hobby Lobby, which relocated from 61,082 square feet at The Commons into 55,002 square feet at Belgate Shopping Center. Other anchors at the Belgate Shopping center, which completed in 2013, included Marshalls, Old Navy, and World Market. The center is a part of the Belgate development, which is home to North Carolina’s only IKEA store. Magic Mart’s occupancy of a 91,152-square-foot former Walmart space at Lexington Parkway Plaza in Davidson County was the Triad’s largest new tenant occupancy reported during 2013. Dunham’s Sports, which was the largest tenant occupancy reported during 2012 in the Triad market, continued its expansion with the opening of a 60,200-square-foot store at Randolph Mall during 2013. The largest retail loss among the Tri-City markets during 2013 was reported at Parkway Plaza in South Durham, where Kmart vacated 84,723 square feet.
Weighted average retail asking rents increased in all three markets during 2013. Rents in the Triangle market, which ranked the highest among the Tri-City markets, averaged $22.54 per square foot at the end of 2013. This rate was $0.44 per square foot higher than the rate reported at the end of 2012 and $1.36 per square foot higher than the $21.18 averaged at the end of 2008. The Charlotte market’s average rent of $19.16 per square foot reported at the end of 2013 was the second highest among the Tri-City markets and was $0.13 per square foot higher than the $19.03 per square foot reported at the end of 2012. Despite the increase, average asking rents in the Charlotte market remained $0.10 per square foot below the rate reported at the end of 2008. The average retail asking rent in the Triad market increased $0.08 per square foot during 2013 to average $16.54. This rate was also $0.10 per square foot higher than the rate reported at the end of 2008.
A total of 1.4 million square feet of retail space was reported under construction in the Tri-City markets at the end of 2013. The Charlotte region accounted for approximately 51% of the retail space under construction at the end of 2013. A 350,000-square-foot Premium Outlets project was the largest retail center under construction at the end of 2013 in the Charlotte market. Saks Fifth Avenue OFF 5TH will anchor the outlet mall, which will also feature over 90 outlet stores. The Triangle region accounted for approximately 45% of the retail space under construction at the end of 2013. The 519,949-square-foot Parkside Town Commons project in Cary was the largest retail center under construction at the end of 2013, accounting for half of the retail space under construction in the Triangle. A 135,300-square-foot Target, 55,908-square-foot movie theater, 53,000-square-foot Harris Teeter, and 50,000-square-foot Field & Stream are expected to anchor Parkside Town Commons during 2014. The 51,094-square-foot renovation at 2703 High Point Road in Greensboro was the only retail project under construction in the Triad at the end of 2013.
The proposed pipeline of retail space totaled 23 million square feet in the Tri-City markets at the end of 2013. The Charlotte market accounted for 50% of the proposed retail space with a total of 11.6 million square feet, while the Triangle market ranked second with nearly 10 million square feet of proposed space at the end of 2013. The 1.5 million square feet of space proposed for the Triad market accounted for 7% of the proposed space in the Tri-City markets. Three regional centers are planned for the Charlotte market and account for a significant portion of the proposed retail space. The 1.3 million-square-foot Bridges of Mint Hill is the largest of the planned regional centers. Two regional centers are also planned for the Triangle market, with the 2.2 million-square-foot Veridea regional center in Cary the largest of the two proposed. The 787,477-square-foot Britt Way Village power center is the largest proposed project in the Triad region and accounts for 53% of the planned retail space in the Triad.
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