Grocery, Infill Mixed-Use Projects Make Up Bulk of New Retail Supply in Triangle
Regency Centers has announced its plans for Midtown East, a shopping center in Raleigh that will house the market’s first Wegmans grocery store.
The Raleigh and overall Triangle retail markets ended 2016 in a very healthy position. The Triangle vacancy rate is currently at 6.09 percent, nearing 10-year lows dating back pre-recession and includes retail absorption nearing 900,000 square feet over the past four quarters. The region’s diverse economic engine driven by technology, university systems, heathcare and Raleigh as a state capital, combined with a relatively low cost of living and temperate climate, continue to push population growth and related retail expansion.
With fierce grocery competition, a natural evolution of inward growth and urbanization and several large mixed-use development projects, the Triangle retail market is thriving. However, e-commerce, rightsizing and store closures continue to challenge the broader U.S. retail market and the Triangle has not been spared.
With several homegrown grocery brands, North Carolina and the Triangle region have historically been one of the most competitive areas for grocers in the United States. Regional players like Harris Teeter (now owned by Kroger), Lowes Foods, Food Lion, The Fresh Market, Ingles and Earth Fare (all based in North Carolina) have competed for years with out-of-state supermarkets Kroger, Whole Foods Market, Trader Joe’s and even Walmart.
This year brought a new level of competition with Publix opening its first stores in the Triangle, Sprouts Farmers Market starting construction on its first store and Wegmans announcing four new stores, although at least two of the Wegmans stores face significant development issues. The line between full-service and specialty grocery stores has been blurred and the battle for customer attention will enter a new territory when Wegmans opens its first stores in late 2018 or early 2019. Supermarkets also have their attention on the Triangle’s urban centers for the first time.
Rapid multifamily growth in the downtowns of Raleigh, Durham and Chapel Hill has ignited significant urbanization as retail is now focused inward. With residential and employment densification occurring, Harris Teeter and Publix are both finalizing leases in downtown Raleigh. Harris Teeter will become part of Lowe Enterprises and Peace University’s joint venture at Seaboard Station, while Publix will anchor Kane Realty Corp. and Williams Realty’s vertical project on West Street.
Target will enter the Triangle’s urban cores as well, committing to flexible format stores at Cousins and Northwood Ravin’s Carolina Square in Chapel Hill and the just recently announced Target on Hillsborough Street in a project backfilling a historic bowling alley led by Loden Properties.
Major Mixed-Use Projects
While urban development is increasingly a focus in the Triangle, new mixed-use development activity in infill submarkets and the suburbs is also very active as multifamily developers and national or regional homebuilders continue to expand. Notably in Raleigh, Regency Centers has announced Midtown East, which will be Wegmans’ first store in Raleigh. Kane continues expanding at North Hills and has broken ground on The Dillon in the Warehouse District of downtown Raleigh with a significant commitment from Urban Outfitters.
Also in Raleigh, Crabtree Terrace will be the first significant project in the Crabtree area in years and will contain luxury retail, Class A office space and a flagship hotel that should be released in early 2017.
In Cary, Columbia Development has its eyes on the state property site along Cary Towne Boulevard for a large mixed-use project anchored by Wegmans, while CBL is planning a repositioning of Cary Towne Center. Kite Realty Group is finalizing Parkside Town Commons with Target, Harris Teeter and Frank Theatres as its major anchors, while Leyland Alliance is about to kick off a Wegmans project at Twin Lakes, all in West Cary.
In Durham, Austin Lawrence Partners and Armada Hoffler are under construction with the One City Center tower, Northwood Ravin is moving forward with 555 Mangum adjacent to American Tobacco, Longfellow is launching Durham ID and several grocery stores have downtown Durham on their radar.
Not to be out-matched by its larger neighbors, Chapel Hill is experiencing its biggest development boom in decades with Carolina Square on Franklin Street, Northwood Ravin’s Carraway Village in North Chapel Hill, East West Partners’ Village Plaza and Leon Capital Group’s Wegmans project that is on the drawing board along 15-501.
Challenges in the Triangle
Even with its vibrant diverse economy, active retail market and robust development pipeline the Triangle market still faces challenges. Continued rightsizing, store closings and consolidation notably in the sporting goods category are impacting the local retail market. Smart retailers and developers are embracing place-making, accepting the changing landscape of the traditional anchor and buying into omni-channel retailing.
Active and successful brick-and-mortar concepts will be those that remain insulated to e-commerce or that adapt to the shifting retail environment. The near- and long-term outlook for the Triangle retail market is very positive, although the national and global economy are ongoing risks along with developers facing tough municipal governments, tightening debt markets and high construction costs in 2017.
— By Charlie Coyne, Senior Vice President and Tiffany Barrier, Senior Associate of Retail Services, CBRE | Raleigh. This article originally appeared in the January 2017 issue of Southeast Real Estate Business.