Triangle Riding High Amid New Retail Development in Downtown Submarkets
The Triangle continues to attract national attention due to job growth, relatively low cost of living, economic diversity, a central East Coast location and its access to three world-class universities. Additionally, the Triangle’s unemployment rates are below the state and national averages. These are some of the driving forces that bring nearly 80 residents a day to the metro area, as recently published by U.S. News & World Report. Triangle retailers, developers and investors are taking advantage of this momentum, and the local retail market is thriving as a result.
At the conclusion of third-quarter 2017, the Triangle retail vacancy was 6.7 percent. This represents a 60-basis point increase year-over-year. However, there was over 340,000 square feet of positive net absorption during the same quarter. This stat marks the highest quarter of positive absorption for the market since the second quarter of 2014.
There were several notable retail deliveries in 2017, such as Carolina Square, containing nearly 50,000 square feet of ground floor retail space. The mixed-use project is located along Franklin Street in Chapel Hill and is a joint venture between Cousins Properties and Northwood Ravin. The retail portion of Carolina Square delivered 84 percent preleased and is anchored by Target’s first flexible format store in the Carolinas. The tenant roster also includes Pizza Press, B. Good, Alumni Hall, Purvelo and Francesca’s. Additionally, Target opened a second flexible format store in an urban setting along Hillsborough Street in Raleigh. Loden Properties led the redevelopment of the project, which saw Target backfill a former bowling alley.
In addition to urban deliveries, there was significant activity in Triangle’s suburban submarkets as well. The Cary submarket saw Whole Foods Market open as the anchor tenant at Alston Town Center, while Publix opened stores in Cary, Apex and Wake Forest.
Across the market, almost 300,000 square feet of retail product is currently under construction. Out of the product being developed, over 45 percent is in downtown Raleigh and downtown Durham. This statistic stands out when considering these central business districts make up only 2.5 percent of the total Triangle retail market.
There is significant activity in the Warehouse District, a historic industrial section of downtown Raleigh that is being revitalized.
The Dillon, a mixed-use project being developed by Kane Realty, is the largest project underway in the Warehouse District. In addition to multifamily and office space, there will be 52,000 square feet of ground floor retail. The tenant roster includes Urban Outfitters, Heirloom Brew Shop, Barcelona Wine Bar and the recently announced Weaver Street Market. The retail portion of The Dillon is 77 percent preleased and is scheduled to deliver in the first quarter. Also underway in the Warehouse District is Morgan Street Food Hall, a 22,000-square-foot lifestyle dining concept — the first of its kind in the Triangle.
Also in downtown Raleigh, Heritage Properties’ One Glenwood, which will include 15,000 square feet of ground floor retail space, broke ground during the fourth quarter of 2017. In the Central Business District, Dominion Realty Partners’ FNB Tower is slated to break ground in February and will contain 11,000 square feet of ground floor retail, of which 54 percent is preleased.
Being developed by a joint venture between Kane Realty and Williams Realty, The Peace mixed-use project is now under construction in the Glenwood South District. The co-developers recently executed a 45,600-square-foot lease with Publix, which will be the first grocery store in downtown Raleigh. Publix will be located on the ground floor of the 12-story, 400-unit multifamily tower. Harris Teeter is also still pursuing its 50,000-square-foot store as part of the Seaboard Station redevelopment.
Downtown Durham is experiencing robust development activity as developers look to capitalize on the city’s unique culture, creative energy and well-educated population. A joint venture between Austin Lawrence Partners and New York-based Dream Hotel Group captured this identity and redeveloped the former Jack Tar Motel into a modern boutique hotel called Unscripted Durham. The hotel contains nearly 12,000 square feet of ground floor retail space that was fully leased at delivery. The most notable projects currently under construction in downtown Durham are One City Center and Durham ID. The next project to break ground in downtown Durham will likely be 555 Mangum.
There are multiple high-profile infill suburban projects under construction in the Triangle as well. Regency Centers’ Midtown East development recently broke ground in Raleigh and will be anchored by Wegmans grocery store. The Wegmans at Midtown East will be the grocer’s first location in the Triangle, although three others have been announced. While Wegmans appears to be holding true to its commitments in the Triangle, Lidl’s mysterious expansion pause is cause for concern.
With larger suburban mixed-use projects in the pipeline, including Fenton and the Cary Towne Center redevelopment, the Triangle is poised to see retail construction activity increase significantly this year and likely peak in 2020.
— By Charlie Coyne, Senior Vice President, Director of Retail Services, and Josh Stanley, Research Analyst of CBRE | Raleigh. This article originally appeared in the January 2018 issue of Southeast Real Estate Business.