Mike Wiggins, Crosland Southeast
Pappas Properties has begun construction on a Harris Teeter at Berewick and Raley Miller in a joint venture with Levine Properties, and has filed a rezoning petition to add another Harris Teeter at the corner of Fairview and Providence. Harris Teeter has recently added a store in Cornelius, as has Publix.
Publix has recently opened a new store in the booming South End submarket located along the transit line on South Boulevard and has won zoning approval for a store to be constructed at Cotswold. A grocer is also rumored to be scouting a redevelopment opportunity in SouthPark. Aston Properties is adding a Walmart Neighborhood Market to its Cuthbertson project, Howard’s Mill.
Whole Foods Market continues to pick off prime sites with two new stores planned for the market, one at Waverly, a mixed-use project under development by a joint venture between Crosland Southeast and Childress Klein in South Charlotte, and Crescent Communities’ newly announced project on Stonewall in Uptown.
Grocery-anchored shopping centers continue to garner compressed cap rates — often beginning with the number 5. The latest to close at an eye-popping price of $300 per square foot and a 5 percent cap rate was the Harris Teeter-anchored center in Myers Park sold to EDENS in March 2015, according to Berkeley Capital.
Additionally, single credit-tenant trades continue at a torrid pace, driving cap rates to new lows, even in the face of rising interest rates. Recent offerings of ground leases in the Midtown trade area were near 5 percent rates, and McDonald’s has long commanded plus-4 percent cap rates.
Top Submarkets
The submarkets with the hottest velocity are SouthPark, where there are over 2,000 apartments under construction with more in the planning stage, and Uptown/South End where there are more than 5,900 apartments and three Class A office towers in the pipeline. Each market has new grocer approvals and arguments could be made they are both lacking enough restaurant offerings.
In addition, South Charlotte is producing enormous retail activity with Whole Foods Market, CVS/pharmacy, Chick-fil-A, Dressler’s and Bad Daddy’s all inking leases within the last several months at the Waverly project. Lincoln Harris has plans to develop more than 200,000 square feet of retail on the former Charlotte Golf Links property behind Rea Village in a mixed-use endeavor. It is no secret that high densities of upper median income households above $110,000 per household are driving the flow of retailer activity in these areas.
E-Commerce, Buying Power
Retailers in general are still tweaking their prototypes as some concepts suffer and others benefit from e-commerce. Commodity retail products can be bought and shipped directly to the customer and are therefore taken off the sales floor, whereas other retailers are now also acting as e-order fulfillment centers. An exciting retail format like Waverly can provide longer and more socially fulfilling shopping trips versus a few clicks on an iPad.
Certain retailers have become less rent-conscious and are focused on location and co-tenancy related to their specific offerings. Demand for Class A assets remains high and rental rates are reflective of the improving fundamentals of certain submarkets.
Rates are slowly increasing, annual increases are acceptable and tenants are exercising renewals above pre-recession “vintage” levels. Retailers that have announced their expansion plans are notable for their connection to the residential explosion occurring in Charlotte. Grocers and restaurants are being followed closely by the re-emergence of expansion plans of Lowe’s Home Improvement and Target, whose sales have begun to trend upward.
Job growth in Charlotte has moved back towards pre-recession levels with more than 11,000 jobs created in 2014 and over 1 million employed in the region. Quality and quantity are hallmarks of the recent job growth, with many jobs created outside of the big banks by newcomers such as Sealed Air Corp. and AvidXchange.
New companies are being drawn to the Queen City and surrounding region for its quality of life, attractive cost of living, skilled workforce and access to the world through the Charlotte-Douglas International Airport, which currently ranks as the eighth-busiest airport in the United States based on total passengers. With 2.51 million people comprising the Charlotte MSA and an average household income of $63,000, Charlotte’s buying power is on every retailer’s radar for expansion.
By Mike Wiggins, Partner, Crosland Southeast. This article originally appeared in the June 2015 issue of Southeast Real Estate Business.