In Raleigh-Durham, there is approximately 58 million square feet of retail space with year-end vacancy at 4 percent. The consistently low vacancy has helped drive rental rates up to an average of $22 per square foot.
The Raleigh area had approximately 460,000 square feet of retail space constructed in 2019 that was more than 80 percent preleased. The largest projects included the completion of Midtown East in the Wake Forest/Falls of Neuse Road submarket, which heralded the arrival of North Carolina’s first Wegmans store. This also marks Wegmans’ 100th U.S. store and set an opening day record with more than 30,000 shoppers. Wegmans expects to open five additional stores in the Triangle, including locations in Holly Springs, Wake Forest, Chapel Hill and two stores in Cary.
Another large project was the new Publix supermarket that opened recently at Leesville Market near Interstate 540. And according to some sources, Hobby Lobby will be moving into the space formerly occupied by Toys ‘R’ Us in the Cary Crossroads Plaza.
In Durham, Chapel Hill-based developer Beacon Properties Group is building a project called Oakridge directly off US 15-501. Tentative plans for the 108-acre property include a walkable mixed-use village with residential units, office space, 57,000 square feet of retail space and 17,000 square feet of restaurant space. The development is expected to open in 2021.
Other recent leases in the Durham area include Kimbrell’s Furniture and Planet Fitness, and Sprout’s Farmers Market recently leased 30,000 square feet at 105 W. N.C. Highway 54 on the city’s south side.
Recent studies indicate retail trends are changing with our growing population and shifting demographic patterns to more urbanization, and shoppers are now seeking new experiences and entertainment opportunities. A prime example in the Raleigh area would include the recent opening of Drive Shack. This entertainment center has been very successful, and the company will be expanding its parking to accommodate the overflow.
Also coming soon to our market will be Urban Air Adventure Park, which will take 60,000 square feet at Poyner Place near Triangle Town Center in north Raleigh. This kid-friendly, family-oriented center will offer various attractions to include climbing walls, trampolines and a ropes course.
According to Urban Land Institute’s annual Emerging Trends in Real Estate report, baby boomers are spending less on goods and putting dollars toward medical, dining and experiences. Likewise, millennials are looking for less “stuff” and more experiences, and Generation X consumers spend more like previous generations.
Regardless of which generation is shopping, Raleigh had an influx of new retail that includes the first of two new grocery stores to open in downtown Raleigh. The Weaver Street Market co-op store recently located within The Dillon office tower.
While Wegmans, Publix, Sprout’s and Lidl have entered the Triangle market, we have also witnessed the disappearance of some of the “staple” retailers like Sears, Kmart and hhgregg. Even JC Penney remains in a financial slump according to a recent article by CNBC, reporting that more of its stores will close in 2020, including the location at North Hills. Kroger closed 14 stores in the Triangle to focus on the growth of its Harris Teeter stores, and while some locations were converted to a Harris Teeter, other locations became opportunities for Food Lion and Crunch Fitness.
The Raleigh-Durham area continues to offer a high quality of life, educational and employment opportunities, and is consistently ranked by multiple publications as one of the best places to live in the country. The Emerging Trends report lists Triangle as the No. 2 market nationwide on the list of “U.S. Markets to Watch for Overall Real Estate Prospects in 2020.” Strong job growth and a booming population also translate into an increase in retail spending, which can only help to keep vacancy low through 2020.
— By Joaquin Canals, Broker at NAI Carolantic. This article originally appeared in the January 2020 issue of Southeast Real Estate Business.