Pain Felt in Charlotte Retail Sector, But Phased Reopenings Give Market Hope
The COVID-19 outbreak had a tremendous impact on retail across the country, and Charlotte was no exception. As stores were forced to close, business owners had to devise creative ways to operate during the pandemic. Rent deferral, Paycheck Protection Program funds, layoffs and furloughs were some of the ways owners addressed cash flow. Many restaurants faced questions regarding takeout, delivery service, menu adjustments, table spacing and employee safety.
Enhanced cleaning procedures, payment procedures, marketing adjustments and general overall operations were other issues facing many restaurants and retailers.
Restaurants with drive-thrus and takeout, as well as ones capable of adding “COVID-19-friendly” delivery options, were able to remain open, albeit with decreased sales volume.
Despite all efforts, the trickle-down effect will likely cause several restaurants and retailers to permanently close and not survive this downturn at all. As Phase I and II of North Carolina’s economic reopening went into effect and additional stores began to reopen in some capacity, retailers began to adapt to new ways to operate with safety protocols in place. As a result, more discounts and flash sales were offered, and curbside pick-up became a prevalent way to shop.
The next six months should reveal how the COVID-19 pandemic and related business adjustments have affected Charlotte retail for years to come.
According to the International Council of Shopping Centers (ICSC), April rent collection in the United States averaged approximately 64 percent across all retail categories, with health and fitness falling to approximately 12 percent and grocery coming in around 98 percent. For the Charlotte region, some of the more common rent relief compromises were two to three months of rent deferral with repayment over a specific time period, either during the original lease term or equal months added to the end of the term.
With the loosening of stay-at-home restrictions, it appeared that some Charlotteans were ready to venture out and patronize retail establishments with others choosing to remain cautious and venture out for essential items only. This became evident when South Carolina, which sits on Charlotte’s southern border, ended its stay-at-home restrictions approximately three weeks ahead of North Carolina. When the South Carolina restaurants and retailers opened, it gave an opportunity for many Charlotteans to travel across the border for a restaurant experience and/or some shopping. Gyms and salons reopened in South Carolina’s second phase, which allowed people to travel across the border for those services as well, while North Carolina gyms remain closed.
When North Carolina started its Phase II reopening, additional stores could open at 50 percent capacity, followed by restaurants and breweries with proper social distancing, tables spaced a minimum six feet apart and 50 percent maximum occupancy.
Other operations allowed to open included personal care businesses, pools and childcare facilities. Interestingly, bars were prohibited to open, which caused more than 200 bar owners to file suit against North Carolina’s governor.
For the most part, retail and mixed-use developments are continuing to move forward in the metro Charlotte region. A $1 billion mixed-use development by the NFL’s Carolina Panthers will break ground just outside of Charlotte in Rock Hill, South Carolina. The Panthers’ training facility and corporate offices will anchor the 241-acre project. The first phase will also include a sports medicine center, meeting space and a hotel.
Elsewhere in the region, a Virginia-based developer, Metropolitan Partnership, is working on a $600 million mixed-use project (office, retail and apartments) in Uptown Charlotte. Additionally, the 26-story, 742,000-square-foot Ally Charlotte Center in Uptown and the Vantage Towers in South End (which features 580,000 square feet of office space, 55,000 square feet of retail space and a 200-room boutique hotel) remain on pace to open in 2021.
The COVID-19 pandemic continues to have negative ripples across the real estate community with several retailers planning to close stores, restaurants not reopening at all and hotels operating well below normal occupancy levels. It is still too early to determine the number of business that will close.
North Carolina Department of Transportation (NCDOT) has seen a $300 million budget shortfall for the fiscal year ending June 30 due to significantly lower gas consumption, resulting in less tax revenue. NCDOT has laid off about 300 temporary workers and consultants and delayed the start of about 88 major construction projects. The reduction in staff has caused some delays in permitting and other required development NCDOT approvals.
Overall, COVID-19’s negative impact on retail in Charlotte and the region was certainly felt, but cautious optimism and initial signs of recovery are present. The next six months should provide more light on what can be expected and how successful retailers are able to weather the storm.
— By Steve Rich, CCIM, Senior Director of Retail Services; Philip Corriher, CCIM, Senior Director of Retail Services; and Kaitlyn Fitch, Retail Associate of Colliers International. This article originally appeared in the June 2020 issue of Southeast Real Estate Business.