Raleigh-Durham Retail Bolstered By Grocery Growth, Offsetting Store Closures
This time last year, we were commenting on the changing retail market, but we were overall very optimistic about 2020. What a difference a year makes!
Across the United States, 2020 brought us the closing of the following: 279 SteinMart stores; 1,100 Ann Taylor stores; 950 Pier 1 Imports stores; 350 Gap stores; 248 GNC stores; 145 A.C. Moore stores; 230 Tuesday Morning stores; and 178 Forever 21 stores. Additionally, Macy’s closed 29 stores in 2020 and expects to close another 45 in 2021. This trend of retail store closings will slow down in 2021, but it will not change.
On the positive side, retailers such as Walmart, Target, The Home Depot, Lowe’s Home Improvement and Walgreens have seen positive sales numbers and continue to expand. In the supermarket sector, Kroger, Food Lion and Publix have had record numbers and, along with Aldi and Lidl, are expanding.
In the Raleigh-Durham market, our 2020 vacancy rate has increased to 8.24 percent and rental rates have hovered in the $18 to $20 per square foot range, but those numbers are skewed due to rent concessions and abatements.
Raleigh-Durham has approximately 86.6 million square feet of retail space with around 640,000 square feet under construction. A large percentage of this activity is from projects including the Seaboard Station redevelopment in downtown Raleigh, Wegmans in Chapel Hill and Wake Forest, the Lowes Food-anchored Cary Greystone shopping center and the Publix at Wendell Falls. Overall, our market saw a negative net absorption of 47,976 square feet for 2020 due to the aforementioned store closings being offset by grocery chain growth.
For years, the industry has been talking about the future repositioning of traditional malls, and in 2020 the talk became reality.
Locally, Epic Games purchased Cary Towne Center. Epic plans to convert the mall into a 980,000-square-foot corporate headquarters by 2024, canceling plans announced last year for a mix of office, retail and residential uses. Additionally, Northwood Investors announced that the much-beleaguered Northgate Mall in Durham is scheduled to be redeveloped into retail, office, residential and life sciences, but we shall see.
Across the country, distressed malls are an attractive target for companies such as Amazon and FedEx that are eying the empty spaces for micro-fulfillment centers. However, flipping from the retail model will require the properties to be rezoned and, in many instances, the shift from retail to industrial is likely to be met with pushback from “stuck in the past” municipalities.
The biggest takeaway from 2020 is the seismic shift to e-commerce. Consumers have fully embraced online shopping and retailers have responded with the speedy rollout of new technologies, new apps and new ways of meeting shoppers’ needs.
The words “contactless” and “frictionless” have quickly become part of the vernacular and companies that have managed to adapt are winning. Investments into technologies such as satellite internet, which allows for faster internet anywhere in the world, will impact future retailers. The convenience and safety of online shopping is here to stay.
— By Joaquin Canals, Senior Vice President, Tri Properties | NAI Carolantic. This article originally appeared in the January 2021 issue of Southeast Real Estate Business.