High Occupancy and Nominal Construction Limit Absorption in GSA
Key Takeaways
- Vacancy rates were slightly lower during the fourth quarter of 2018 and, with no new construction underway, are expected to drop further in the next few quarters.
- Core rental rates have decreased significantly because prime retail spaces that were available one year ago are now leased.
2018 Market Recap
The Greenville-Spartanburg-Anderson retail market is comprised of approximately 17.11 million square feet of core and non-core shopping center space. Since the fourth quarter of last year, the vacancy rate has dropped 10 basis points from 10.14% during the fourth quarter of 2017 to 10.04% during the fourth quarter of this year. While the vacancy rate dropped, the market posted a net negative annual absorption of 7,945 square feet. Over the past year, the triple net overall average weighted shop space rental rate has decreased from $13.34 per square foot during the fourth quarter of last year down to $8.90 per square foot during the fourth quarter of 2018 because the higher quality spaces are all being absorbed. Likewise, core rental rates have drastically decreased because prime retail spaces that were available one year ago are now leased; therefore, the weighted rental rates for the remaining core retail spaces were much lower during the fourth quarter of 2018.
Market Conditions
The Greenville-Spartanburg-Anderson retail market is comprised of 17,105,581 square feet of retail space within 26 submarkets. The market absorbed 20,184 square feet of retail space this quarter, and the vacancy rate dropped from 10.16% during the third quarter of 2018 to 10.04% this quarter. Most of the positive absorption occurred within the non-core submarkets of Belton/Honea Park, White Horse Road/Berea and the East Side, while the core submarkets posted a net negative absorption of 5,023 square feet. Average triple net weighted shop space rental rates are increasing across most submarkets: non-core rental rates rose from $10.50 per square foot last quarter to $10.80 per square foot during the fourth quarter of 2018. Likewise, core rental rates increased from $15.24 per square foot during the third quarter of 2018 up to $16.44 per square foot this quarter. There is no retail construction underway in the Greenville-Spartanburg-Anderson submarkets.
Shopping Center Market
Woodruff Road
The Woodruff Road corridor is comprised of 2.1 million square feet of core retail space and is the largest submarket in the region. This submarket absorbed 8,948 square feet this quarter, mostly within Magnolia Park Town Center which absorbed 7,948 square feet. The vacancy rate dropped from 6.22% during the third quarter of this year to 5.79% during the fourth quarter of 2018. The average triple net shop space rental rates in this submarket remained unchanged at $16.45 per square foot.
Clemson Boulevard
Clemson Boulevard is the primary retail corridor in the Anderson market and has 979,631 square feet of retail space within the submarket. This submarket absorbed 1,903 square feet, mostly within the Boulevard Market Fair building located at 3801 Clemson Boulevard. In addition, the vacancy rate dropped slightly from 7.44% during the third quarter of 2018 to 7.25% during the fourth quarter of this year due to the core vacancy rate dropping from 1.42% to 1.18% from last quarter until this quarter; the non-core vacancy rate remained unchanged. The average triple net rental rate increased from $11.80 per square foot during the third quarter of 2018 to $12.25 per square foot this quarter.
Greer
The Greer submarket is composed of approximately 729,617 square feet of retail space. This submarket posted a net negative absorption of 8,300 square feet this quarter all within Collins Corner Shopping Center and Peachtree Shopping Center. Non-core vacancy rate rose from 0.78% during the third quarter of 2018 to 2.33%, likewise, the core vacancy rate increased from 3.43% last quarter to 4.24% during the fourth quarter of 2017. The overall Greer average triple net shop space rental rate rose from $8.00 per square foot last quarter to $11.00 per square foot this quarter.
Haywood–Pleasantburg
The Haywood–Pleasantburg submarket is comprised of 1,376,275 square feet of retail space including space on the Haywood, Pleasantburg and Laurens Road corridors. This submarket posted a net negative absorption of 50,723 square feet during the fourth quarter of 2018, and the vacancy rate rose from 5.19% during the third quarter of 2018 to 8.87% during the fourth quarter of this year. However, the average triple net shop space rental rate increased from $11.32 per square foot during the third quarter of 2018 to $13.33 per square foot during the fourth quarter of 2018; core rental rates also increased to $18.90 per square foot.
West Spartanburg
West Spartanburg includes retail centers along Blackstock Road, W. O. Ezell Boulevard, John B. White Sr. Boulevard and Reidville Roads and is comprised of 1,521,963 square feet. Core retail space within this sector absorbed 4,926 square feet only to be offset by non-core retail space posting a net negative absorption of 4,280 square feet – leading to an overall West Spartanburg sector absorption of 646 square feet. The submarket vacancy rate dipped slightly from 4.71% during the third quarter of 2018 to 4.67% during the fourth quarter of 2018. The West Spartanburg triple net shop space rental rate remained unchanged at $12.00 per square foot from the third quarter to the fourth quarter of 2018.
Pelham Road
The Pelham Road retail submarket consists of 312,856 square feet of retail space, and this submarket posted a net negative absorption of 1,000 square feet. The core vacancy rate rose from 0.71% during the third quarter of 2018 to 1.23% during the fourth quarter of 2018; however, the non-core vacancy rate remained unchanged from the third quarter to the fourth quarter of this year. The overall Pelham Road submarket vacancy rate rose from 13.5% last quarter to 13.85% this quarter, and the average shop space rental rates remained unaffected at $22.00 per square foot from the third quarter through the fourth quarter of 2018.
Urban Retail
The urban retail market is divided into six subareas: the West End, the Village of West Greenville, Augusta Street, Downtown Greenville, Downtown Spartanburg and the Main and Stone area, and the urban retail square feet being tracked totals approximately 2.25 million square feet. Downtown Greenville is the largest of these, followed by the West End. Average triple net weighted rental rates in the Augusta Street area rose from $30.09 per square foot during the third quarter of 2018 to $31.50 per square foot this quarter; conversely, the average downtown Greenville weighted rental rates decreased from $24.49 per square foot last quarter to $23.31 per square foot during the fourth quarter of 2018. Average triple net rental rates in the West End were around $20.26 per square foot for the remaining spaces.
Gross Retail Sales & Employment
Per the Bureau of Labor Statistics’ most recent data from July of 2018, non-farm employment added 8,300 jobs from October of 2017 to October of 2018 within the Greenville-Spartanburg-Anderson Metropolitan Statistical Area (MSA), and there were a total of 579,400 non-farm employees. Data from the South Carolina Department of Revenue states gross retail sales in the Greenville-Anderson-Spartanburg region increased by 6.45% and reached approximately $50.80 billion over the last 12 months, spanning from September 2017 through September 2018.
Significant Transactions
The retail sector within the Greenville-Spartanburg-Anderson market was active throughout the fourth quarter of 2018. CoStar reported 162 retail sale transactions, including a 294,336-square-foot, four-property portfolio sale purchased for $37 million by Ingles Markets, Inc. In addition, 85 leases were signed during the same period, including a 44,187-square-foot lease in Spartanburg signed by an undisclosed tenant.
Sales
- In Greenville, 1 South Main LLC purchased a 40,704-square-foot, two-property portfolio for $3.31 million.
Leases
- 11,000 square feet at 3245 Wade Hampton Boulevard in Taylors, SC was leased to be used as a thrift store.
- Score’s Jewelers leased 9,666 square feet at 154 Civic Center Boulevard in Anderson.
Construction Pipeline
Delivered
- In Spartanburg County, an 11,700-square-foot Tuesday Morning store was delivered during the fourth quarter of 2018.
Market Forecast
With minimal construction activity, the Greenville-Spartanburg-Anderson retail vacancy rate is predicted to decrease in the next few quarters as existing retail shop space is filled. Non-core will continue to outperform core retail because the rental rates are lower and the spaces available are more flexible in nature for tenant use; however, with no new construction in the pipeline, rental rates may stabilize until new retail construction begins or existing retail space is upgraded.
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To download the complete report: 2018 Q4 Retail Greenville-Spartanburg-Anderson Report