Retail Market Experiences the Greatest Development Activity in Years

Research & Forecast Report

GREENVILLE, SC | RETAILQ4 2015

Jessica Rahal Research Coordinator | South Carolina

Key Takeaways > The Greenville/Spartanburg, South Carolina retail market continues to tighten with strong demand, declining vacancy, and escalating rental rates.

> Construction activity is strong throughout the market and is at its highest level in recent years.

> Grocers and fast-casual restaurant chains are among popular retailers.

> New retailers are entering the market and existing retailers are growing their presence.

Strong Demand Yields Tight Market in 2015Favorable demographics, a growing population, and a strengthening tourism industry are collectively driving the Greenville/Spartanburg, South Carolina retail market. The market’s vacancy rate continues to decline steadily despite strong construction activity and new product being added to the inventory. New developments are successfully attracting retailers and pre-leasing quickly with many delivering fully leased. At year-end 2015, the market vacancy rate was down to 11.8%, a number that does not accurately depict true market conditions as a majority of the existing vacant space resides in older, less desirable shopping centers. One year ago, the total vacancy rate for the market was 12.1%. The vacancy rate in the highly demanded Woodruff Road submarket was down to just 2.9% at year-end with less than 40,000 square feet of shop space remaining available for lease. Retailers are competing for quality space, and consequently, many are preleasing space in new developments at rental rates never-before-seen in the market.

Rental rates are climbing due to increased competition for space and rising construction costs for new and redeveloped space. At the end of the fourth quarter of 2015, asking rental rates for shop

Market IndicatorsRelative to prior period Q4 2015 Q1 2016*

VACANCY

NET ABSORPTION

CONSTRUCTION

RENTAL RATE Note: Construction is the change in Under Construction. *Projected

$4.67

$7.75

$11.31

$5.75

$9.07

$12.09

Anchor Jr Anchor Shop Space

Q4-14 Q4-15

Average Asking Rental Rates (NNN)Greenville/Spartanburg, SC Retail Market

2

space averaged $12.09 NNN for the market. The Woodruff Road submarket, home to Magnolia Park, reported the greatest rental rates for shop space with asking rental rates averaging $34.57 NNN at year-end 2015. Overall, rental rates for the market are up from $11.31 NNN at year-end 2014. Downtown retailers are seeing rental rates for shop space reach the mid-to-high $30s.

Downtown Greenville is BoomingSignificant interest in Greenville’s downtown mirrors the national trend of urban core development. Developers and retailers are targeting a growing millennial population and are catering to their desire for a walkable, live, work and play environment. Downtown Greenville developments consist of various mixed-use developments with residential, office, and retail components. Retailers leasing space in the submarket include grocers who recognize a strong future demand, as well as restaurants and breweries. Hotel development, which oftentimes offers retail or restaurant space, is also strong as the region’s tourism industry grows.

> Caviar and Bananas plans to open in May 2016 near the recently completed Aloft Hotel. The restaurant will serve breakfast, lunch, dinner, weekend brunch, and will have a retail section.

> Two Chefs Café & Market will be the anchor tenant at the new Main + Stone mixed-use development. The restaurant and market is relocating from Poinsett Plaza and will occupy approximately 5,000 square feet at the complex. Main + Stone is being developed by the Beach Company and will offer 292 apartment units and 20,800 square feet of retail and commercial space.

> Toss Pizza Pub recently announced plans to join Biscuit Head at the new South Ridge mixed-use development at Church Street and University Ridge. South Ridge is a 350-unit multifamily complex being developed by The Beach Company. Toss Pizza Pub will be occupying approximately 4,000 square feet and is expected to open March 2016 upon completion of the complex.

> Sidewall Pizza Company will soon open a second location at 99 Cleveland Street. Their original location in Travelers Rest has quickly become a local favorite.

> Roots Smokehouse recently opened its doors at The Village of West Greenville.

> Two vacant warehouses on Welborn Street in Greenville’s West Side are being redeveloped into The Commons, a 40,000-square-foot food hall to include Feed & Seed and Community Tap, among others.

> Bex Café & Juice Bar recently opened at 820 S. Main Street.

Hotel Development Heats Up

A total of 1,087 hotel rooms are under construction or planned for downtown Greenville. Many of the hotel developments offer retail or restaurant space.

> Aloft Hotel recently opened on Laurens Street. The 144-room hotel was built atop the new city parking garage at the ONE complex. A new bar, W XYZ, is open at the hotel.

> An Embassy Suites is under construction at RiverPlace. The 7-story, 156-room hotel is expected to be open by mid-year 2016. Ruth’s Chris Steak House will be occupying a 7,000-square-foot restaurant space at the development.

> A dual-branded Residence Inn and SpringHill Suites is planned for the corner of Washington and Spring streets. The 7-story, 240-room hotel will include 1,500 square feet of retail space and 70 parking spaces.

> A 117-room Home2 Suites is planned at North Main and Elford streets.

> A 130-room Hyatt Place hotel is planned at the corner of East Broad and Calvin streets.

> Homewood Suites is planning a 150-room hotel next to Fluor Field.

> A 150-room AC Hotel is planned across from the Peace Center.

Downtown Greenville | Highlighted Development

1 FALLS PARK PLACE: 6-story, mixed-use development to be located on a vacant lot at Falls Park Drive and Main Street. The building will offer a rooftop terrace and pool, as well as office, retail and residential space.

2 CAMPERDOWN: A mixed-use development to include residential, retail and office components. Plans also include a Marriott-branded AC Hotel.

MIXED-USE DEVELOPMENTS

1 ALOFT HOTEL (open)HOSPITALITY

2 EMBASSY SUITES (under construction)

3 RESIDENCE INN/SPRINGHILL SUITES (planned)

4 HOME2 SUITES (planned)

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CADE

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HURC

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BEATTIE PL.

2

1

21

3

4

5

5 HYATT PLACE (planned)

3 THE COMMONS: 40,000-square-foot food hall with office space.

3

2 South Carolina Research & Forecast Report | Q4 2015 | Greenville Retail | Colliers International

Suburban Activity Keeps Heating UpGrocery-anchored shopping centers and smaller, fast-casual restaurant-anchored centers are driving development and growth in the suburban submarkets. Development is occurring throughout the suburbs, but the Haywood Road and Woodruff Road corridors are the main focal points.

Magnolia Park, the redevelopment of the former Greenville Mall on Woodruff Road, completed construction late in 2014. The development delivered near full occupancy with commitment from major tenants Cabela’s, Dave & Busters, and Nordstrom Rack, among other national retailers. The outdoor shopping center continues to attract retailers and restaurants upon the proven success of others in the center. Tin Lizzy’s Cantina was among the most recent restaurants to announce plans to locate in the center. The Atlanta-based restaurant plans to occupy a new 5,000-square-foot space. The restaurant will be the second in South Carolina. The first location opened in Columbia in October 2015. Tucanos Brazilian Grill plans to open early February 2016 near the Regal Cinema movie theatre. Grimaldi’s recently opened their second South Carolina location at the center.

The Magnolia Park redevelopment on Woodruff Road attracted some national tenants that were previously located on Haywood Road. Retailers Pier 1, Toys ‘R Us, and Babies ‘R Us relocated from Haywood Road leaving vacant space that has since been backfilled. Haywood Road has absorbed the vacant space and is seeing a re-emergence in tenant interest. The Cheesecake Factory is opening its first South Carolina restaurant at the Haywood Mall. The restaurant, which selects upscale malls for new locations, recognized Greenville’s strong demographics and has the potential to attract additional retailers and restaurants targeting similar demographics.

Panera Bread is open at its new outparcel space at Haywood Mall. The restaurant relocated from its space within the mall. Haywood Road is also a new home to Tijuana Flats. Five Guys is relocating from its Congaree Road location to the space adjacent to Tijuana Flats.

Grocery Store HappeningsGrocers are aggressively growing their footprints, expanding to new markets and strengthening their market share. Consumers are shopping for quality produce and welcoming more places to shop.

> Harris Teeter is re-entering the market at high velocity. The grocer’s first location, a two-story, 53,000-square-foot store, is currently under construction at Lewis Plaza on Augusta Street. The grocer has already confirmed a second location. The grocer plans to anchor the proposed $60-million NorthPointe mixed-use development to be located on the corner of Stone Avenue, North Church Street and Wade Hampton Boulevard. The proposed development will include 285 multifamily units, 30,000 square feet of commercial space, and a six-story parking garage. Both grocery store locations will feature a wine bar and juice bar in addition to the grocer’s traditional, high quality grocery items.

Greenville/Spartanburg, SC Retail Market Vacancy Rate Trends

Source: Colliers International

11.8%

11.9%

12.1%

Q4-15Q3-15Q4-14

Grocers are Investing in the Upstate

Cabela’s at Magnolia Park

Source: CoStar

3 South Carolina Research & Forecast Report | Q4 2015 | Greenville Retail | Colliers International

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Greenville-Anderson-Mauldin SC Gross Retail Sales ($)

Greenville County$1.3 billion +2.0% since October 2014+18.2% since October 2012

City of GreerFiscal year 2015 gross retail sales totaled $1 billion$2 billion

total sales

October 2015+5.7% since

October 2013

+11.3% sinceOctober 2012

Greenville MSA

Source: South Carolina Department of Revenue

> Lowes Foods is also aggressively expanding. The grocer announced plans for its second Upstate location which will be at the Village Market-East shopping center at Woodruff Road and Sunnydale Drive in Simpsonville. The grocer’s first location is currently under construction at Suber and Hammett Bridge roads in Greer and is expected to open by mid-year 2016. Construction on the Simpsonville store is to begin in 2016 and complete in 2017.

> Two new Aldi grocery stores opened in October. The new stores feature high ceilings, natural lighting and are environment friendly. The stores are located at 100 Chalmers Road in Greenville and 1050 W. Wade Hampton Boulevard in Greer.

> The Fresh Market opened a new 24,000-square-foot store at 1601 Woodruff Road earlier this year.

> Walmart Neighborhood Market is expanding its footprint. A new store opened earlier this year at Cedar Springs in Spartanburg. Construction is underway on a new store in Simpsonville at 1401 West Georgia Road which is expected to be completed in January 2016.

> Publix is relocating to a new location in Simpsonville. The grocer will occupy space at Fairview and Harrison Bridge roads, where Hobby Lobby will also locate.

> Europe-based Lidl, is planning to expand to the U.S. and plans to open its first South Carolina grocery store on Woodruff Road.

Restaurants Bring New Flavor to SuburbsThe popularity of fast-casual dining continued to grow through 2015. Several restaurants announced plans to open locations throughout suburban Greenville.

> Culver’s, a fast food chain specializing in frozen custard and burgers, is opening a new location at 1040 W. Wade Hampton Boulevard. Construction is underway and is expected to be completed in April 2016. This will be the chain’s second Greenville location.

> Wayback Burgers recently announced plans to open a Woodruff Road location. The restaurant will occupy 2,750 square feet at 1757 Woodruff Road between Aldi and Dunkin’ Donuts. The restaurant expects to open early 2016.

> The Shuckin’ Shack Oyster Bar opened its first Upstate location in December at 3620 Pelham Road.

> Local Taco, The Lost Cajun, and Taziki’s recently opened new locations at the Earth Fare-anchored Pelham @ 85 shopping center.

> Chicken Salad Chick plans to open its third Greenville location in spring 2016. The restaurant is under construction at Garlington and Woodruff roads, across the street from the new Tijuana Flats.

> The Donut Experiment Greenville is open at 2123 Augusta Street. The new shop allows customers to decorate their own doughnut.

> Hardee’s recently opened a newly constructed store at 3 Pelham Road.

Ideal Environment for Investment SalesCurrent market conditions provide an ideal environment for investment sales. Rising costs and declining returns in gateway markets are driving investors to seek opportunities in secondary and tertiary markets.

> The Gallery Shopping Center, anchored by Gabe’s and Conn’s, recently traded. The 142,911-square-foot shopping center was acquired by DNA Partners for approximately $13 million. Kimco Realty was the seller.

> Pelham Place, a 57,158-square-foot shopping center, was acquired earlier this year for $5.8 million. The center, located at 3093 South Highway 14 in Greenville, is home to a 38,003-square-foot vacant, but leased grocery space.

Gross Retail SalesGross retail sales in the Greenville-Anderson-Mauldin, SC MSA were down slightly over the previous year as of October 2015, but up 5.7% from October 2013 and 11.3% from October 2012. According to the South Carolina Department of Revenue, the greatest amount of retail sales come from Greenville County where gross retail sales were $1.3 billion in October 2015, accounting for 64.5% of the MSA’s total sales. Greenville County sales are up 2.0% from October 2014 and 6.3% from October 2013.

4 South Carolina Research & Forecast Report | Q4 2015 | Greenville Retail | Colliers International

Q4 2015 Retail Market Summary Statistics

Greenville, SCANCHOR SPACE

(GREATER THAN 25,000 SF)JR. ANCHOR SPACE(10,000-25,000 SF)

SHOP SPACE(LESS THAN 10,000 SF)

MARKET BUILDINGS INVENTORY (SF)

VACANCY RATE(%)

VACANT(SF)

ASKING RENT(NNN)

VACANT(SF)

ASKING RENT(NNN)

VACANT(SF)

ASKING RENT(NNN)

Belton/Honea Path 5 260,281 10.3% 0 - 0 - 26,700 $4.26

Boiling Springs 8 605,386 32.2% 129,000 $4.00 0 - 66,152 $8.77

Cherrydale/TR 5 453,054 16.4% 0 - 30,100 - 44,235 $14.63

Clemson Boulevard 12 977,172 2.5% 0 - 0 - 24,550 $11.28

Clemson Pendleton 7 380,437 12.0% 34,928 - 0 - 10,840 $6.46

Downtown 3 169,726 1.7% 0 - 0 - 2,841 -

Duncan/Lyman 4 219,302 26.9% 44,000 - 0 - 15,023 $10.00

Easley 4 541,859 25.4% 120,479 $7.00 0 - 17,220 $11.58

East Side 12 990,248 21.3% 128,076 - 15,600 - 67,360 $12.57

East Spartanburg 13 1,061,468 18.9% 34,928 $7.00 37,655 $4.00 127,934 $8.44

Greer 9 729,617 8.1% 0 - 10,500 - 48,383 $13.77

Haywood/Pleasantburg 16 1,420,009 13.2% 78,059 - 47,487 $8.66 62,480 $15.25

Highway 81 3 175,362 6.6% 0 - 0 - 11,525 $7.00

Inman/Lyman 4 222,836 27.1% 34,928 - 17,500 $6.00 7,920 $8.95

Mauldin 6 410,608 3.0% 0 - 0 - 12,364 $13.49

Oconee 8 741,796 4.8% 0 - 22,400 $5.00 13,250 $10.59

Pelham Road 7 312,856 17.6% 38,083 - 0 - 16,890 $13.03

Pickens/Liberty 4 204,720 4.8% 0 - 0 - 9,880 $12.00

Powdersville 1 141,000 0.0% 0 - 0 - 0 -

Simpsonville 10 697,345 2.8% 0 - 0 - 19,224 $14.19

South Side 4 159,418 2.8% 0 - 0 - 4,500 $7.00

West Anderson 17 728,508 18.3% 34,928 $8.00 40,801 $5.00 57,240 $10.36

West Spartanburg 16 1,521,963 13.0% 63,657 $4.50 63,284 - 71,557 $13.81

White Horse Road/Berea 10 777,987 10.2% 48,510 $4.75 0 - 31,057 $9.01

Woodruff Moore 3 145,400 0.0% 0 - 0 - 0 -

Woodruff Road 32 2,112,629 2.9% 0 - 26,000 $20.00 34,262 $34.57

Market Total 223 16,160,987 11.8% 789,576 $5.75 311,327 $9.07 803,387 $12.09

Garlington StationAs quality retail space in high-traffic areas become more difficult to find, developers and tenants are turning to redevelopment in addition to new construction. One such redevelopment is Garlington Station, located at 1143 Woodruff Road. Renovations were completed in October 2015 on the 23,197-square-foot shopping center and a new outparcel space. Stanton Optical and Tijuana Flats are open at the outparcel. The center is located adjacent to the Shops at Greenridge and less than one mile from Magnolia Park.

Source: Colliers International

5 South Carolina Research & Forecast Report | Q4 2015 | Greenville Retail | Colliers International

For more statewide commercial real estate news check out our market reports at: www.colliers.com/southcarolina/insights

PHASE 2: EXPANSION

PHASE 3: HYPERSUPPLY

PHASE 4: RECESSION

PHASE 1: RECOVERY

NEW CONSTRUCTION RENTAL RATE EMPLOYMENT OCCUPANCY

COMMERCIALREAL ESTATEGROWTH CYCLE

THE GREENVILLE/SPARTANBURG, SC RETAIL MARKET is moving along the expansion phase. Rental rates, occupancy and employment are all strong and increasing. New construction is at its highest level at years and momentum continues to grow as grocery stores and national retailers show significant interest in the market.

Commercial Real Estate Growth Cycle: Where the market stands and where it is going.

BullStreet

Summerville Marketplace Shopping Center

2016 OutlookThe Greenville/Spartanburg retail market is likely to welcome continued development and activity in 2016 with new retailers entering the market. Grocers will expand their footprint to accommodate the region’s growing population. Fast-casual restaurants will remain a favorite among diners. Mixed-use developments will continue to break ground downtown. The market’s vacancy rate will further decline as space continues to be absorbed and new developments deliver near full occupancy. Rental rates will trend up as competition for space tightens and construction costs for new development increases. The investment sales market will likely be active in 2016 as investors take advantage of high occupancy, top rental rates and low interest rates.

Around the StateRetail development is on the rise throughout South Carolina with grocery stores and sporting goods retailers anchoring larger developments. As employment and population growth continue, the state will attract additional national tenants to the market. Mixed-use developments are gaining popularity in both the suburbs and downtown submarkets.

Charleston, South Carolina

Charleston’s retail market continues to be influenced by a growing tourism and residential population.

> Earth Fare opened earlier this year at Summerville Marketplace Shopping Center. Petco is also open at the center. Other tenants include Dunkin’ Donuts, Mattress Pro, Crust Pizza, Tijuana Flats and Lee Nails.

> J Crew Mercantile will open its first South Carolina store at Bowman Place in Mount Pleasant, the former K-Mart redevelopment that is also home to Nordstrom Rack, Dick’s Sporting Goods, and DSW among other retailers.

Columbia, South Carolina

Retail development is at its highest level in years in Columbia. Activity is gaining momentum at BullStreet, which is officially under construction with the ground-breaking of Spirit Communications Park, the development’s minor-league baseball stadium, and the First Base Building, the first building to be under construction at the development. The First Base Building will be located at the first base line of Spirit Communications Park and is expected to be delivered in April 2016. The building offers approximately 26,203 square feet of retail and restaurant space in addition to approximately 72,000 square feet of office space and is expected to receive significant attention.

66 South Carolina Research & Forecast Report | Q4 2015 | Greenville Retail | Colliers International

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FOR MORE INFORMATION:Liz H. McCaryDirector of Marketing | South Carolina+1 803 401 4269Liz.McCary@colliers.com

Jessica D. Rahal, CPRCResearch Coordinator | South Carolina+1 803 401 4264Jessica.Rahal@colliers.com

GREENVILLE RETAIL PROFESSIONALS:Frank Hammond, CCIM, CPM | Senior Principal+1 864 527 5451Frank.Hammond@colliers.com

Lyn Tyner | Principal & Brokerage Associate+1 864 527 5431Lyn.Tyner@colliers.com

Nick Reinhardt | Brokerage Associate+1 864 527 5432Nick.Reinhardt@colliers.com

Scott Burgess | Brokerage Associate+1 864 527 5434Scott.Burgess@colliers.com

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