SOUTHEAST SNAPSHOT, DECEMBER 2004

Charlotte Retail Market

The largest city in the Carolinas, Charlotte, North Carolina, is the center of the seven-county, Charlotte-Gastonia-Rock Hill metropolitan statistical area. More than 1.6 million people reside in the region, with an expected growth of 10.57 percent over the next 5 years. The retail vacancy rate in Charlotte has remained stable, although some developers and leasing agents wonder how long the retail strength can sustain itself. Big box retailers are becoming harder to come by and with the reduction of anchor tenants, there is a concern as to how well small shop tenants will fare. One developer has stated that the neighborhood retail growth that follows residential building will remain strong due to the influx of new residents and new small shop concepts. Charlotte is not immune to the national economic trends, although being one of the fastest growing communities in the United States, it will continue to increase and prosper.

All totaled, 2.4 million square feet of new retail space is currently under construction around Charlotte. As much as 6 million square feet is estimated to come on line in the region over the next 3 years. The majority of new development is happening in the Ballantyne area of South Charlotte, in the north near The University of North Carolina at Charlotte and Northlake Mall, and along Interstate 485 at Highway16 (Providence Road) and Route 74 (Independence Road). The long-anticipated I-485 Beltway, which connects Interstates 85 and 77, has only the northern section still to be finished. Any large tract of land near where I-485 intersects with older neighborhoods has been snatched up for mixed-use and residential projects. Like most of the country, mixed-use, town center-style projects are underway in several submarkets.

One such “urban village” mixed-use development is Ayrsley in the Ballantyne area. With two-story office and ground-floor retail, the “people-sized” buildings are in a scale that isn’t intimidating. There are comfortable places to live, pedestrian-friendly shopping and offices close enough so residents can walk to work. Still within a half hour of Uptown, Ayrsley will be anchored by Harris Teeter.

Ballantyne is also the site of a new Earth Fare grocery-anchored strip shopping center. The 172-acre mixed-use project is called Toringdon. Continental Real Estate of Columbus, Ohio, is building both the 100,000-square-foot, open-air Toringdon Market and a 125,000-square-foot specialty center called Streets of Toringdon. Continental has partnered with Raleigh, North Carolina-based Lichtin Corporation to develop the complex, which will include 650,000 square feet of office space and 800 apartment units.

Matthews, North Carolina-based Sheild Property Company is constructing Ballantyne Village, a self-contained, mixed-use property. Ballantyne Village will be comprised of four buildings, two of which are 14-story residential towers above 120,000 square feet of upscale retail and restaurants. A movie theater will also accommodate the residents of Ballantyne Village and the visitors of nearby Ballantyne Resort Hotel and Ballantyne Corporate Park.

With the opening of Nordstrom last spring, Simon Property Group’s SouthPark Mall has undergone a $100 million renovation. An additional 208,000 square feet will be added to SouthPark’s existing 1.3 million square feet. A two-story Dick’s Sporting Goods store will be added, and Neiman Marcus is slated to open as a new anchor in the spring of 2006. Located a mere 7 miles south of the city center, SouthPark is more than 30 years old. However, the mall keeps attracting new, high-end tenants, like Joseph-Beth Booksellers, because of the synergy it has created. SouthPark’s roster boasts Burberry, Louis Vuitton, Sigrid Olsen and Kate Spade.

Piedmont Town Center is another $120 million, “live-work-shop and play” project, just one block west of SouthPark Mall. Also nearby, Charlotte-based Crosland spent $1 million to upgrade and rehab Foxcroft Village, with new tenant Brixx Pizza. Crosland is also developing Blakeney, a mixed-use project with Harris Teeter anchoring 515,000 square feet of retail. With an anticipated delivery date of second quarter 2005, approximately 250,000 square feet of office space, 364 townhomes and single-family units will complete Blakeney.

The local news has been abuzz with a controversial request for public funds to subsidize a private shopping center. The Village at Seven Eagles is still under review, despite the announcement that the MSA’s first Saks Fifth Avenue will open some time next year. If plans are approved, the 19-acre center will feature a 120-room luxury hotel. Charlotte-based Harris Land Company and Metropolitan Partnership of Washington, D.C., are the developers of The Village at Seven Eagles.

Another major project is the $240 million redevelopment of Elizabeth Avenue in one of the oldest neighborhoods in Charlotte’s Midtown area. Its new lease on life will begin with an 800-plus parking deck, Charlotte’s first Whole Foods Market and Eastern Federal multi-screen movie theater.

A new 1.2 million-square-foot super-regional mall has broken ground 10 miles north of downtown. Taubman Centers and Skanska USA Building are creating the Northlake Mall using wood, stone, brick and glass to have a “woodsy” feel. The anchors will be Belk, Dick’s Sporting Goods, Dillard’s and Hecht’s. The $175 million center is located near the intersection of Interstates 77 and 485. A movie theater and as many as 150 more shops and restaurants should complete Northlake Mall.

The South Boulevard corridor, where the city runs its trolley line and light rail, is drawing existing and interesting new retailers. Bloom, a Food Lion market, is revolutionizing the supermarket industry with its Table Top Circle concept. The hassle-free shopping is organized so that foods that go together are located together, like cereal and milk. Express parking and staples centered near the entrance allow shoppers to pick up milk, bread, eggs or a ready-made meal and be in and out in no time. Also, NOFO, an eclectic gift store and restaurant that offers everything from penny candy to high-end kitchenware, is expanding throughout North Carolina.

In Uptown Charlotte, Novare Group will start construction on a 35-story condo tower with 390 units located at North Church and West Fifth streets. A basketball arena for the NBA’s newest team, The Bobcats, is under construction. Across the street, Spectrum Properties is redeveloping the old convention site into a 200,000-square-foot retail and entertainment center. A baseball stadium is also under proposal for the city’s center.

In contrast to the new luxury tenants, a value-oriented mega-mall, Concord Mills, opened 5 years ago and has become the Number 1 tourist attraction in the state of North Carolina. Owned by The Mills Corporation of Arlington, Virginia, Concord Mills is located approximately 25 miles to the northeast of Charlotte in the town of Concord. The center is 1 mile from the Charlotte Motor Speedway and the year-round Blockbuster Pavilion, an open-air performance amphitheater. The 1.4 million-square-foot Concord Mills had more than 15.3 million visitors in 2003 and is credited with the creation of 3,500 jobs in the area. Recently, Circuit City joined the center with a 36,000-square-foot addition.

On the north end of Charlotte, one of the largest deals in recent months is Dollar Smart Superstore, taking 56,000 square feet in North Park Mall. Additionally, Wal-Mart Supercenter is part of an 800,000-square-foot retail complex called The Galleria, which is being constructed on Sardis Road on the east side of the city.

Other major new leases to be signed for space in Charlotte include The Home Depot, which is building an 80,000-square-foot store in Woodlawn Marketplace. Petco has taken 30,000 square feet in Carolina Pavilion and Peak Fitness will occupy 50,000 square feet in Matthew’s Festival Center.

Shopping centers with grocery anchors are still the trend in Charlotte. Not a new trend, but nonetheless, there is action from Lowes Foods opening all around the I-485 Beltway. This is taking a large bite out of market leader Harris Teeter’s volumes. Compare Foods is also adding four more stores to the 10 it currently has in North Carolina. This grocer primarily caters to the Hispanic market, the largest growing segment of the state’s minority population. Another area of growth to watch is Tom Short Road, where every available parcel is becoming a new residence, so shopping centers are sure to follow.

— Stephen Kramer, principal, Divaris Real Estate


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