Patience Required for Charleston’s Retail Tenants
- Tenants waiting longer than ever for the right space in Charleston.
- Limited new supply, high occupancy and rapid economic growth making grade A retail difficult to find.
Hurry Up and Wait
The current economic expansion in Charleston is entering its ninth year, and tenants are finding it increasingly difficult to move from site identification to opening. In general, there is a 12- to 18-month delay between the time a tenant identifies a submarket and site they want to occupy and when they can open their store. This is the result of four factors – some of which are unique to high-growth Southeastern cities.
The first factor making it difficult for tenants to find locations is a shift that has occurred nationally in retail. Until the Great Recession in 2008, most retailers were willing to accept locations in a variety of places within a submarket, driven largely by the need to increase same-store sales by opening new stores. After the recession, retailers across all product categories have demanded space in core retail areas with established and growing retail synergy that includes restaurants, health and fitness, and entertainment opportunities. At the end of the second quarter, core retail areas have 4.1% vacancy while centers in non-core areas in the Charleston Market had 8.1% vacancy.
Second, vacancy in Charleston is historically low. Excluding King Street, 6.1% of the market was vacant at the end of the second quarter. Within the small shop space subcategory, almost onethird of the 527,000 square feet of vacant square footage was in the North Charleston submarket alone – the largest geographically and lowest income of Charleston’s submarkets. The impact on tenants leaves three solutions: (1) negotiate to locate a retailer in a desirable center where the current tenant is doing poorly and engage in the early termination of their lease; (2) wait for newly constructed or redeveloped space to become available; or (3) wait for a tenant to leave the center and bid for the space.
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