Record-Setting Activity Brings New Retailers and Restaurants to Columbia

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1 Research & Forecast Report COLUMBIA, SC RETAIL Q4 215 RecordSetting Activity Brings New Retailers and Restaurants to Columbia Jessica Rahal Research Coordinator South Carolina Key Takeaways >> Columbia, South Carolina s retail market continued to improve and grow through 215 as retailers and developers invested in the market. >> Developers and retailers are turning to new construction and redevelopments to meet the significant demand for space. >> Rental rates are on the rise, specifically for junior anchor and shop space, which are in greatest demand. >> Total gross retail sales in the area is up over previous years. Construction Activity is at its Highest Level in Years Retailers are investing in the Columbia, South Carolina market, opening their first locations or expanding their presence within the market. Strong interest in the area and demand for space are collectively contributing to declining vacancy rates and limited quality options for space. Additionally, retailers are expressing a desire to locate at specific intersections or in certain retail corridors, placing additional stress on the existing inventory. The vacancy rate was down to 8.5% at yearend 215 from 8.7% the previous year. The limited change in vacancy is misleading as many retailers are preleasing space in planned and newly constructed shopping centers. Also, a majority of the retail space remaining vacant is located in older shopping centers. As a result, the market witnessed a wave of new construction and redevelopment as developers sought to meet the growing demand for retail space. Retailers are expanding at high velocity given the improving economy and increased consumer spending, driving the greatest level of construction seen in recent years. Land costs along primary retail corridors are skyrocketing, and consequently many developers are renovating older, but welllocated, retail space. Development has been widespread throughout the market with almost every submarket seeing activity. Market Indicators Relative to prior period Q4 215 Q1 216* VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE Note: Construction is the change in Under Construction. *Projected Retail development activity is gaining momentum throughout Columbia, SC. New restaurants, retailers and hotels are investing in the market. 1.5 MILLION SF HOTELS UNDER CONSTRUCTION & PLANNED MIXEDUSE DEVELOPMENT GROCERY STORES RESTAURANTS

2 Downtown Developments Suburban Activity >> Construction is nearing completion on the City Market redevelopment in the Congaree Vista. Newk s Eatery recently opened their first Columbia location at the complex. Grill Marks and The Wired Goat, both new to the market, are also open. A brewery remains under construction and additional space is available for retail or office use. >> South Carolina s first Kroger Marketplace is under construction at Killian s Crossing. The new Kroger Marketplace will offer bed and bath selections, baby goods, a jewelry counter, home fashion and more, in addition to its fresh foods. The 125,squarefoot store will also offer Kroger Fuel. Other tenants at Killian s Crossing include ChickfilA, Applebee s, McDonald s, and Panda Express. The lifestyle center is located at I77 and Killian Road and offers 4 acres of retail, residential, and commercial space. >> Another redevelopment, West End Alley, is under construction across the street at the 7 and 8 blocks of Gervais Street. Tin Lizzy s Cantina opened their first South Carolina restaurant at the complex. City Bar and Fondue will be joining the new restaurant at the development. Additional tenants include Wet Willie s, Tsunami and Rocketman. >> Exterior renovations have been approved for the historic fire station building in the Vista near the recently completed University of South Carolina Alumni Center. The building will offer up to 35, square feet of commercial space. >> Spirit Communications Park, a minorleague baseball stadium, and The First Base Building are under construction at BullStreet. The First Base Building will be located at the first base line of the stadium and is expected to be delivered in April 216. The building offers approximately 26,23 square feet of retail and restaurant space in addition to 72, square feet of Class A office space. Upon full buildout of the mixeduse development, there will be approximately 3.3 million square feet of commercial space and 3,5 residential units. >> Rosewood Crossing, the former KMart redevelopment at Fort Jackson Boulevard and Garners Ferry Road, completed earlier this year. Marshalls, Michaels and Petsmart anchor the center. Kay s Jewelers, Kirkland s, and others are also located at the center. Unfortunately, the devastating, historic flood that hit South Carolina in October affected Rosewood Crossing and the retailers were required to temporarily close and repair damages caused by the flood. >> The Fresh Market will be opening a new grocery store at Two Notch Road and Fore Avenue, near the Village at Sandhill. The 25,squarefoot store will anchor a new 37,squarefoot center to be called The Shoppes at Two Notch and is expected to be open Fall 216. >> Landmark Square Shopping Center, located at I77 and Garners Ferry Road, recently underwent a major facelift. Ross Dress for Less and Burke s Outlet are the shopping center s newest tenants. Goodwill, which is also located at the center, is expanding its store. >> A redevelopment also completed this year on Park Terrace Drive in the Harbison Boulevard retail corridor. The redevelopment is anchored by Guitar Center and Academy Sports. Blaze FastFire d Pizza is opening its first South Carolina restaurant at the center. Additional retailers at the development include Salsarita s, Sports Clips, and Title Boxing Club. >> A new retail center is complete at Forest Drive and Percival Road. Tijuana Flats recently opened its first Columbia location at the development. Other tenants include Panera Bread, Wing Stop, PetCo, and Mattress Firm. >> Cardinal Newman moved into its new school on Alpine Road, leaving its former Forest Drive site vacant and available for redevelopment. The Beach Company plans to redevelop the site into 3 apartment units, shops and restaurant space, and a new parking garage. Highlighted Retail Activity HARBISON/ST. ANDREWS DOWNTOWN NORTHEAST COLUMBIA FOREST ACRES SOUTHEAST COLUMBIA CAYCE/WEST COLUMBIA 2 South Carolina Research & Forecast Report Q4 215 Columbia Retail Colliers International

3 Rental Rates Climb Killian s Crossing Site Plan Competition for space and rising construction costs are pushing up asking rental rates throughout the market. Asking rental rates for shop space have shown the greatest hike, increasing to $14.65 NNN per square feet (PSF) at yearend 215 from $12.73 NNN PSF one year ago. Asking rental rates for anchor and junior anchor space averaged $7.37 NNN PSF and $7.88 NNN PSF, respectively, at the end of 215, holding steady over the previous year. Demand for anchor space has been declining during recent years as retailers reevaluate their business plans and downsize their store footprints in an effort to minimize costs and provide a better consumer experience. Bigboxes vacated by grocers or large discount retailers have provided redevelopment opportunities for developers to convert the space into junior anchor and shop space which is easier to lease. The newly renovated space is then leased at higher rental rates, pushing up the market average. Recent Retail Announcements > > Walmart Neighborhood Market plans to open its first Columbia store at 3533 Broad River Road on January 27. Two other stores are under construction in the Cayce/West Columbia submarket. The stores will be located at Knox Abbott and Charleston Highway and at the intersection of Old Barnwell and Emanuel church roads. > > Tandy Leather leased space in Parkland Plaza in the Cayce/West Columbia submarket. > > The owner of Columbia s Gold Gym locations has rebranded the fitness centers into Müv Fitness. All gyms in the area remain open and a new location will soon open at Westside Plaza on Augusta Road in Cayce. > > Midwood Smokehouse is open at the former American Roadside Burger restaurant space at the Whole Foodsanchored Cross Hill Market. > > Red Robin opened at Columbiana Centre off Harbison Boulevard. > > Publico Kitchen + Tap opened on Greene Street at the former Garibaldi space. > > Persona Wood Fired Pizzeria is open at Main and Gervais Streets. The restaurant is the first location on the East Coast. Gross Retail Sales A strengthening economy, job creation and lower gas prices are motivating an increase in spending on retail goods and services. Gross retail sales in Richland and Lexington counties accounted for 91.6% of total sales in the Columbia, SC MSA in October 215 according to data from the South Carolina Department of Revenue. Gross retail sales from January to October 215 totaled $18.6 billion for the two counties, increasing 3.1% over the same period the previous year and 5.5% over the same period in 213. Shop Space Average Asking Rental Rates $12.73 Q4 214 $13.2 Q1 215 January October Gross Retail Sales Combined Richland & Lexington Counties Jan. to Oct % since 214 $13.73 Q % since % since 211 $14.29 Q3 215 $14.65 Q4 215 Lexington and Richland counties account for 91.6% of gross retail sales in the Columbia MSA. Source: South Carolina Department of Revenue 3 South Carolina Research & Forecast Report Q4 215 Columbia Retail Colliers International

4 Q4 215 Retail Market Summary Statistics Columbia, SC ANCHOR SPACE (GREATER THAN 25, SF) MARKET INVENTORY 15 1,28, % 11,279 $ ,833 $ ,228 $ , % 14,7 $21.95 Downtown Forest Acres SHOP SPACE (LESS THAN 1, SF) BUILDINGS Cayce/West Columbia VACANCY RATE (%) JR. ANCHOR SPACE (1,25, SF) 3 775,469.6% 4,62 $16. Harbison/St. Andrews 34 3,545, % 41,435 $1. 34,152 $ ,156 $14.84 Lexington 14 1,569,51 4.7% 33,245 39,746 $ , % 36, $8. 33,28 $ ,943, % 145,751 $7. 27,74 $ ,222 $15.7 North Columbia Northeast Columbia Southeast Columbia Market Total 8 1,11,65 6.4% 34,268 3,535 $ ,846,29 8.5% 357,71 $ ,327 $ ,397 $ Year in Review Restaurant Openings First Base Building at BullStreet >> Top Dawg Tavern opened their first South Carolina location at the Village at Sandhill. >> Panera Bread opened at the former Bluestein s Wholesale Dry Goods site along Gervais Street. >> Kaminsky s is open at 93 Gervais Street. The dessert café is also located in downtown Charleston. >> Old Chicago Pizza and Taproom opened at the Adluh Flour Mill redevelopment. >> Starbucks opened a new concept café at the Sheraton on Main Street in downtown Columbia. City Market Redevelopment >> Rise Gourmet Goods and Bakeshop opened along Harden Street. Big Box Announcements >> Costco is making a much anticipated appearance in the market. The new store is under construction at Piney Grove and Fernandina roads near Harbison Boulevard. >> Construction is underway on Sam s Club new store to be located at Fashion Drive and Forum Drive at the Village at Sandhill. The 136,squarefoot warehouse superstore will be the company s third Columbia location. Source: Garvin Design Group Historic Fire Station Redevelopment Hospitality News >> The Hyatt Place Hotel at 823 Gervais Street welcomed its first guests early in 215. AT&T occupies the streetlevel retail space at the hotel. >> A new 18room Aloft hotel is under construction along Lady Street across from the new Hyatt Place hotel. >> The Clarion Hotel on Gervais Street is being converted into a dualbranded Hilton Garden Inn/Home2 Suites hotel. Upon completion, the hotel will offer 23 guest rooms. 4 Source: Lambert Architecture + Construction Services South Carolina Research & Forecast Report Q4 215 Columbia Retail Colliers International

5 216 Outlook The strong momentum that began in 214 is expected to continue through 216. National retailers will continue to be attracted to the region s favorable demographics and growing population. New construction activity will continue in order to meet the robust demand for space, but will become limited as the remaining quality land options are developed. The redevelopment of older, vacant centers will continue to provide an opportunity for investors and attract retailers. Asking rental rates will continue to climb as demand remains strong and construction costs escalate. Around the State Retail development is on the rise in downtown and suburban submarkets throughout South Carolina. Charleston, South Carolina Development activity continues to increase in Charleston. A strong tourism industry drives downtown activity and a growing population is motivating suburban development. > > 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 KMart redevelopment that is also home to Nordstrom Rack, Dick s Sporting Goods, and DSW among other retailers. Greenville, South Carolina Significant 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 mixeduse developments with residential, office, and retail components. Groceryanchored shopping centers and smaller, fastcasual restaurantanchored centers are driving development and growth in the suburban submarkets. Commercial Real Estate Growth Cycle: Where the market stands and where it is going. NEW CONSTRUCTION RENTAL RATE EMPLOYMENT OCCUPANCY PHASE 4: RECESSION PHASE 1: RECOVERY COMMERCIAL REAL ESTATE GROWTH CYCLE PHASE 3: HYPERSUPPLY PHASE 2: EXPANSION THE COLUMBIA, 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 in years and momentum continues to grow as grocery stores and national retailers show significant interest in the market. For more statewide commercial real estate news check out our market reports at: FOR MORE INFORMATION Rox Pollard Vice President & Director of Retail Services Team rox.pollard@colliers.com Liz H. McCary Director of Marketing South Carolina liz.mccary@colliers.com Jessica D. Rahal, CPRC Research Coordinator South Carolina jessica.rahal@colliers.com Copyright 215 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Colliers International South Carolina 131 Gervais Street, Suite 6 Columbia, South Carolina colliers.com/southcarolina 5 North American Research & Forecast Report Q4 214 Office Market Outlook Colliers International