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Charlotte Retail Market Report2Q’18

Charlotte’s Economy Continues to Climb in 2018 with Low Unemployment and Increasing Home Values...Local Economy

Charlotte’s economy continues to climb during the first half of 2018, driven by the combination of low unemployment and skyrocketing home values.

The unemployment rate for Charlotte’s metro area fell to 3.4% during the second quarter, according to the U.S. Bureau of Labor Statistics. That marked its first journey below 4.0%. The Q2 figure was down from 4.0% at the end of the previous quarter and 4.3% a year earlier. Charlotte’s rate compares favorably to both state and national figures.

The Charlotte Chamber reported that total employment in the Charlotte MSA rose to just less than 1.3 million during the second quarter from 1.26 million the prior year. Median home prices climbed to $245,000 from $226,500 a year earlier, the Chamber said, while monthly retail sales rose to $2 billion from $1.8 billion.

Charlotte Retail Market Overview

Charlotte’s retail market continued to see positive trends at midyear. Vacancy rates have reached record lows over the past year, while average rents have hit record highs. A flurry of construction activity in 2017 has put more product on the market this year, including high-profile projects like the Whole Foods development uptown. Construction has slowed compared to last year, however, partly because of a dwindling supply of available land. That might be one reason the number of leasing deals has also declined.

The retail market’s vacancy rate was 3.8% at the end of the second quarter, little changed from the previous quarter and year. Rates haven’t been above 4% since the first quarter of 2017, and remain well below a decade ago, when they pushed into double digits.

Leasing activity continued to slow compared with 2017. A total of 192 lease deals were signed during Q2, down from 226 the prior year. It was the second straight quarter that fewer than 200 deals were signed, ending a seven-quarter run of 200-plus deals. Square footage involved in the Q2 deals fell to 676,343 from 862,078 a year earlier.

Greater Charlotte Area(28 ± Mile Radius from Uptown Charlotte)

2018 2Q

Total Number of Buildings 10,244

Total Square Feet 126,565,309

Average Asking Rates $16.30

Overall Vacancy 3.8%

Net Absorption 347,466 SF

Deliveries 573,412 SF

Under Construction 1,397,467 SF

Charlotte, North Carolina

2Q 2018Retail Market Report

3%

4%

5%

6%

7%

8%

9%

4.7% Average Vacancy Rate

Vacancy Rates

$13.00

$13.50

$14.00

$14.50

$15.00

$15.50

$16.00

$16.50

$17.00

0100,000200,000300,000400,000500,000600,000700,000800,000900,000

1,000,000Absorption (RSF) / Asking Rates

2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%

10.0%11.0%12.0%13.0%14.0%

Charlotte Unemployment Rate

Avg. Asking Rate Absorption SF

Copyright: NAI Southern Real Estate 2018Sources: CoStar, NAI Southern Real Estate

2Q17 vs. 2Q18

DELIVERIES ASKINGRATES

VACANCYRATE

NETABSORPTION

The biggest retail lease signing for the quarter was for 51,000 square feet by Aviation Institute of Maintenance at Independence Square in the East Charlotte submarket. The second biggest deal of the year was inked during Q1, when Ultimate Performance Sports signed on for 37,176 square feet at 10400 East Independence Boulevard.

Twenty retail buildings spanning 573,412 square feet were delivered during Q2. That compares to 22 buildings spanning 307,087 square feet the previous quarter and 29 buildings totaling 383,615 square feet the previous year. The quarter’s biggest delivery was Harris Square, a 67,000-square-foot building in the University submarket. The top delivery so far in 2018 was the 150,000-square-foot Life Time athletic facility at Rea Farms in South Charlotte.

Meanwhile, construction activity slowed. Fifty-eight buildings totaling 1.3 million square feet were under construction at the end of Q2, down from 65 buildings totaling 1.8 million square feet the previous quarter and 79 buildings totaling 2.2 million square feet the previous year. The number of buildings under construction was the lowest in six quarters. First-quarter net absorption was positive 347,466 square feet. That compares to positive 620,480 square feet the previous quarter and positive 266,004 square feet the previous year. The average Q2 rental rate across all types of retail properties was $16.30 per square foot, up from $16.01 the first quarter and about the same as a year earlier. Year-to-date, rates are lower than they were in 2017, though they’re still at their second-highest level of the decade.

Central Business DistrictAn affiliation between AP Stonewall Station Phase 1 LP and Asana Partners spent around $34 million to buy 47,000 square feet of retail at Novel Stonewall Station in uptown Charlotte. The deal included the 38,000-square-foot Whole Foods Market.

Midtown - South EndThe Charlotte City Council approved a 20-story office tower and mixed-use project in Elizabeth that will include up to 512,500 square feet of office space, 30,000 square feet of ground-floor retail and a 240-room hotel. The project, being developed by NAI Southern Real Estate, is bounded by Baldwin Avenue and Third and Fourth streets and is located adjacent to the Lynx Gold Line streetcar system. Charlotte-based The Spectrum Cos. announced plans for a mixed-use project in South End that will likely include two midrise office buildings, ground-floor retail and restaurant space, a boutique hotel and a pedestrian plaza. The development is located over a five-acre block bounded by Carson Boulevard and Tryon, Catherine and Winnifred streets. It currently contains surface parking lots and a 58,500-square-foot office building at 1100 South Tryon Street. No delivery date has been announced.

A number of new tenants signed leases at the Atherton Mill mixed-use site in South End. Columbia, S.C.-based Edens, which owns the property, said the following retailers signed on and will likely open during the summer of 2019: Cava, a Mediterranean restaurant; Indaco, a rustic Italian restaurant; The Eagle Food & Beer Hall, an eatery specializing in Southern dishes; Las Olas, a swimwear maker; Paint Nail Bar, a luxury nail salon. About 60,500 square feet of retail space is being developed at Atherton Mill

SouthparkA partnership between Ascentris and Childress Klein paid $15 million for a 5.54-acre tract of land at the corner of Morrison Boulevard and Sharon Road in the Southpark submarket. The seller was Southpark United Methodist Church Inc. Plans for the mixed-use property include a pair of 12-story apartment buildings as well as nearly 90,000 square feet of ground-floor retail space.

$9$11$12$14$15$17$18$20$21$23$24$26$27

2014

Q1

Q2

Q3

Q4

2015

Q1

Q2

Q3

Q4

2016

Q1

Q2

Q3

Q4

2017

Q1

Q2

Q3

Q4

2018

Q1

Q2

Class A Class B Class C



n 11,065-square-foot mixed use project was delivered at the City Park development in Southwest Charlotte during the first quarter. City Park will include residential, office, retail and hotel development.

East CharlotteA partnership between Selwyn Property Group and SunCap Property Group said it will develop a 13.6-acre site into a 60,000-square-foot commercial center near Monroe and Idlewild roads in East Charlotte. The center, dubbed MoRA Point, will be anchored by a 22,000-square-foot grocery store. Broadstone KKD Portfolio LLC paid $1.8 million to buy the roughly 3,000-square-foot Krispy Kreme store at 9301 East Independence Boulevard in the East Charlotte submarket. Krispy Kreme signed a 20-year lease at the property on the day of the transaction.

Outlook Charlotte’s rapid economic and population growth have bolstered the area’s retail market, even as online retailers take more market share from brick-and-mortar chains. Mixed-use projects have driven much of the retail market’s expansion over the past couple of years and should keep doing so in the near term. The year-over-year slowdown in leasing deals is something to keep an eye on, though that might be more a product of dwindling supply than a lack of interest on the part of prospective tenants.The macro outlook remains robust in both Charlotte and North Carolina. Speaking at a mid-year Economic Outlook forum, Charlotte economist John Connaughton said the state should add 113,000 net jobs in 2018. He also forecast that North Carolina’s GDP growth rate will accelerate to 2.8% this year from 1.6% the previous eight years.

Asking Rates by Building Class

$8 $10 $12 $14 $16 $18 $20 $22 $24 $26 $28 $30 $32 $34

Lancaster CountyGaston CountyLincoln County

Cabarrus CountyNorth

Union CountyIredell County

York CountyEast

NorthwestNortheast

Outer SoutheastSouthwest

Inner SoutheastDowntown

Rates by Submarket



2Q 2018Retail Market ReportClass A, B & C Submarket Statistics

and Submarket Specific Statistics

Notable Lease TransactionsBuilding Submarket SF Qtr Tenant Name

1 246 N New Hope Rd Gaston County 103,000 2nd Curt’s Premium Outlets

2 7421 E Independence Blvd East 51,000 2nd Aviation Institute of Maintenance

3 2025 Morganton Blvd SW Caldwell County 48,000 2nd N/A

4 845 Blowing Rock Blvd Caldwell County 38,660 1st Big Lots

5 10400-10420 E Independence Blvd East 37,176 1st Ultimate Performance Sports

6 2365-2441 Cherry Rd York County 32,798 1st Adventure Air

7 16045 Johnston Rd Outer Southeast 29,990 2nd Crunch Fitness

8 1834 Matthews Township Pky East 25,685 2nd Fab Fun Furniture Company

9 13719 Independence Blvd Union County 24,800 2nd N/A

10 906-916 N Salisbury Ave Rowan County 20,000 2nd To The Pointe Dance

11 3500 E Independence Blvd East 18,162 2nd N/A

12 248 1st Ave NW Catawba County 18,000 1st N/A

13 19700-19706 One Norman Blvd North 15,752 2nd Carolina Office Solutions

14 1227-1255 Burkemont Ave Burke County 15,000 1st Harbour Freight Tools

15 426-448 Conover Blvd Catawba County 14,550 1st Walgreens

16 314 S Main St Rowan County 13,000 1st Railway Crossfit

17 2620 Nelda Dr Union County 12,000 1st Diamond Indoor Soccer Academy

18 5331-5411 South Blvd Inner Southeast 11,766 2nd Party City

19 2055 US Highway 70 SE Catawba County 11,400 1st Sunrise Appliances

20 1718 Highway 70 SE Catawba County 11,160 1st Guitar Center

21 1443 South Blvd Inner Southeast 11,060 2nd N/A

22 22 Union St N Cabarrus County 10,409 1st N/A


*Class A-C covers the entire 28± Mile Radius Market

Total SFTotal #

of BuildingsTotal

Available SFVacancyRate %

NetAbsorption

Building Deliveries

UnderConstruction

End of 2Q

Average Rental Rate

Class A / (4 & 5 Star) 23,955,154 411 1,479,160 5.9% 375,933 8 375,933 $22.06

Class B / (3 Star) 70,118,646 5,016 4,051,601 5.7% 122,078 12 401,864 $16.11

Class C / (1 & 2 Star) 32,491,509 4,817 1,722,407 5.3% (150,545) 0 8,500 $13.53

Dowtown 1,336,934 91 102,789 5.4% (1,079) 1 15,000 $32.59

Inner Southeast 11,002,442 898 415,918 3.2% 99,160 2 23,000 $25.34

Southwest 3,845,437 259 111,423 1.7% (4,195) 0 20,980 $20.05

Outer Southeast 11,907,832 571 662,434 3.6% 44,366 1 357,813 $19.87

Northeast 11,295,762 907 802,382 4.0% (11,565) 1 172,550 $17.17

Northwest 7,190,024 621 498,980 3.8% (115,046) 0 453,925 $16.73

East 13,465,849 972 656,958 3.2% 69,626 0 23,290 $16.30

York County 13,023,295 1,186 786,485 3.9% (18,265) 3 74,308 $14.63

Union County 10,051,711 939 930,762 5.8% (19,728) 3 33,400 $13.77

Iredell County 10,713,345 855 627,940 4.6% 62,402 1 19,100 $14.38

Cabarrus County 13,995,533 1,030 689,352 3.6% (47,960) 2 32,389 $12.97

North 5,481,494 441 259,163 4.0% 15,583 2 25,000 $13.26

Lincoln County 4,272,324 468 232,862 3.5% 66,889 1 75,282 $12.86

Gaston County 13,870,255 1,425 947,357 5.3% 136,954 0 9,100 $11.25

Lancaster County 3,966,566 408 242,553 4.3% 196,721 3 11,200 $10.39



Notable Lease TransactionsBuilding Submarket SF Qtr Tenant Name

23 400 N Polk St Outer Southeast 9,150 2nd N/A

24 4901 Wilkinson Blvd Northwest 9,100 1st AVR Rental Car

25 102 N Statesville Rd North 8,943 2nd Shapes for Women

26 4571 S New Hope Rd Gaston County 8,800 2nd For Left

27 630 University Center Blvd Northeast 8,547 2nd Seafood Connection

28 375 Main Ave NE Catawba County 8,400 2nd Steele Construction

29 541 E Club Dr Gaston County 8,400 2nd Sellers Automotive

30 1451-1497 E Franklin Blvd* Gaston County 8,127 1st Tuesday Morning

31 8829 E W.T. Harris Blvd East 8,100 1st King of Spicy

32 1423 S Tryon St Inner Southeast 7,600 2nd N/A

33 5850 E Highway 74 Union County 7,522 1st N/A

34 1458 Perfection Ave Gaston County 7,104 1st King Tiger Tae Kwon Do

35 1322 Cliffside Pl SE Caldwell County 7,000 2nd Auto Correct Paint and Body

36 2351 Len Patterson Rd York County 7,000 1st Pet Supplies Plus

37 2587 Cherry Rd York County 6,700 1st Quality Golf

38 14015 Conlan Cir* Outer Southeast 6,600 1st Duckworths Grill & Taphouse

39 2667 E Main St Lincoln County 6,500 2nd N/A

40 7000 N Tryon St Northeast 6,500 1st Bridgestone

Notable Sales Transactions: 2017 through 2Q 2018Building(s) Price SF Seller Buyer

Mooresville Consumer Square $48,230,000 470,310 DDR Corp. Slate Retail REIT

Hickory Ridge Shopping Center $44,020,000 380,487 Retail Properties of America, Inc Acadia Realty Trust

14835 Ballantyne Village Way $43,150,000 146,000 Vision Ventures American Realty Advisors

400 S. Stonewall St $34,050,000 47,500 Crescent Communities Asana Partners

Matthews Township Shopping Center $27,500,000 128,651 Invesco ECHO Real Estate Services

The Arbors at Mallard Creek $25,100,000 55,323 Principal Real Estate Investors, LLC Westwood Financial Corp.

The Shops at Whitehall Commons $15,600,000 42,245 Weingarten Realty Advisors Westwood Financial

Cannon Crossroads $14,525,000 67,055 Pacolet Miliken Enterprises, Inc ECHO Real Estate Services

West Town Market $14,250,000 67,940 Retail Properties of America, Inc New Market Properties, LLC


* Renewal

Charlotte

Concord

Rock Hill

Monroe

Fairview

Huntersville

Mint Hill

Kannapolis

Unionville

Weddington

Indian Trail

Fort Mill

Matthews

Mooresville

Cornelius

Midland

Belmont

Lake Norman of Catawba

Waxhaw

Newport

Lake Wylie

Catawba

Stallings

Denver

Lesslie

Pineville

Maiden

Mount HollyHarrisburg

Wesley Chapel

Lowesville

Westport

Tega Cay

Mineral Springs

Marvin

Landis

Enochville

Dallas

Lowell

Davidson

Cramerton

India Hook

Stanley

Salisbury

Ranlo

Wingate

High Shoals

Faith

Iron Station

Granite Quarry

China Grove

Riverview

Hemby Bridge

Mount Pleasant

JAARS

McAdenville

77

85

8585

74

74

485

485

485

485

485

49

29

7429

29

85

85

7477

601

601

321

5211677

21

21

16

16

521

28 ± Mile Radius

277

85

77

77

77

2949

16

Mecklenburg County

Gaston County Cabarrus County

Union County

York County

Lincoln County

Rowan County

LancasterCounty

Iredell County

1

82

6

5

7

3

4

Retail Submarkets1 Downtown2 Inner Southeast3 Outer Southeast4 East5 Northeast6 North7 Northwest8 Southwest





1Q 2017RETAIL Market Report

NAI Southern Real Estate4201 Congress StreetCharlot te, NC 28209

704-375-1000www.srenc.com

NAI Southern Real Estate-Charlotte, NC. We obtained the information above from sources we believe to be reliable. However, we have not verified its accuracy and make no guarantee, warranty, or representation about it. No part of this document is to be reproduced without our written permission. This document has been prepared and issued by NAI Southern Real Estate on the basis of publicly available information, internally developed data and other sources believed to be reliable. The information contained herein is not guaranteed, does not purport to be comprehensive and is strictly for information purposes only. NAI Southern Real Estate or its affiliates does not assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions provided herein. Any expressions of opinions are subject to change without notice. This document does not constitute an offer or an invitation to invest, lease, rent, purchase or conduct any real estate activity, business activity, or personal activity based upon its data or purpose. No party should treat any of the contents herein as advice.


Billy [email protected]

704-632-7634

Ragan [email protected]

704-632-7630

Louis Rose [email protected]

704-632-7622



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