Disciplined development has kept vacancy rates low, allowing North Carolina’s Raleigh, Charlotte and Greensboro metropolitan areas to outpace the 2.4% national average retail rent growth, according to CBRE’s tally. Low vacancies helped Raleigh boost rents 5.1% from 2022 to 2023, Charlotte rents by 4.7% and Greebsboro rents by 3.9%.
Average rent per square foot climbed to $21.55 in Raleigh, where developers added 359,000 square feet of new space and tenants absorbed 561,000, leaving the market with a vacancy of only 2%, according to CBRE. Raleigh’s labor base is expected to grow by 2.4% this year, according to Marcus & Millichap vice president Benjamin Yelm, regional manager of the Carolinas and Southern Virginia. The trend could continue for the next several years, as Apple is expected to start construction on a corporate campus in Raleigh’s Research Triangle in 2026
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Register hereAs household formations slow in similar-size cities in the Southeast, regional investors increasingly may target Raleigh’s retail sector, he said. Some 1.3 million of new retail space will deliver in 2024, according to Yelm. The historically tight market’s coming supply largely will sit in the Chatham County corridor, where local companies are going on hiring sprees.
Net in-migration is tightening in the Charlotte metro’s retail market, too. Developers added 246,000 square feet of new space in 2023 and tenants absorbed 810,000, generating a vacancy rate of 3% and annual rent per square foot of $16.38, according to CBRE. Employment is expected to climb 2.3% this year. However, big-box retailers like Ashley, Homesense and Publix struggle to find suitable space to serve that base, as most new developments are under 30,000 square feet, according to Yelm.
North Carolina chain Lowes Foods will expand its store count from three to seven this year. One store will open in Winterville, east of Raleigh, and the other three will open in the Charlotte metropolitan area in Concord, Kannapolis and Waxhaw.
That might be why Ikea’s second unit in the market will occupy only 15,000 square feet compared with the 356,000-square-foot unit in University City that opened in 2008. The second Charlotte Ikea will open this summer in the Promenade on Providence as part of the chain’s strategy to open smaller “plan and order point” locations — which specialize in kitchen, bedroom and living room planning — to support flagship stores.
About 700,000 square feet of new space is currently under construction in Charlotte and expected to open in 2024, Yelm said.
Greensboro landlords also have the upper hand in tenant negotiations. Developers opened 417,000 square feet of new space in the metro in 2023, and tenants absorbed 658,000, resulting in a 3.4% vacancy rate and a 3.9% increase in annual rent per square foot to $12.83, according to CBRE. Leasing in the Piedmont Triad — Greensboro, Winston-Salem and High Point — is hot, with Carhartt, Dave’s Hot Chicken and CycleBar among the entrants. Projects on the horizon include Ryan and TH3 Partners’ plan to develop the remaining 30-acre parcel in Greensboro’s Pyramid Village commercial district into health care, retail, multifamily and hospitality to complement existing retail anchor Walmart.
Are you working on something exciting in North Carolina? Email executive editor Brannon Boswell at bboswell@icsc.com.