2021 Triangle Market Overview and 2022 Forecast: RETAIL

February 11th, 2022

Retail Trends and OutlookJoaquin Canals NAI Tri Properties broker photo

Each year, our industry experts evaluate and review the Raleigh, Durham, and greater Triangle commercial real estate market’s annual performance. We share activity and trends from the market data we analyzed and experienced in 2021 to activities we anticipate in 2022.

What are the key market drivers? How have the different real estate sectors performed?

In this segment, we interviewed Joaquin Canals, Senior Vice President to share his thoughts on retail trends. To learn more about other property types click on office, land, flex, healthcare, life science, investment sales, and warehouse.

What was unique about 2021? And were there any milestones for this property type?

Nationwide, major retailers leveled off in the number of store openings compared to closures, signaling that the retail market is on the rebound.

In Raleigh Durham, we also saw positive activity; vacancy in 2021 continued to decrease and absorption increased. 2021 net positive absorption was over 690,000 square feet compared to a negative net absorption seen in 2020, and construction was dominated by supermarket anchored centers or shadow-strip construction adjacent to big-boxes.

Who were the big “winners” in this property type?

Not sure if there were any ‘winners’ except for the large category killers like Wal-Mart, Target, Supermarkets, Home Depot, and high-end retailers, which is what was predicted.

Do you see any new emerging trends? Where do you see growth occurring?

You are going to see the continued redevelopment of malls into mixed-use, distribution, or life sciences, but it will be limited to malls located on exceptional real estate where redevelopment can occur. Two successful examples of this happening in our market are Cary Town Center mall that Epic Games purchased as a new headquarters and the Morrisville Outlet Mall being converted to life science and is fully leased by Invitae Corp. And at the end of the year, it was announced that a former Kroger on Six Forks near Wake Forest Road has plans to convert to lab space.
We anticipate supermarket driven construction will continue in suburban areas where housing is thriving.

What do you anticipate for 2022?

We expect 2022 will be very similar to what we saw in 2021. Grocery anchored asset types will prevail as Raleigh Durham continues to grow and expand outward.

The pipeline for 2022 most notably includes The Fenton delivering with 345,000 square feet of retail is about 90% preleased and includes retailers such as Pottery Barn, Williams-Sonoma, Athleta, Paragon Theaters, Arhaus Furniture, and more.

Where do you see opportunities in your property type for Raleigh, Durham, and the greater Triangle?

There still is an opportunity for tenants to negotiate favorable lease terms as landlords continue to be challenged to retain tenants.

Landlords are coming to grips with the idea that mid-sized boxes just aren’t coming back and when they do, it’s at a discounted rental rate. So landlords more landlords are considering repositioning retail centers to other property types.

In our market, what challenges are there in this property type?

The costs associated with construction and retrofitting spaces has skyrocketed and large-box vacancy in strip centers will continue to drag this sector.

 

As you look ahead, planning your CRE goals for 2022, let our real estate advisors help guide you with insider market knowledge and experience.

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