For 75 years, the Army-Navy store in downtown Greenville occupied 6,000 square feet of South Main Street. The company announced its intention in early 2021 to move to Laurens Road, having sold the long-held location for $ 1.34 million.
While the new owner clearly has plans for the space after paying top dollar for a prime downtown address, the sale technically leaves one vacancy – one of many that dot the central business districts of Greenville and Spartanburg in the wake of the coronavirus pandemic which is taking a heavy toll on brick and mortar retail. But as the move from the Army-Navy store makes clear, not all retail vacancies are created equally.
“This store is vacant now, but it has been bought and is going to be redeveloped. This appears as a vacant position in the report, ”said Jimmy Wright, broker with NAI Earle Furman, the largest commercial real estate brokerage in the upstate. “But it’s a transition by an owner-operator who said, I see the best value for me now is to sell this building and move somewhere else, and let someone else take this clay ball. and reshape it. “
According to a second quarter 2021 market report prepared by NAI Earle Furman, the number of vacant homes in the upstate continued to rise: they fell from 4.8% to 5.3% in the downtown area. of Greenville and 5.8 to 6.5% in downtown and western Spartanburg. This despite some positive figures in the industrial and even office sectors during this same period, highlighting the difficulties facing retail operators as Covid-19 continues to maintain its tenacious grip on northern the state, the nation and the world.
Yet Wright would not call the situation alarming. “There will always be a vacant position; it’s inherent, ”he said. “When we underwrite properties, we underwrite them with a built-in vacancy factor, and banks look for that as well. A typical vacancy factor in a multi-tenant building is between 3% and 5%. So these numbers are still within tolerance, even though they may be on the high end. “
Overcoming the “Amazon effect” of retail
The recovery of retail in the upstate was also hampered by other factors. A labor shortage among lower paid hourly workers – so evident in the restaurant and hospitality industry – has forced many retailers in the upstate and elsewhere to adjust hours opening or delaying their expansion plans. And soaring construction costs due to inflation have made building new commercial properties less feasible than before the pandemic.
“I don’t know what the long-term impact of the current inflationary period is,” Wright said. “There are a number of factors that go into it: there’s a labor shortage, there’s a supply chain issue, and then on top of that you’ve got all these projects. who have been inactive for some time. So now, these are restored, and it’s just a matter of having all these circumstances striking at the same time. So I think in the short term, it will be difficult to develop new retail businesses because of the cost of it.
The pandemic has also altered the purchasing habits of consumers, potentially in the long term. “The Amazon effect is real,” Wright said, referring to the practice of buying online rather than buying in person, in many areas postponing lockdown periods. This got retail owners thinking about how they would reposition themselves for the future, an area that some retailers in Greenville and beyond are already starting to understand.
Wright points to the continued success of TJX, the parent company of brands like TJ Maxx, Marshall’s and Home Goods, whose customers tend to buy great deals in person that they won’t find online. “They have a good role model and they are successful right now,” he added. “They’re not totally dependent on the Internet and they’ve found a model that’s right for them. Others are doing the same, because we are in this period of transition.
It is not unusual at this time to see retail spaces shifting from stores to personal service outlets like “financial services or beauty salons, be it an eyelash studio or a hair salon or something like that that you can’t get out of Amazon, ”Geoff Beans said. , also a broker at NAI Earle Furman. “It’s a service you pay for. The restaurant industry is one of them, but it is currently experiencing negative issues during the labor shortage.
During this period of transition for retailing in the upstate, Wright also expects an increase in the number of service-oriented boutiques like Monkee’s of the West End, a women’s clothing boutique in Greenville who succeeded despite the difficulties of the pandemic. Again, the idea is for companies to go their separate ways by offering something that customers can’t get online.
“You’re looking at a retailer like the New York Butcher Shoppe, which has a grocery component, but it’s also service-oriented,” Wright said of the Greenville-based company with three locations in the area. “You can go out there and ask for a tomahawk rib eye, and you can get one, and they’ll tell you how to cook it.” They all have little differences that are designed to serve the customer better and interface with them more.
Are vacancies an opportunity for growth?
In his second quarter market report, NAI Earle Furman expected the upstate retail march to continue into the second half of the year. The negative absorption trend in the Greenville area – meaning more businesses are moving than they are moving in – is expected to continue. “Although the state is working to reopen its economy, there is still a long way to go towards a full recovery,” the report said.
A critical step towards getting back to normal is filling the labor shortage, Beans said. “These are companies that need workers,” he added. “There are so many restaurants right now that aren’t open for lunch – they can’t factor in lunch because their sales aren’t as high as they want, and that keeps them from looking to develop. So correcting that is really a big deal right now.
And yet the retail vacancies in Greenville and Spartanburg could offer more growth opportunities, as installation in these off-the-shelf locations will not require the exorbitant costs of new construction. “The spots with vacancies right now, at least in the short term, are in a better position,” Wright said. “They know what their costs are now and they can figure out what their rates are, so they could have a competitive advantage. It might be cheaper to renovate than to start new construction.
And Main Street, Greenville’s commercial face for many tourists and residents, remains healthy due to the city’s robust growth. The location of the old Army-Navy store, after all, will one day house something else. “At any stage of growth, you will have transition spaces,” Wright said. “That’s the underlying thing: we grow up, and when you grow up, you have a transition.