Tuesday, May 24, 2016

Eastern Massachusetts Retail Report Preview

The 2016 KeyPoint Report for Eastern Massachusetts/Greater Boston, based on our proprietary GRIID™ retail database, is in production. While you’re waiting, here’s a preview:

Vacancy Rate: An additional 553,700 square feet of retail space became vacant this year, resulting in a vacancy rate of 9.1%, a moderate increase from last year’s 8.8% rate. Retail space inventory also gained modestly, with an increase of 0.5%. New shopping centers that opened the prior year continued to phase in additional space, but no major new shopping center opened in the region this year. Big box closings, notably Sam’s Club, JCPenney, and Kmart, were the primary cause of the increase in vacancy this year. Citibank and City Sports departures from the region also added to the vacancy level.

Size Classifications: It was another negative year for small stores in the Under 2,500 SF category. This classification remains the largest segment of the retail market; however, its market share in the region slipped to 20.0%. Independents continue to represent the overwhelming majority of small store closings, although chains like Radio Shack, Curves for Women, Citibank, and 7-Eleven contributed as well. The only size classifications that showed improvement in the vacancy rate this year were the 25,000-49,999 SF bracket, which declined from 7.0% to 6.3%, and the 50,000-99,999 square foot segment, which declined from 6.6% to 5.9%, largely the result of new store openings by LA Fitness, Big Lots, TJMaxx, Ocean State Job Lot, Primark, and Round 1.
Town Rankings: The City of Boston again leads the region in total retail inventory. Cambridge ranked second again, while Natick jumped back ahead of Brockton for third place. Abington, Bedford, and Hingham were healthiest by occupancy, with vacancy rates below 3.0%. None of the top ten had rates above 4.0%. The highest vacancy rate was Taunton at 20.4%. Five towns are new to the top ten this year, including Bedford, Lynnfield, North Andover, Raynham, and Burlington.

Retailer Activity: The retailer adding the most retail space to the region was Target, with a new 160,000 square foot at Landmark Center in Boston. Life Time Athletics and Wegmans, both new additions to University Station in Westwood, ranked second and third. The new Walmart Supercenter in Wareham was partially offset by the vacancy of its traditional store in that town, keeping it out of the top three positions. Dollar Tree also added about 100,000 square feet to the region, the only small store format to place high on this list.

Also notable is the new 77,000 square foot Primark store in Boston, representing its first US store. Dollar Tree led the way in store count growth, netting 11 new locations.

The retailer closing the most space was Sam’s Club, phasing out its last two stores in Seekonk and Fall River. JCPenney closed its Natick Mall store, clearly its largest unit in the region at 192,700 square feet. Wegmans will replace this anchor space with a 125,000 square foot store in 2017, and lease the remaining space to complementary tenants. Citibank closed 15 branch locations, the most in the region.

Retail Categories: Non-retail uses are absorbing significant shopping center vacancy. In fact, Medical & Dental led all categories this year, netting 25 more units and ranked second in terms of incremental square footage. Fitness clubs continue to add space including some newcomers to the region: Fit Factory opened two units this year and Life Time Athletics added the largest fitness center in the region to date. Planet Fitness, Crunch Fitness, and LA Fitness added stores as well.

The complete report contains much more detailed information on these areas and more, and will be available soon at KeyPointPartners.com.

Bob Sheehan, Vice President of Research
BSheehan@KeyPointPartners.com

The KeyPoint Report examines changes in supply, vacancy and absorption, retailer activity, and market composition by store size and retail categories during the year ending May 2016. This study includes 189 cities and towns, representing more than 3,500 square miles (44% of Massachusetts’ land area) and approximately 5.2 million people (76% of the state population).  

KeyPoint Partners’ GRIID™ database maintains detailed information on virtually all retail properties in three key regions: Eastern Massachusetts, Southern New Hampshire and Greater Hartford, Connecticut. These markets encompass approximately 44% of all retail space in New England. GRIID™ has information on nearly 262 million square feet of retail space and nearly 60,000 retail establishments. The KeyPoint Reports contain a summary and analysis of market trends and activity for each studied area.

The KeyPoint Reports: Visit KeyPointPartners.com and click on Retail Reports at the top.

KEYPOINT PARTNERS COMPANY NEWS

New Leasing Assignments: 225-249 King St., Northampton, MA, 622 Somerville Ave., Somerville, MA, and 101 East St., South Hadley, MA. Sr. Associate Michael Branton is handling the assignments; Nashua Village, Nashua, NH. VP of Leasing Don Mace is handling. Employee News: Yabat Fantahun has been promoted to Parking Manager in the Boston office. Jacques Juslin has joined the Boston Office as Assistant Parking Manager.

NATIONAL RETAIL NEWS

Retail sales rose 1.3% in April according to the Commerce Department, trouncing forecasts. The rise in sales was the biggest in a year. Retail sales fell 0.3% in March, and last month’s rebound reflected a jump in auto sales and slightly higher gas prices. Among retailers reporting monthly comp-store sales, L Brands was up 1.0%, Gap was down 7.0%, and Costco sales were flat. See our sales reports BELOW...A US District Court Judge in the District of Columbia granted the Federal Trade Commission’s request for an injunction against the $6.3 billion merger of Staples and Office Depot. Staples will terminate the proposed merger as a result, and pay Office Depot a $250 million break-up fee. Staples also will scrap an agreement to sell more than $550 million in corporate contract business and related assets to Essendant in connection with the Office Depot deal... Sports Authority will close all of its 450 stores by Memorial Day after seeking Chapter 11 bankruptcy protection. The company filed for bankruptcy protection in March, but notified a US Bankruptcy Court last month that it could not reorganize and would instead focus on selling the firm. A group of liquidators that includes Gordon Brothers has reportedly acquired the assets of the company. An auction for the retailer’s store leases will be held at a later date. Sports Authority reportedly has more than $1.1 billion in debt.

ACCELERATING RETAIL NEWS

East Coast Wings & Grill has agreements to add 80 new restaurants across the country within the next 5 years. The chain currently has 31 locations...J.C. Penney will open 60 additional Sephora shops in Penney stores, including a flagship to open in November....T-Mobile plans to open 400 branded stores this year... Sierra Trading Post, acquired by TJX Cos. in 2012, is accelerating store expansion. A new location will open in May in Salt Lake City. In the 3rd quarter, TJX will open a Sierra Trading Post store in Ann Arbor, MN. In total, TJX plans to open five Sierra stores in 2016...Tuesday Morning opened two new stores, relocated 11, closed 18 and expanded one in Q3. The company plans 4 new store openings, 14 relocations, one store closing, and four expansions this year. Tuesday Morning currently operates almost 750 units in 40 states...Arby’s Restaurant Group Inc. recently signed a string of deals with new and existing franchisees to build 138 units. Arby’s has 3,300 locations worldwide...Dunkin’ Donuts will be opening its first stores in Hawaii. New franchise group Aloha Petroleum, Ltd. will develop 15 new Dunkin’ Donuts restaurants on the islands of Oahu, Maui, Kauai and Hawaii, with the first restaurant to open in 2017...Michaels Companies opened a 26,500 s/f Pat Catan’s Crafts and Floral store this month, the first opening since Michaels acquired Pat Catan’s parent company earlier this year. Michaels plans to open 43 Michaels stores this year, including 13 relocations. The company also plans to close 10 Michaels stores and 10 Aaron Brothers stores...Grill and sushi bar Kona Grill, Inc. expects to open 8 restaurants in 2016, representing over 20% unit growth... Aldi opened 7 new stores in Southern California this month...Gander Mountain will open 3 new stores this fall in Colorado, Pennsyvania and Texas, bringing its total store count to 160 units... Lifestyle retailer Sundance has added a store in the Portland, OR suburb of Tigard. Sundance has been expanding aggressively, with openings at Galleria Edina in Edina, MN, NorthPark Center in Dallas, Kierland Commons in Scottsdale, AZ, and Southlake Town Square in Southlake, TX...Whole Foods Market is opening its first ever 365 store in Silver Lake, CA this month. The smaller format of 365 averages 30,000 s/f, compared to Whole Foods at 45,000 s/f...TJX Companies Inc. plans to open almost 2,000 additional stores around the world. TJX currently has more than 3,600 stores in nine countries around the world. This year, TJX plans to add 195 new stores...Lowe’s plans to add at least 45 new stores this year.  At the end of the quarter, the company was operating 1,860 stores...GameStop has opened its first ThinkGeek retail location in New York City and plans to open an additional 25 US locations this year. The NY opening marks GameStop’s fourth ThinkGeek store...German supermarket giant Lidl is building up a real estate team in Philadelphia, the company’s first foray outside Europe, ahead of its planned US expansion. Lidl plans to open stores of about 36,000 s/f, about twice as big as a typical Aldi, but only about half the size of a standard supermarket. Most of the locations Lidl is rumored to be pursuing are in the Pennsylvania suburbs and South Jersey. Lidl already has about 200 staffers preparing for its first US openings, which are expected in 2018.

DECELERATING RETAIL NEWS

Bob Evans Farms Inc. is closing 27 poorly performing locations. Bob Evans is a family-dining chain with 548 restaurants in 18 states, primarily in the Midwest...Sears Holdings Corp. will close another 68 Kmart units and 10 Sears stores as it looks to restore profitability, about 5% of its nearly 1,700 store base...GNC Holdings Inc. will sell 84 company-owned stores to Sun Holdings in a deal that will eventually lead to the nutrition retailer selling off about 1,000 of its stores...New York grocery chain Fairway Market has filed for Chapter 11 bankruptcy this month...AĆ©ropostale filed for bankruptcy protection and will close more than 100 stores of its roughly 800 stores... The Fresh Market announced the closure of 13 US locations on May 18. The grocer will close all locations in Texas, Iowa, Missouri and Kansas. The company currently operates 175 stores in 23 states...Scoop NYC will shutter all 13 locations, and its Soho flagship is already out of business. The stores will likely shut down in eight to 12 weeks, when it’s estimated all merchandise will be sold out... Gap Inc will close 75 Old Navy and Banana Republic stores in overseas markets, as the struggling apparel retailer focuses on its North American market to revive its fortunes.The store closures include all its 53 Old Navy outlets in Japan.


NEW ENGLAND NEWS

Old Navy will open a two-level store in Millennium Tower Boston in Downtown Crossing, and Irish retailer Primark will expand its first US store in the same building... The NH State Liquor Commission plans to open a 33,000 s/f store in Nashua in August. The Nashua store will surpass the Salem store as the largest in the state...Sea Bags, the company that makes upscale totes and other items from recycled sail cloth, is opening 3 more stores this summer in Massachusetts, Connecticut and New York, bringing their total retail outlets to 8. New York, and the 925-square-foot store in Mystic, Connecticut, will open at the end of the month...Flagship Cinemas is opening a new theater next to Walmart in Falmouth, ME. The location will be Flagship’s 15th theater....Retail development firm Edens received approval to build a 10.2-acre mixed-use expansion adjacent to Dorchester’s South Bay Center. The 5-building lifestyle center will be complete by 2018.

APRIL RETAIL SALES REPORT



























Notes: figures gathered from individual company websites, press releases, and Federal filings.  Not all companies report all figures; results not reported will be marked “n/r”. Quarterly results will be updated when available; quarterly figures are shown in italics. Figures from companies not calculated to one decimal point automatically received an ending digit of 0. 

COMMERCE DEPARTMENT MONTHLY SALES

Sales at retailers jumped in April by the most in a year, the Commerce Department said. Purchases climbed 1.3% last month, the biggest gain since March 2015. Retail sales excluding autos rose 0.8% in April.

Source: U.S. Department of Commerce - commerce.gov

TREASURY YIELDS


















Treasury Yield Sources:  federalreserve.gov; ustreas.gov

CONSUMER CONFIDENCE INDEX

The Conference Board Consumer Confidence Index®, which had increased in March, declined moderately in April. The Index now stands at 94.2 (1985=100), down from 96.1 in March. The Present Situation Index increased from 114.9 to 116.4, while the Expectations Index decreased from 83.6 to 79.3 in April.

Source: The Conference Board - www.conference-board.org

PURCHASING MANAGERS INDEX

Manufacturing expanded in April as the PMI® registered 50.8 percent, a decrease of 1 percentage point from the March reading of 51.8 percent, indicating growth in manufacturing for the second consecutive month, following five consecutive months of contraction in manufacturing. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

Source: Institute for Supply Management - Manufacturing Report on Business - www.ism.ws