Thursday, December 19, 2019

KeyPoints 2019: Our Year In Review

It’s the end of another KeyPoints publishing year. Here’s a recap of topics on which we’ve commented in 2019 - with some additional thoughts from Bob Sheehan, VP of Research. Stay with us in 2020 to see where these stories go:

January: Which Supermarket Anchor Do You Want in Your Center? If you ask any shopper which shopping center he or she visits most often, chances are the answer will be a grocery-anchored shopping center. This retail property type typically offers a variety of convenience-oriented co-tenants...that serve the daily needs of nearby residents. NOTE: And remember, landlords...Amazon-proof tenants!

February: Where to Locate Your Next Store So you want to know where to locate your next store? When it comes to determining which site has the highest potential, there are a number of factors to consider. There’s no question that physical site characteristics...are important variables in the decision making process. However the utmost consideration should be given to demographics and competition. NOTE: I forgot one! A good store manager.

March: How Bad is the Mall Business These Days? It will be two years in May since Credit Suisse came out with its bold prediction that up to 25% of regional enclosed malls would close by 2022…Many skeptics rejected the idea, saying...that dire calculation was way overblown.  We’re not even halfway to that 2022 end date, yet it’s starting to feel as if that forecast by Credit Suisse may not be so unreasonable. After all, the ongoing brick-and-mortar fallout experienced at regional malls is showing no sign of abatement. NOTE: Nothing has happened to change the dire trend so far.

April: Any Takers for Toys R Us Space Yet? It seems that, on an annual basis, we see another national big box chain fall to online competition, high debt, and, in some cases, mismanagement…This means that every year the real estate industry is searching for replacements, sometimes successfully – and other times not. NOTE: It shouldn’t be surprising if we see another one or two Toys R Us pop-ups.

May: Preview: KeyPoint Report for Eastern MA 2019 Total inventory in Eastern Massachusetts experienced a modest decline this year to 196.0 million square feet, a drop of 0.2%...Following a substantial rise in the vacancy rate last year to 9.5%, it was encouraging to see the region show a nominal decline to 9.4% this year…Store closings and liquidations counterweigh on the region and hinder consistent absorption gains. Without the repurposing of space, conditions would be of even more concern. NOTE: Currently the vacancy rate has ticked higher, to 9.7%.

June: Preview: KeyPoint Report for Southern NH 2019 The retail inventory in Southern New Hampshire included 29.9 million square feet in 2019, indicating a modest increase of 107,800 square feet from a year ago. However, vacancy rose by 130,600 square feet, increasing the vacancy rate to 9.7% from 9.3% last year.  NOTE: It appears the vacancy rate is trending back up.

July: Vacancy: The New Norm Only a year ago it seemed that the worst was behind us, with retail store closings down dramatically: according to tracking by Coresight Research, there were 5,524 store closings in 2018, down 30% from an all-time high of 8,139 in 2017. Well, records are made to be broken…Coresight reports that 7,062 stores have been closed by U.S. retailers so far this year, and if this pace continues, the research firm projects more than 12,000 store closings by year end, blowing away the 2017 high. NOTE: Still on schedule for a new record.

August: Greater Hartford, CT Report Preview Total retail space in Greater Hartford currently stands at 37.6 million square feet, an increase of 166,300 square feet from last year. The modest change is primarily attributed to a low level of new development offset by a number of conversions to non-retail space…However, the region still could not escape a slight uptick in the vacancy rate from 10.6% to 10.8%. NOTE: Since the Report’s release, the vacancy rate has trended up to 11%.

September: JC Penney: What Now? JC Penney has been on a downward trend, experiencing a continuous erosion of market share…It has gone through four chief executives, most notably Ron Johnson, who came over from Apple after transforming Apple retail…Unfortunately Johnson couldn’t successfully reboot Penney’s, and he proceeded to run the ship into the ground…well not quite. NOTE: Q3 report shows a loss narrower than expected, but sales were still down 10.1% v. last year.

October: The Halloween Issue A bit of a bright spot in the midst of continuing upheaval in the retail world: even though they’re searching for ideas online, Halloween shoppers still plan to visit actual stores for their costumes, candy, and party purchases, at least according to the National Retail Federation’s Halloween Data Center. NOTE: Party City reported a 4.9% drop in October comp sales, and sales at its Halloween City stores fell 20.8%.

November: The Replacements: Avoid the Big Gorilla We all recall the days of large format retailers such as Linens ‘N Things, Circuit City, Borders, Filene’s Basement, Office Max and, more recently, Sports Authority and Toys R Us. There are many more we could add to this list…All large format vacancies to be filled. A certain degree of panic set in among landlords who had to find viable replacements in a retail world that was in a state of disarray. Who would they find? NOTE: Entertainment, Fitness, and non-retail continue to be the best alternatives.

All of which brings us to the close of another action-packed retail year! Thanks for your readership and support. Happy Holidays and a peaceful, prosperous New Year!




                                                                                                                                                                                                       

                                                                                                                                                                        Mark Becker     Bob Sheehan     Chris Cardoni
                                                                                                                                                                                                                                                             Partner/CFO     VP/Research  Marketing Mgr.

KEYPOINT PARTNERS COMPANY NEWS


NATIONAL NEWS

The Commerce Department said retail sales rose 0.2% last month. Data for October was revised up to show retail sales increasing 0.4% instead of gaining 0.3% as previously reported. Compared to November last year, retail sales increased 3.3%. Excluding automobiles, gasoline, building materials and food services, retail sales edged up 0.1% last month after rising by an unrevised 0.3% in October. Lackluster sales at the start of the holiday shopping season signaled consumer spending, which accounts for two thirds of the US economy, could be softening as the fourth quarter progressed... See sales reports below.

ACCELERATING NEWS

Expanding cannabis dispensary business MedMen is seeking  freestanding corner locations at major intersections, and has done 30-plus deals across the country. Former bank locations of about 3,500 s/f are preferred…Tupperware opened a holiday pop-up in downtown Manhattan, to be open through December…Bloomingdale’s opened its first new location since 2015, a three-level, 150,000 s/f store, at the newly opened SoNo Collection shopping center in Norwalk, CT…REI Co-op opened 4 new stores in a single day last month. By the end of the year, REI will have opened a total of 8 new stores…Wawa Inc. is gearing up expansion across Maryland. Wawa plans to open 5 new stores across the state in 2020. Over the next five years, it will also open 10 to15 more. Wawa operates more than more than 870 c-stores, with 600-plus offering fuel... H&M opened a 26,000 s/f store in downtown Detroit... Dave & Buster‘s opened 15 new stores last year and has already signed leases for 25 new stores, 11 of which are already under construction…LVMH has reached a deal to buy Tiffany & Co. at $135 a share in cash, or $16.2 billion. LVMH has a portfolio of luxury brands that includes Moët & Chandon, Dom Perignon, Givenchy and Louis Vuitton. The transaction is expected to close in the middle of 2020, subject to approvals...Japanese home retailer MUJI is about to embark on a US expansion, with 3 new stores scheduled to open in Seattle, Portland, and Santa Monica this year. The company operates more than 400 stores in Japan, hundreds across China and Europe, and 22 in the US and Canada…Tru Kids, which bought certain properties of Toys “R” Us after the chain filed for bankruptcy in 2018 and closed all its US stores, has opened 2 smaller and more interactive Toys “R” Us stores at Westfield Garden State Plaza, in Paramus, NJ and The Galleria in Houston…Value-priced fashion retailer Citi Trends will open 25 - 30 new stores annually and complete major remodels in 50 existing stores each year. Citi Trends currently operates 566 stores in 33 states...Target has signed a lease to open a 33,000 s/f small-format store on 42nd Street between 7th and 8th Ave. The store, projected to open in 2022, will be Target’s 10th small-format shop in the Manhattan area...Dollar General Corp. plans to open 1,000 stores in 2020, up from 975 in 2019. It also will undertake 1,500 store remodels and 80 store relocations...Primark will open 4 more US stores, including in the brand-new American Dream mall in East Rutherford, NJ. It also has signed a lease for a 45,000 s/f retail building on Chicago’s State Street, the biggest lease in that city’s Loop district since 2014. Two more US outlets will open in 2020 in Sunrise, FL and the Fashion District of Philadelphia, that city’s third Primark. Primark opened its first US store in Boston in 2015…Boot Barn will open at least 40 stores by the end of its 2021 fiscal year. The retailer of western and work-related footwear, apparel and accessories operates nearly 250 stores across the US…Lidl is acquiring 6 Shoppers Food & Pharmacy from United Natural Foods Inc. (UNFI), following the announcement that UNFI reached deals to sell 13 of its 43 Shoppers Food & Pharmacy stores to 3 grocery operators...Dine Brands will launch Flip’d by IHOP in April, about half of the size of a typical IHOP, with less seating and no wait staff. Customers order via a digital kiosk or move through assembly line at the counter. Online ordering for pick-up or delivery will also be available. IHOP is exploring sites in New York, Washington, D.C., Denver, Chicago and San Francisco...Lululemon opened a net of 19 stores in the quarter, ending with 479 total locations. Since the year-ago quarter, the retailer has opened a net of 53 new stores... Burlington opened 72 new stores and closed six in the last nine months, bringing its store count to 726…It’Sugar opened a three-level, 22,000 s/f store at American Dream in East Rutherford, NJ. A three-story replica of the Statue of Liberty covered in Jelly Belly beans stands outside the entrance.

DECELERATING

HRI Holding Corp., parent company of Houlihan’s and sister restaurant concepts J. Gilbert’s, Bristol Seafood Grill, Devon Seafood Grill, and Make Room for Truman, has filed for Chapter 11 bankruptcy protection while accepting a “stalking horse” offer to be acquired by holding company Landry’s for $40 million and the assumption of certain liabilities. The move follows the closing of 12 unprofitable stores, which pared the company’s restaurant portfolio to 47 restaurants, 34 of which operate under the Houlihan’s name. Landry’s portfolio includes Morton’s The Steakhouse, McCormick & Schmick’s, Mastro’s, Chart House and Salt Grass Steak House...A.C. Moore has decided to exit its retail operations as part of a broader strategic plan. The company has retained Gordon Brothers to close stores. A.C. Moore currently operates more than 145 stores.  Michaels, which operates some 1,260 stores nationwide, will assume leases for up to 40 A.C. Moore locations and an East Coast distribution facility. The stores are expected to re-open under the Michaels banner in 2020...RTW Retailwinds, formerly known as New York & Co., will close up to 30 stores in coming weeks. For the year, RTW expects to have opened nine stores and closed 31.

NEW ENGLAND NEWS

The 99 Ranch Market, the largest Asian supermarket chain in the country with more than 50 stores, will open a 60,000 s/f store in North Quincy in the former Big Y, which closed in August. The location will be 99 Ranch’s first in New England...Urban Edge Properties has acquired Wonderland Marketplace, a 139,507 s/f shopping center on 16 acres along Route 1A in Revere, MA for $24.1 million... 7 retail tenants have signed on to take space in the South Village section of the 170-acre Tuscan Village mixed-use development in Salem. L.L. Bean will open a 15,000 s/f lakeside store. The other retailers are Old Navy, Ulta Beauty, JPMorgan Chase Bank, Chipotle Mexican Grill, fitness company Drive Custom Fit, and Pressed Café. About 800,000 s/f of retail space is planned in the mixed-use Tuscan Village, which will be some 2.8 million s/f. The remainder of the space will include residential and Class A corporate and medical office space...Newmark Knight Frank announced the completion of the sale of Simsbury Commons in Simsbury, CT on behalf of EDENS to PAG Investments. Totaling 256,804 s/f, Simsbury Commons is presently 98% leased. Major tenants include Stop & Shop, Bob’s Stores, Bed Bath & Beyond, Apple Cinemas, and HomeGoods...The awning-capped, roof-decked Baseball Tavern across from Fenway Park will soon close its four-floor pub, but will re-open in the new development proposed by Scape North America for the 1252-1270 Boylston Street block, which will feature apartments and ground-floor retail. The new Baseball Tavern won’t have a roof deck, but will have a street-level patio.

MALL NEWS

Brookfield Properties opened a new enclosed mall, The SoNo Collection, in South Norwalk, CT. The 700,000 s/f center is situated at the intersection of I-95 and Highway 7. Among the 90 tenants are Nordstrom, Bloomingdales, Arhaus, H&M, Pink, Talbot’s, White Barn Candle, and Zara. Ebar and Bazille inside Nordstrom are the only restaurants now open, but coming soon are Yard House, Pinstripes, Mission Ceviche, and several others... Nearly 50 years after the Hanover (MA) Mall first opened its doors, the shopping center off Route 3 - once the largest of its type in the region - will shut down for good at the end of January. A handful of stores are still open inside the building, including Macy’s, Sears, Foot Locker and Famous Footwear. Macy’s will stay open and anchor the new mixed-use development called Hanover Crossing slated to replace the mall by 2021...Jared opened a new concept store in collaboration with digital brand James Allen at Francis Scott Key Mall in Frederick, MD. The store combines the best of the two retailers, both of which are owned by Signet Jewelers. Signet operates 3,300 stores under the brands Kay Jewelers, Zales, Jared The Galleria of Jewelry, H. Samuel, Ernest Jones, Peoples, Piercing Pagoda, and JamesAllen.com.

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

The Commerce Department said retail sales rose 0.2% last month. Excluding automobiles, gasoline, building materials and food services, retail sales edged up 0.1% last month.

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® decreased in November, following a slight decline in October. The Index now stands at 125.5 (1985=100), down from 126.1 in October.

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

PURCHASING MANAGERS INDEX

Manufacturing contracted in November, as the PMI® registered 48.1 percent, a decrease of 0.2 percentage point from the October reading of 48.3 percent. “The PMI® contracted for the fourth straight month, at faster levels compared to October. This marks eight straight months of softening or contraction in manufacturing.

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