Preview: KeyPoint Report for Greater Hartford, CT

With the releases of The KeyPoint Reports on Eastern Massachusetts/Greater Boston and Southern New Hampshire behind us, it’s time to move onto the report for Greater Hartford, Connecticut, based on our proprietary GRIID™ retail database. As with the other reports, our modus operandi is to share some of the regional highlights while the complete version is still “baking”. In Greater Hartford, the 2014 retail market traveled further down the road to stability.

Retail Inventory and Vacancy: Total retail space in Greater Hartford currently totals 37.2 million square feet, a nominal increase of 70,000 square feet from last year. In today’s environment, limiting new development should be regarded as a good thing. Much of the existing vacancy needs to be filled or demolished before considerable retail space can be added to the region. Consequently, the region experienced its second year in a row of declining vacancy albeit a modest 90,800 square foot reduction in unoccupied space reflected a drop of 2.2%. Currently, the vacancy rate in the region is 11.0%, down from an 11.3% rate in 2013 and 12% in 2012.

Size Classifications: The vacancy rates in all size classifications either stayed even or declined during the year - with one exception. Seven retail tenants in the 10,000-24,999 square foot bracket closed in 2014 and remain vacant, pushing the vacancy rate from 10.1% to 10.4% in this category. Some of the casualties included Nassau’s Furniture, Monster Mini Golf, and Thomasville Furniture. For the second year in a row, smaller sizes continued to show improvement after experiencing several years of an uptrend in vacancy rates. Among the three smallest categories, retailers less than 2,500 square feet showed the largest decline in vacancy rate, going from 19.1% to 18.0%. However, the current vacancy rate in this size classification, the highest in the region, is of greatest concern.

Town Rankings: The top ten among Greater Hartford retail markets (based on square feet of retail space) remained the same as in 2013, with only one change within the rankings: East Hartford inched ahead of Farmington into sixth place this year. Manchester continues to dominate all communities, with 5.4 million square feet of retail space. West Hartford remains a distant second at 2.9 million square feet. Among towns with the highest vacancy rates, the fact that the same four towns as last year remain above the 20% level is disconcerting. These include East Windsor, East Hartford, Berlin, and New Britain. Among towns with the lowest vacancy rate, Wethersfield slipped out of last year’s top spot and was replaced by Rocky Hill, last year’s runner-up. Farmington, Plainville, Enfield, and Newington round out the top five.

Retailer Activity: Dollar General made its entry into Greater Hartford with six new stores, adding 62,000 square feet and taking top spot for incremental space in the region. New York-based Best Market entered the region this year with a 35,300 square foot unit in Newington, a space previously occupied by A&P. Following the acquisition of four iParty stores, Party City ended the year in third place with an additional 36,900 square feet. Closely behind was United Bank, adding 33,300 square feet - and becoming the third largest bank in Connecticut - via its acquisition of Rockville Bank. United and Dollar General also were one-two in the number of new locations with eleven and six, respectively.

As a result of the aforementioned acquisitions, it’s not surprising that Rockville Bank and iParty led the list of retailers by square foot contraction at 39,200 and 36,900 square feet, respectively. Two of the 13 Rockville locations remain vacant. Correspondingly, Rockville Bank contracted by 13 locations, the most in the region. The closing of a 30,600 square foot TJMaxx in Windsor was the third largest space decline in the region.

The KeyPoint Report examines the retail real estate marketplace for Greater Hartford, Connecticut, with a focus on changes between August 2013 and July 2013. This report provides an analysis of changes in the region's retail activity and examines supply, vacancy and absorption, retailer activity, and market composition by store size and retail categories. The Greater Hartford market includes 26 cities and towns and represents more than 835 square miles and approximately 812,200 people, equating to 22.6% of the Connecticut total population. The complete report contains much more detailed information on these categories and more, and will be available soon at KeyPointpartners.com.

Bob Sheehan, Vice President of Research

BSheehan@KeyPoint Partners.com

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 260 million square feet of retail space and approximately 60,000 retail establishments. The KeyPoint Reports contain a summary and analysis of market trends and activity for each studied area.The KeyPoint Report for Eastern Massachusetts/Greater Boston and The KeyPoint Report for Southern New Hampshire have been released, and are available at KeyPointPartners.com.

Company News

New Business: New  combined Leasing/Property Management assignments include Tyngsboro Crossing (formerly TJ Maxx Plaza), a 180,400 s/f center in Tyngsboro, MA; 2100 Washington Street, Hanover, MA, a 20,000 s/f retail/office property; and Merchant’s Row, a 63,700 s/f retail center also in Hanover. VP of Leasing Don Mace is handling these assignments. The Property Management team has taken on Woonsocket Medical Building, a 53,000 s/f office property Woonsocket, RI. Employee News: Sarah Chenault joined the Burlington, MA office as a Property Manager. Sarah has prior property management experience at Jones Lang LaSalle. Brett Yancey joined the Brookline, MA office  as an Assistant Property Manager in the Brookline Office. Brett has prior experience at Jones Lang LaSalle.  Rachel Cormier has been promoted to Senior Property Manager in the Burlington, MA office. Rachel has been with KeyPoint Partners since 2000.

National Retail News

August comparable-store sales posted a year-over-year gain of 4.8% based on the ICSC’s final tally of 11 retail chains. A healthy August back-to-school shopping season seemingly helped apparel sales for some retailers. L Brands was up 5.0%, Gap was down 2.0%, Rite Aid was up 3.9%, Walgreen’s rose 1.4%, and Costco gained 7.0%. See our sales report below...UPS Stores said that a security breach may have led to the theft of customer credit and debit data at 51 UPS stores in the US. ..Duane Reade drugstores in NYC have been re-branded as “Duane Reade by Walgreens”. Walgreen Co. bought Duane Reade for $1.08 billion in 2010. ...CVS Caremark Corp. is changing  its name to CVS Health and has halted sales of tobacco products a month ahead of schedule. CVS Health operates 7,700 drugstores and 900 walk-in clinics...Dave & Buster's Entertainment, Inc.  plans to offer 5.88 million shares at $16 to $18 each in its initial public offering. Dave & Buster's Inc. said its application to trade under the symbol PLAY has been approved, in a filing with the Securities and Exchange Commission...Wal-Mart will rebrand its 21 Wal-Mart Express stores to its Neighborhood Market banner in the next few months. New small stores that open in the future, including 90 scheduled to open by the end of 2014, will be branded Neighborhood Express.

Accelerating Retail News

Burger King has confirmed a deal to buy Tim Hortons with financial assistance from Warren Buffett. The deal, valued at about $11 billion, will allow the burger chain to expand its global presence and possibly cut taxes by moving out of the US. Under the terms of the agreement, Burger King will pay $59.74 in cash and 0.8025 shares of the new company for each Tim Hortons share.  Warren Buffett's Berkshire Hathaway will contribute $3 billion in preferred equity financing for the deal, but won't have any role in management. The deal is subject to approval from the Canadian government. The merged company will be based in Canada, and with 18,000 restaurants worldwide, will become the world's third-largest fast-food company. It’s not yet know whether the new Treasury Department rules to limit tax inversions will affect this merger..Boston’s Restaurant & Sports Bar is planning to open 5 locations in Greater Baltimore. The Dallas-based chain, which specializes in gourmet pizza and pasta, signed a five-unit franchise agreement to develop restaurants in Baltimore, Baltimore County and Harford County.  Boston’s has 32 locations across 22 states...Muscle Maker Grill will open 22 new locations throughout the country, which will raise the number to over 75 units. Recent openings include Las Vegas, NV, Dallas, TX, Hamden, CT, and Staten Island, NY...Destination XL Group Inc. anticipates opening 40 additional 5,000 - 6,000 s/f DXL stores in select smaller markets, for a total of 270-300 new DXL stores. Destination XL will also close approximately 40 Casual Male XL and Rochester Clothing stores...Abercrombie & Fitch anticipates opening 14 international stores throughout the year, including 8 Hollister stores and 5 Abercrombie & Fitch stores. The company also plans to open approximately 8-10 international and US outlet stores,and expects to close approximately 60 US stores, during the fiscal year...1-800-Flowers.com Inc. has entered into an agreement to acquire Harry & David Holdings for $142.5 million in cash.  The deal includes Harry & David’s brands and websites, headquarters, manufacturing and distribution facilities and orchards, warehouse and distribution facilities, and 47 Harry & David retail stores...Peet’s Coffee & Tea is opening 16 stores in the greater Chicago area in a phased rollout across the market this fall, part of Peet’s US expansion effort which will bring its store total to nearly 300 locations nationwide by the end of the year...Neiman Marcus will open its first Manhattan location, 250,000 s/f  three-level store in the new Hudson Yards development, in 2018. Hudson Yards include more than 17 million s/f. of commercial and residential space. As part of its New York expansion, Neiman Marcus will also open a full line store in Roosevelt Field Mall in Garden City in 2016...In December, Starbucks will open its first Starbucks Reserve Roastery and Tasting Room in Seattle. The 15,000 s/f store is designed to be an integrated coffee roasting, education and retail space. Starbucks will grow Starbucks Reserve from 800 to 1,500 stores worldwide by the end of fiscal 2015. Starbucks is on track to bring approximately 1,550 net new stores in fiscal 2014 and 1,600 net new stores in fiscal 2015, with nearly 300 net new company-operated US locations...Mattress Firm  has agreed to acquire Sleep Train in a $425 million deal that will give the company more than 2,000 bedding specialty stores in 40 states. Sleep Train operates about 310 stores. Last month Mattress Firm agreed to buy Bedding Experts in a $60 million deal...Stein Mart is opening 6 new stores in fall 2014 as part of its store expansion plan that calls for 9 new locations in key growth markets, and seven relocations. The openings will bring the company's total US store count to more than 270...Krispy Kreme has signed a franchise agreement for 20 new Krispy Kreme shops in Southern Maryland, Washington, DC , Northern Virginia and nearby counties over the next several years. Krispy Kreme currently has over 260 US shops, of which approximately 160 are franchised...Ulta Beauty announced a five-year strategic plan that includes opening 100 stores annually. Ulta ended the quarter with 715 stores.  ..Home décor retailer At Home hopes to expand to 600 US locations. It currently operates 75 stores that average of 120,000 s/f...Yum! Brands Inc. debuted Banh Shop, the first of two Vietnamese-inspired sandwich shops in the Dallas area which will serve Vietnamese banh mi sandwiches.

Decelerating Retail News

Staples will close about 140 locations this year, part of a store-closing plan announced earlier. Staples shut 80 outlets in North America in the fiscal second quarter...Sears Holdings Corp. is shutting 130 stores across the country, after already closing 95 stores.

New England Retail News

Market Basket agreed to a deal that will see former CEO Arthur T. Demoulas and his family take complete ownership of the grocery chain. Arthur T. and his family, who own 49.5% of the company, will pay more than $1.5 billion for the 50.5% owned by rival family members, including Arthur S. Demoulas. The deal ended the summer’s standoff over the chain’s future. Market Basket reportedly plans to open at least 4 new stores in MA the near future. Demoulas said Market Basket will consider scaling back new store openings from a planned 4-5 to 2-3 if that will help the company better manage the roughly $500 million in private equity debt which financed its recent purchase. Market Basket currently operates 71 New England stores...The new Whole Foods store in Nashua, NH, the first in the state, also features its first in-store restaurant in the the region.  J.Bartlett’s Public House is a pub-style restaurant that seats 50. The store also has a pizza oven, with a dedicated phone line for orders, and an Ole Hickory smoker for making brisket and other smoked dishes...Crumbs Bake Shop, which closed its doors this past July, will reportedly begin reopening locations in New York, Los Angeles, Chicago, Boston and Washington, D.C. this month under a new ownership team led by Marcus Lemonis and Dippin' Dots owner Fischer Enterprises. Many of the Northeast mall locations will remain closed. Crumbs had three MA shops including a location on Federal Street, the Prudential Center and the Natick Mall...Uniqlo opened its first 2 MA stores this month at the Natick Mall and The Mall at Chestnut Hill. The new stores, 2 of 25 in the US, will be followed by 2 more at the Northshore Mall, Peabody and Legacy Place in Dedham...HFF has closed the sale of Waterbury Plaza, a 141,443 s/f center in Waterbury, CT anchored by Stop & Shop and Raymour & Flanigan. HFF marketed the property on behalf of the seller, Kimco Realty Corporation. Slate Properties, Inc. purchased the asset for $27.15 million...Mill Stores, which sells unfinished furniture, sheds and other woodwork, is closing 9 of its 13 New England stores.

August 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 increased 0.6%  last month after an upwardly revised 0.3% gain in July, as Americans stepped up purchases of automobiles and a range of other goods.

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 July, improved further in August. The Index now stands at 92.4 (1985=100), up from 90.3 in July. The Present Situation Index increased to 94.6 from 87.9, while the Expectations Index edged down to 90.9 from 91.9 in July.

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

Purchasing Managers Index

Manufacturing expanded in August as the PMI® registered 59 percent, an increase of 1.9 percentage points when compared to July's reading of 57.1 percent. August's PMI® reading of 59 percent is the highest reading since March 2011 when the PMI® registered 59.1 percent. 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