Thursday, December 20, 2018

The Year in KeyPoints: An Annual Review

The end of another KeyPoints publishing year approaches. We’ve explored events and trends in retail real estate, and shared our unique research. Below is a recap of topics on which we’ve commented in 2018. Stay with us in 2019 to see where these stories go from here:

January: Reason to Smile
VP of Research Bob Sheehan wrote about a positive trend in brick-and-mortar retail holiday sales: “By most accounts, the industry just experienced its best Christmas since the end of the Great Recession in 2010. The National Retail Federation (NRF) reported that November/December sales were 5.5% higher than holiday 2016…If any of you thinks this could be a “one and done” holiday shopping season, it’s likely you’re mistaken. North American retailers expect a 6.2% increase in sales in 2018”.
Update: Most recent forecasts peg Christmas 2018 coming in at 4.3% to 4.8% (NRF) and 4.8% (CBRE), slightly below 2017. However, online sales are running 18.6% (Adobe Analytics) higher, an all-time record.

February: Mall owners Fill Up on Entertainment
Bob commented on the rise of entertainment tenants in malls: “The tenant category that is arguably playing the largest role in the re-thinking of mall tenancy is the category we broadly refer to as Entertainment… a variety of non-traditional entertainment concepts of many different types are absorbing large chunks of unoccupied mall square footage.”
Update: Entertainment growth doesn’t stop at the mall. Outside the mall, movie theaters, upscale bowling facilities, and trampoline parks continue to add space to the region.

March: Another Category Killer Gets Killed
Bob wrote about the demise of Toys R Us: “The two questions that always come up when bankruptcies are announced are, “Who will absorb the sales?”  and “Who will fill the vacancies?”  We can expect to see a significant impact on vacancy rates in all regions which may take some time to fully mitigate - and that’s only until the next category killer bites the dust.”
Update: Not a category killer per se, but a Sears and Kmart liquidation would add over 2.5 million square feet of vacancy to the three New England regions tracked by KeyPoint Partners.

April: Internet Sales tax: A Game Changer?
Bob commented on possible changes to the laws covering sales tax on online retail: “A change in the sales tax rule should be deliberated very carefully. If small retailers with both a physical presence as well as an online platform are required to collect sales tax for online purchases, will they have the wherewithal to get it done? It could be that burden, and the expense, are too big to bear. Consequently, a change in the online sales tax rule may be just the thing that drives some of these smaller retail firms out of business.”
Update: So far it appears that the sales tax change hasn’t had much effect on internet sales, which is setting all-time highs this holiday season.

Our May through August issues focused on our KeyPoint Reports on retail real estate in key New England markets, based on our GRIID™. All reports are available at KeyPointPartners.com.

September: Is It the 900 lb. Gorilla?
Bob Sheehan shared some thoughts on whether market share from closing Sears stores was being taken up by Amazon: “Although Sears hasn’t filed yet, its ongoing initiative to eliminate stores has freed up substantial sales dollars. Sears…saw its US revenue drop from $21.0 billion to $11.1 billion during that time frame, a decline of nearly $10 billion…When $10 billion gets tossed back into the expenditure pot, someone must be benefitting. Where have those revenue dollars gone?”
Update: Not much new to report here…yet!

October: Then and Now: Decade of Change?
Bob Sheehan explored whether the list of Top 25 Retailers in Eastern MA had changed in 10 years: “If were to ask you how much a list of the Top 25 Retailers by Store Count in a given region of the country had changed in the last ten years, what would you say - a great deal, somewhat, or not very much, really? We decided to use our GRIIDTM database to see how much change this region experienced during the past 10 years. To do so, we listed the top 25 retailers by store count in 2008 and in 2018.”

November: Just How Apocalyptic Is It?
Last month Bob questioned the concept of “retail apocalypse” by analyzing vacancy at 270 shopping centers: “While the fallout is far from over, there are signs the worst may be behind us…The point that needs to be stressed here is that 199 of the 270 shopping centers analyzed here - 74% - are only 4% vacant. In most circles that’s considered fully occupied.  Put another way: most centers are doing fine.”

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 of Research       Marketing Mgr.

KeyPoint Partners Company News

New Leasing Assignment: VPs of Leasing Don Mace and Michael Branton will handle leasing for 375 South Willow Street, Manchester, New Hampshire.


National Retail News

US retail sales increased a slight 0.2% in November, as strong holiday shopping sales were offset by lower gas prices. Excluding gas, however, the Commerce Department said last month’s retail sales rose a healthy 0.5% in a positive sign for economic growth. Retail sales have climbed a solid 5.3% so far this year. In November, non-store retail sales - a category that includes Internet brands such as Amazon - jumped 2.3%. Furniture, electronics, and health stores also enjoyed a solid bump as the holiday shopping season went into full swing. Besides non-store retailers, the gains were fueled by a 1.2% increase at furniture stores and a 1.4% growth in electronics and appliance stores. Core sales, which exclude autos, gas, and building materials, have increased over the past two months at the fastest pace in two years, a reassuring sign coming to the end of 2018. Among retailers still reporting monthly sales, L Brands was up 9.0% and Costco was up 9.2%. See sales reports below...Baskin-Robbins unveiled its next generation store format in a Fresno, CA location, adding handheld ice cream novelties and upgrading decor with modern fixtures and artwork that reflect local communities. The store will act as a model for new and remodeled shops in 2019, and will be among 6 - 10 new or remodeled stores to adopt the design in 2019. Baskin-Robbins has more than 2,500 US stores.

Accelerating Retail News

Burlington Stores expects to open 46 net new stores next year...Ikea will open around 30 urban store concepts over the next two years. These stores will differ from the company’s big-box warehouses, with a more experiential concept and a greater focus on e-commerce and service offerings…Leichtman Capital Partners closed on its sale of GFG Holding Inc. to two private-equity partners: Lion Capital LLP and Serruya Private Equity Inc. Terms of the deal were not disclosed. Global Franchise Group owns the brands Great American Cookies, Hot Dog on a Stick, Marble Slab Creamery/MaggieMoo’s, Pretzelmaker and Round Table Pizza...At Home is building  its store portfolio, with a potential to grow to at least 600 locations. The retailer currently operates 178 stores…Giant Food opened 3 new stores in  VA last month, and will remodel 24 locations to feature new amenities such as improved perishable, produce, beer, wine and spirits offerings; florists; bigger natural and organic departments; hot food bars; juice bars; better checkout zones; and full-service pharmacies. Giant operates 164 supermarkets in Virginia, Maryland, Delaware and DC…Dollar General plans to open 975 new stores, remodel 1,000 stores and relocate 100 stores. The company expects to add produce to about 200 of these remodeled stores. Currently, Dollar General has about 425 stores that carry produce. The company sees an opportunity to add 12,000 to 13,000 US store..Swedish socks brand Happy Socks opened its 100th global store, in Manhattan’s Times Square, its third NYC location. Happy Socks hopes to open about 30 - 40 stores in the next couple of years…5 new Popeyes franchises will open on Long Island. Popeyes has about 2,500 US restaurants, and approximately 175 new locations opened in 2018... Dave & Buster’s Entertainment Inc. is on track to open 15 new locations in its fiscal 2018, which ends in February. Dave & Buster’s owns and operates 120 venues in 39 states, Puerto Rico and Canada…Amazon opened a 450 s/f Amazon Go store - about a quarter the size of existing Go stores - on the sixth floor of the Macy’s building in downtown Seattle…Starbucks opened its newest New York Roastery in a new nine-story office building Manhattan’s meatpacking district….Whole Foods Market opened its first Whole Foods Market 365 store in Atlanta, expanding the 365 banner to 12 stores....Grocery Outlet, which operates in Pennsylvania and the western states of Oregon, Washington, Idaho, Nevada and California, opened 30 new stores so far this year and plans 40 more. The retailer is focused on Southern California, and now operates more than 70 stores in the region. In June, Grocery Outlet opened its 300th store in Inglewood, California. The grocer plans to expand nationally…Alimentation Couche-Tard Inc. and CrossAmerica Partners LP reached an agreement that will see 265 sites change hands in a series of transactions. Couche-Tard will sell 192 US company-operated Circle K convenience/fuel stores with an aggregate value of approximately $184.5 million to CrossAmerica. CrossAmerica has agreed to sell to Couche-Tard assets with an aggregate value of approximately $184.5 million. The CrossAmerica assets include the real estate property for 56 US company-operated convenience/fuel retail stores currently leased and operated by Couche-Tard, and 17 company-operated convenience/fuel retail stores currently owned and operated by CrossAmerica in the Midwest.

Decelerating Retail News

Christopher & Banks plans to close 30 to 40 stores over the next two years with closings to begin in late 2019 as leases expire…Sears Hometown and Outlet Stores plans to close 80 to 100 stores during the fourth quarter. The company opened 2 new Outlet locations during the quarter along with 2 new Buddy’s Home Furnishings rent-to-own stores...L Brands signed a definitive agreement to sell its lingerie brand La Senza to an affiliate of private equity firm Regent LP. The deal includes La Senza’s home office organization, North American stores and e-commerce and international partnerships. There are currently 126 La Senza company-owned stores in the US and Canada. The financial terms of the agreement were not disclosed…Scotty’s Holdings LLC has filed for Chapter 11 bankruptcy protection and plans to close 4 of its Scotty’s Brewhouse locations by the end of the year...Shopko is closing 39 stores. The retailer has 363 stores in 24 states.

New England News

Target plans to open its first small-format store in CT, located in West Hartford at the Bishops Corner Shopping Center. The store is expected to open in 2019 and will be Target’s 7th store in the Hartford area and 21st in Connecticut...Asana Partners bought Jamestown’s 130K SF, 28-building Back Bay portfolio - mostly situated on Newbury Street - for $297.9M. The cluster includes 64 retail storefronts, 30 office suites and 51 residential units…Comcast opened 7 interactive Xfinity Stores in New England in 2018, bringing its regional total to 29... Alternative Therapies Group opened a retail marijuana dispensary in Salem, MA, the state’s third. Verilife and I.N.S.A. will become the fourth and fifth when they open soon in Easthampton and Wareham.

Mall News

Crazy 8s, the children’s clothing chain operated by Gymboree, is closing. All Crazy 8 locations will be closed and the number of Gymboree stores will be reduced in 2019, according to Gymboree Group. There are more than 295 US Crazy 8 locations, most in malls...GNC is on track to close about 200 company stores in the current year, and an additional 700-900 company stores over the next three years...Genesco Inc. has entered into a definitive agreement to sell its Lids Sports Group for $100 million in cash to FanzzLids Holdings. Genesco is also the owner of Journeys, Johnston & Murphy, and Schuh.

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

U.S. retail sales increased 0.2% in November, the Commerce Department said. Excluding gas, last month’s retail sales rose 0.5%

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® declined in November, following an improvement in October. The Index now stands at 135.7 (1985=100), down from 137.9 in October. 

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

PURCHASING MANAGERS INDEX

Manufacturing expanded in November, as the PMI® registered 59.3 percent, an increase of 1.6 percentage points from the October reading of 57.7 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

Tuesday, November 27, 2018

Just How Apocalyptic Is It?

If you haven’t read a story - make that ten stories - about the retail apocalypse by now, then possibly you’ve been living under a rock. The “thrashing” of brick-and-mortar retailers by online sellers over the past decade has taken a toll on shopping centers throughout the country, including our home region: retail vacancy in Eastern Massachusetts during that period quickly climbed from the mid-single digits to double digits and has been hovering around the 10% mark for the past few years. However, while the fallout is far from over, there are signs that the worst may be behind us.

To help put the current retail environment into perspective, we used our proprietary GRIID™ retail database to analyze the vacancy patterns of 270 shopping centers in Eastern Massachusetts. For this purpose, we’ve defined “shopping centers” as retail properties having at least 100,000 square feet of retail space, with three tenants or more. We divided these into three size classifications, 100,000 to 249,999 square feet: 250,000 to 499,999 square feet: and 500,000+ square feet. We then further divided those classifications by vacancy rate: centers with 10% vacancy or more, and those with vacancy under 10%. These results offer some insight into the so-called “apocalypse.”


Overall, the regional vacancy rate is currently 10%. The 500,000+ SF size class is 12% vacant, with 18 out of the 32 properties in this segment represented by regional enclosed malls - which adds a definite downside bias to this subgroup. Vacancy in the other two size categories is significantly lower, with both currently standing at 9%. The good news: 199 of the 270 centers (74% the regional total) have vacancy rates under 10%. The 500,000 SF and above segment has the highest at 5%, which includes 11 regional enclosed malls. The 100,000-249,999 SF classification was the lowest at only 3%. So the better news is that the average vacancy rate of all 199 centers is only 4%.

The remaining 71 shopping centers (26% of the regional total) have vacancy rates above 10%.  The average vacancy rate of these centers is 27% and all three size classifications are well above the 20% level. The smallest segment, those centers between 100,000 SF and 249,999 SF, has the highest vacancy rate at 29%, followed by the 500,000 SF and above segment, which encompasses nine shopping centers including seven regional enclosed malls, is 26% vacant. Those centers in the middle range are 23% vacant.

Focusing on shopping centers with 10% of vacancy or more, we dug into the reasons behind the high rates, starting with the large 500,000 SF+ segment. Vacant department stores are the underlying reason for high vacancy among this property group. Six of the nine centers are being impacted by a vacant Sears box.  Macy’s is vacant at two locations. Other vacant department stores among these nine centers include JCPenney and Apex. Vacant Toys R Us stores and  a vacant Babies R Us store affect three shopping centers in this group.

Shifting to the mid-range segment, large format vacancies affecting these shopping centers are somewhat fragmented and include some of the usual suspects: a former Kmart, two Sports Authority boxes, a former Babies R Us, and a vacant Sam’s Club (which no longer operates anywhere in Eastern Massachusetts). Others include an Office Max space, a vacant iParty store, and a vacant Stein Mart store.

The 100,000-249,999 SF shopping centers are of the size that often includes a supermarket anchor. Out of the 49 centers in this category showing more than 10% vacancy, only five are impacted by a supermarket closing: four vacant Shaw’s units and one Stop & Shop vacancy. Three vacant Kmart stores are part of the fallout here as well. Four empty Rite Aid stores as well as vacant TJMaxx, HomeGoods, and Marshalls boxes impact these vacancy rates.

The point that needs to be stressed here is that 199 of the 270 shopping centers analyzed here - 74% - are only 4% vacant. In most circles that’s considered fully occupied.  Put another way: most centers are doing fine. The other 71 shopping centers have mainly been victims of recent or soon-to-be retail liquidations (looking at you, Sears and Kmart) which, it could be argued, are attributable as much to natural retail evolution as to any internet-driven sunami.

So I guess the answer to the question we asked above is… well, you decide!

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

KeyPoint Partners Company News

Promotion: Derrick Taylor has been promoted to Property Manager in the Burlington, MA office....New Leasing Assignments: VP of Leasing Don Mace will handle Alpine Commons, a 209,200 s/f power center in Wappinger, NY.






National News

US retail sales rebounded in October as purchases of autos and building materials surged, possibly driven by rebuilding efforts in areas devastated by Hurricane Florence, and on purchases of electronics and appliances. The Commerce Department said retail sales increased 0.8% last month. Data for September was revised down to show retail sales slipping 0.1% instead of nudging up 0.1% as previously reported. Excluding automobiles, gasoline, building materials and food services, retail sales increased 0.3% last month. Among retailers still reporting monthly sales, L Brands was up 4.0% and Costco was up 8.6%. See sales reports on Page 4.

Accelerating

Hibbett Sports, Inc. has signed a definitive agreement to acquire privately held City Gear, a retailer of premium athletic footwear, apparel and accessories with 135 stores in 15 states….Starbucks is planning to open 2,100 new stores globally next year. The company added about 600 new stores in the most recent quarter and nearly 2,300 last year, and has over 29,300 total locations...Giant Food Stores plans to acquire 5 Shop ‘n Save supermarkets from Supervalu Inc. Financial terms of the deal weren’t disclosed. Giant will convert the stores to Martin’s Food Markets. Giant operates 171 stores in Pennsylvania, Maryland, Virginia and West Virginia as Giant Food Stores and Martin’s Food Markets….Amazon has opened its third Amazon 4-star location, in Berkeley, CA. The format only sells items with a rating above four stars on Amazon, as well as new trending items and best-sellers... Multi-unit franchise operator Drew Smith has opened two  Melt Shop locations in Delaware and New Jersey, the first in these states. Smith owns and operates 23 Five Guys locations throughout greater Philadelphia. The restaurants are part of a 21-unit agreement….Launch Trampoline Park plans to open as many as 10-15 new parks each year over the next several years. Launch has 20 parks currently operating in 13 states, more than half of which have opened since the beginning of 2017 alone.  Development deals have already been signed for 30 new parks throughout 9 states... Lidl US and Best Market announced an agreement in which Lidl will acquire 27 Best Market stores in New York and New Jersey. The deal allows Lidl to expand its regional presence and enter a new market in Long Island…Ollie’s Bargain Outlet opened its 300th location, located about 10 miles south of downtown Baltimore in a former Toys “R” Us. The company has stores in 23 states... Tops Markets completed a financial restructuring and emerged from Chapter 11 bankruptcy. Tops closed 10 stores as part of the restructuring. The downsizing leaves Tops with 159 locations in Upstate New York, Northern Pennsylvania and Vermont…Online retailer Adore Me has opened a store at Bridgewater Commons mall, in Bridgewater, NJ, the brand’s second physical store to date and double the size of its first location at Staten Island Mall. Adore Me plans to open 300 stores during the next five years…Food distributor SpartanNash Co. plans to acquire Martin’s Super Markets Inc.’s 21 stores. The acquisition enlarges the footprint of SpartanNash-owned retail stores. The company currently operates 139 supermarkets under the Family Fare Supermarkets, VG’s Food and Pharmacy, D&W Fresh Markets, Sun Mart and Family Fresh Market banners. Those include 83 pharmacies and 29 fuel centers...Mattress Firm has emerged from bankruptcy having closed about 660 underperforming stores. The closures leave the company with about 2,600 US stores

Decelerating News

Target is planning to close 6 stores in February 2019. Earlier this year, Target closed 12 stores. However, Target will open 30 small stores near colleges and urban areas this year and next... Destination Maternity plans to close 117 locations over the next several months as part of an overall plan to close as many as 280 unprofitable stores over the next four years. The maternity clothing retailer expects to shutter another 42 to 67 stores in fiscal year 2019, which starts July 1. The list of the stores that will be closed has not been revealed...David’s Bridal filed for bankruptcy protection. David’s Bridal has received commitments for $60 million in new debtor-in-possession financing from existing lenders, along with a recommitment of its existing $125 million asset-backed loan, which will help it stay open for business during restructuring. Orders will arrive on time and bridal appointments will not be impacted... Blue Apron announced that its pilot program with Costco will shut down indefinitely.

New England News

The parent company of Papa Gino’s Pizzeria and D’Angelo Grilled Sandwiches filed for Chapter 11 bankruptcy protection following the closure of 95 underperforming restaurants...Nouria Energy Corp. launched a new retail brand, nouria, with a grand-opening celebration of a new concept store in Lewiston, ME. The store marks the first of its kind for the company and features the newly designed company brands, nouria and café nouria. Worcester, MA-based Nouria Energy owns 137 c-store locations in 5 New England states, 116 of which are company operated and 21 of which are leased to dealers. It also owns and operates 47 car washes under the Golden Nozzle brand.

Mall News

Macerich has launched a concept known as BrandBox at Tysons Corner Center just outside Washington, DC. It will house six brands, including apparel retailer Naadam and makeup company Winky Lux, for six to 12 months. Each brand will have its own mini store inside an 11,000 s/f space, with new retailers funneling in and out each year. The mall will provide fixtures,data on foot traffic, radio-frequency identification tagging for inventory, and marketing and staffing help. Retailers simply need to show up and pay rent... GameStop Corp. has entered into a definitive agreement to sell its Spring Mobile business, which owns and operates 1,289 AT&T wireless stores, to Prime Communications, L.P..  The transaction is expected to close in the fourth quarter of fiscal 2018, subject to approvals and closing conditions.

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 US retail sales increased 0.8% last month. Excluding automobiles, gasoline, building materials and food services, retail sales increased 0.3% 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® increased again in October, following a modest improvement in September. The Index now stands at 137.9 (1985=100), up from 135.3 in September. 

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

PURCHASING MANAGERS INDEX

Manufacturing expanded in October as the PMI® registered 57.7 percent, a decrease of 2.1 percentage points from the September reading of 59.8 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

Thursday, November 1, 2018

Then and Now: Decade of Change?

This is a time of great change in the retail industry. Everyday there’s a new headline about the so-called “retail apocalypse” as we hear of another venerable old-school retailer closing up shop.

In that light, if I were to ask you how much a list of the Top 25 Retailers by Store Count in a given region of the country had changed in the last ten years, what would you say – the list had changed a great deal, somewhat, or not very much, really?

We decided to use our proprietary GRIIDTM retail database to see how much change this region (Eastern Massachusetts/Greater Boston) has experienced during the past 10 years. To do so, we listed the top 25 retailers by store count in 2008 and in 2018. The rankings are shown below:


Among the 25 retailers with the most stores in 2018, only six have reduced their store count in the past decade. These include three banking firms: Bank of America, Santander, and Citizens. Fast food chains McDonalds, Papa Gino’s, and Burger King are the other three.

There are only six retailers ranked in the current top 25 that are not on the 2008 list. These include wireless phone chains Verizon, AT&T, and T-Mobile. The others are Supercuts, Dollar Tree, and Eastern Bank, which was in acquisition mode earlier in the period. Heading the top 25 are Dunkin and CVS, which also topped the list in 2008. Among the top 25 retailers adding the most stores during the period were 7-Eleven, by way of the Tedeschi acquisition, and Metro PCS, each increasing by 113 units. Metro PCS had not made its entry into the region yet in 2008. Subway and Dollar Tree were next, adding 67 and 53 stores, respectively.

Eight of the top 10 from 2008 remain in the current top 10. Seven companies on the 2008 list have fallen out of the 2018 list - and they include three that are no longer in operation: Tedeschi, Blockbuster, and Radio Shack. Curves for Women took a precipitous drop from #13 on the list to #561; only five locations remain under their nameplate in 2018. D’Angelo’s dropped from #19 to #37 over the ten year period. Payless ShoeSource fell from #23 to #56, while Shaw’s Supermarket went from #25 to #41.

Are you surprised or not? The changes affecting our industry are real and significant, and we’ll continue to track them. Certainly a sizeable number of retailers not in the top 25 have been severely impacted, and quite a number are no longer in operation. However, it appears that the answer to the specific question we posed above is a hardly-apocalyptic “not very much, really”. Let’s see what the next ten years bring.

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

NEWS: KeyPoint Partners

New Team Members: Peter McClean joined the new Lake Success, NY, office as General Manager. Joe Diaz joined the Burlington, MA office as a Property Accountant. Karen Beadle joined the Boston, MA Office as an Assistant Property Manager. Nicholas Guarente joined the Burlington, MA office as Marketing Associate...New Leasing Assignments: VP of Leasing Don Mace will handle Main Street Marketplace, Woburn, MA and West Bridgewater Plaza, West Bridgewater, MA; VP of Leasing Michael Branton will handle 475 Winter Street, Waltham, MA and 770 Main Street, Osterville, MA.


NEWS: National Retail

US retail sales barely rose in September as a rebound in motor vehicle purchases was offset by a drop in spending at restaurants and bars. Retail sales edged up 0.1 % last month after a similar gain in August.  Excluding automobiles, gasoline, building materials and food services, retail sales gained 0.5% last month. Among retailers still reporting monthly sales, L Brands was up 1.0% and Costco was up 9.2%. See sales reports below...Target is introducing Smartly, a line of essential products aimed at budget-conscious dollar store shoppers. The brand includes more than 70 everyday items, most priced less than $2. Products are available as single items and also offered in small multi-packs. The line will arrive in stores and online this month. Target is positioning the brand for dollar store shoppers and those who live in small spaces without storage for bulk merchandise sold at warehouse clubs.

NEWS: Accelerating Retail

Amazon opened a new store called Amazon 4-star in New York City’s SoHo neighborhood. The location only sells items that are rated 4 stars or above, are top sellers, or are new and trending on Amazon’s website...Brandless will open a pop-up store in New York City this month, the company’s second pop-up. The e-commerce start-up debuted a pop-up store in Los Angeles in May. The New York location is expected to be double the size of the Los Angeles store...Online home furnishings retailer Wayfair will open two holiday pop-up shops in November, at Natick Mall in Natick, MA, and Westfield Garden State Plaza in Paramus, NJ, Wayfair’s first foray into physical retail...Giant Food Stores debuted a new store concept, Giant Heirloom Market, designed for urban neighborhoods. The first will open later this year in Philadelphia the first of several stores planned for the city. Giant has had a presence in Philadelphia since 2011, but the Heirloom Market store will be its first in the downtown area. Giant Food Stores is owned by Ahold Delhaize…Birkenstock has a opened its first US unit, in lower Manhattan...Indigo Books and Music, the largest bookstore chain in Canada, has opened its first-ever US store, a 30,000 s/f store at The Mall at Short Hills, NJ. The concept combines typical book store categories such as books, magazines and stationery with toys, home décor, wellness and other lifestyle products. It will offer in-store events for kids and adults; an in-store café is under construction...Orangetheory will open more than 260 locations this year and plans to continue at that pace next year. The company currently has 901 locations…Beer restaurant Growler USA plans to double units in about an 18-month period - there are 24 currently - and to double again in the following two years…FAO Schwarz unveiled ambitious plans for its return to retail. The toy retailer has set an opening date of November 16 for its Manhattan flagship at 30 Rockefeller Plaza, the company’s return to NYC after it closed its landmark Fifth Avenue store in 2015, and months after former owner Toys “R” Us filed for bankruptcy and shuttered all US stores. FAO is also expanding into Canada, with plans to open permanent in-store shops across Hudson’s Bay’s 89 stores...Lidl is opening 3 new stores  in NJ in October and November. The openings could put the retailer back on track to meet its goal of  100 new US locations in 2018…Mountain Mike’s Pizza opened its 200th unit, in Sacramento, where the brand currently has 20 restaurants. Mountain Mike’s plans to surpass 300 units within the next few years...Ross Stores opened 30 Ross Dress for Less and 10 dd’s DISCOUNTS stores across 19 different states in September and October, completing the Company’s store growth plans for FY2018 with the addition of 99 new stores. Ross now operate nearly 1,500 Ross and over 230 dd’s DISCOUNTS locations...Coldwater Creek has opened a store in Texas, the company’s fifth since it filed for bankruptcy and closed all its stores in 2014...Tempur Sealy International has opened its 38th store, a Tempur-Pedic flagship in Roseville, CA. The 39th and 40th stores will open before the end of this year.Tempur Sealey is targeting 60 to 80 company-owned locations by the end of 2019, and is in negotiations with landlords of certain locations previously occupied by Mattress Firm, which recently filed for bankruptcy protection...Sprouts Farmers Market plans to open 30 new stores next year, and announced the locations of the first 7 in 5 states: CA, FL, NV,WA, and TX. During the first half of 2018, Sprouts opened 16 new stores. Sprouts now operates 315 stores in 19 states…Woof Gang Bakery, a specialty pet retail and grooming franchise, will end 2018 with a milestone 110 franchise locations and enter into 2019 with a goal to open a new store every 10 days. Woof Gang Bakery is projected to open store number 200 in 2021...Xponential Fitness announced the addition of Pure Barre to the company’s family of brands: Club Pilates, CycleBar, StretchLab, Row House, AKT and Yoga Six. Pure Barre has more than 517 studios throughout the US and Canada.

NEWS: Decelerating Retail

National Stores began store closing sales at 184 of its remaining Fallas and Factory 2-U stores across 12 states and Puerto Rico, conducted by a joint venture consisting of Hilco Merchant Resources, Gordon Brothers and SB360 Capital Partners. The closings are the result of the Chapter 11 Bankruptcy filing by National Stores, Inc. and certain of its affiliates. National Stores currently does business as Fallas, Fallas Paredes, Fallas Discount Stores, Factory 2-U, Anna’s Linens by Fallas, and Falas...Mattress Firm has filed for Chapter 11 bankruptcy. The chain plans to remain in business, but has filed for bankruptcy protection to get out of about 800 unfavorable leases. It will quickly close nearly 300 underperforming stores and make decisions about whether to close or maintain the other 500 stores in the coming weeks. It currently has more than 3,300 US stores. Mattress Firm plans to exit bankruptcy in about two months, and hopes that the liquidity gained from the bankruptcy allows it to expand into more favorable markets and even open new stores in existing markets.The chain has struggled with overexpansion, including its purchase of Sleepy’s in 2016 and Mattress Giant in 2012...National Wholesale Liquidators Inc. has filed for Chapter 11 bankruptcy. The  company has engaged two companies to help it sell the inventory and fixtures at its stores.

NEWS: New England

Versus, a new arcade bar and restaurant, opened this month in Boston’s Downtown Crossing. Versus is owned by Big Night Entertainment Group, which runs the Scorpion Bar, the Red Lantern restaurants, and Tremont Street’s Explorateur Café Restaurant and Bar.

NEWS: Malls

With opening of a new 60,000 s/f store at University Mall in South Burlington, VT, Target now has a store in all 50 states. University Mall is managed and leased by KPP, and KPP negotiated the Target lease as well as a lease with H&M, which also opened its first VT store at UMall this month...Sears Holding Corp. filed for Chapter 11 bankruptcy protection this month, hours before a $134 million debt payment came due. The company will close 142 stores near the end of the year, with liquidation sales to begin soon. (in addition to previously announced closures of 46 unprofitable stores by November 2018.) Sears currently operates a total of about 700 Sears and Kmart stores...Family-owned, Pennsylvania-based department store Boscov’s will occupy the space soon to be vacated by Nordstrom at the Providence Place mall. Boscov’s operates more than 45 department stores, primarily in PA.

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

Retail sales rose a seasonally adjusted 0.1% in September, the Commerce Department said. Excluding motor vehicles, sales fell 0.1%. Sales at department stores fell 0.8%. Sales at non-store retailers, online or mail, increased 1.1% 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® increased in September, following a large improvement in August. The Index now stands at 138.4 (1985=100), up from 134.7 in August. The Present Situation Index improved marginally from 172.8 to 173.1, while the Expectations Index surged from 109.3 last month to 115.3 this month.

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

PURCHASING MANAGERS INDEX

Manufacturing expanded in September as the PMI® registered 59.8 percent, a decrease of 1.5 percentage points from the August reading of 61.3 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

Monday, October 1, 2018

Is It the 900 lb. Gorilla?

When a major retailer goes belly up, we hear a wealth of opinions about which other retailers are in the best position to capture market share left behind in the aftermath.

We heard it most recently with Toys R Us: Target, Walmart, Costco and others will likely absorb a piece of the action in the toy category. We heard it when Sports Authority liquidated: Dick’s Sporting Goods was the obvious choice to pick up the slack in that category. And over the years, it was Best Buy reaping the “rewards” left behind by Circuit City, Bed Bath & Beyond doing the same when Linens ‘N Things went out, and don’t forget the bump Barnes & Noble experienced when Borders closed its doors.

Although Sears hasn’t filed yet, its ongoing initiative to eliminate stores operating at a loss has freed up substantial sales dollars. Sears reduced its store count by 241 units between 2012 and 2017 - and saw its US revenue drop from $21.0 billion to $11.1 billion during that time frame, a decline of nearly $10 billion (yes, that’s BILLION with a B - a staggering TEN BILLION). When $10 billion gets tossed back into the expenditure pot, someone must be benefitting. Where have those revenue dollars gone?

Other Department Stores: Department stores have been impacted by online retailing as much as any retail sector. Sales at Sears’ most prevalent co-anchors, Macy’s and JCPenney, were examined during the same five-year period. Both companies have been consolidating as well, often closing stores at the same mall locations as Sears. Macy’s closed 141 stores between 2012 and 2017 while JCPenney vacated 230 units. At the same time, their sales dropped $2.8 billion and $0.5 billion, respectively. So it doesn’t appear that either has been a significant beneficiary of the Sears decline.
Discount Department Stores: How about Target or Kohl’s? Nope. Both reported sales trends during the period that were flat. Target, while increasing store count from 1,778 units to 1,822 units resulting largely from its small store program, experienced a nominal decline in sales from $72.0 billion to $71.9 billion. Kohl’s had a nominal gain in store count from 1,146 to 1,158 stores, although the company has been downsizing selected stores as well. In the meantime, sales ticked lower, from $19.3 billion to $19.1 billion.

Home, Appliance, Electronics Stores: Sears has always been a hugely heavy hardlines retailer, generating 72% of its merchandise sales on this side of the business just last year. So have Home Depot, Lowe’s, or Best Buy gained market share? Well, it wasn’t Best Buy. Sales for this electronics chain were marginally lower at $42.2 billion last year compared to its fiscal 2012 level of $43.4 billion, while its store count dropped from 1,103 units to 1,008 units. Home Depot and Lowe’s have shown significant sales growth since 2012. Home Depot sales jumped from $74.8 billion to $100.9 billion during the five years, a 35% gain in volume; Lowe’s increased sales from $50.5 billion to $68.6 billion, gaining 36%, similar to that of Home Depot.

A reasonable argument might be made that these two home improvement chains have captured some portion of the sales cast aside by Sears. At the same time, it should not go unnoticed that both chains have been riding a very strong housing market in recent years.

Furthermore, both chains opened stores in that period. Home Depot increased its store count by 21 stores for a total of 2,284 units. Lowe’s store count at year end 2017 was 2,152 units, up from 1,754 stores in 2012 (most of that gain came from its 245 store acquisition of Canadian-based ROMA). It’s likely that these two factors had much more to do with top line gains than the absorption of Sears dollars.

Without strong evidence that any particular brick-and-mortar retailer gained from the Sears store contraction, it may be that Sears’ departmentalized sales are too fragmented to have the dispersion of these expenditures end up conspicuously with any particular retailer.

Or there could be another, simpler, more obvious explanation…the 900 lb. online gorilla! (Hint: it begins with an “A”).

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


Read the 2018 KeyPoint Report on Eastern Massachusetts/Greater Boston, including the special section on malls, and the 2018 KeyPoint Report on Southern New Hampshire, available now. AND Watch for the 
The 2018 KeyPoint Report on Greater Hartford, CT coming soon.

See current and past reports at KeyPointPartners.com/Reports

KeyPoint Partners Company News

New Team Members: Kelley Colarusso joined the Burlington, MA office as an Accounts Payable Data Entry Clerk;  Amanda Phalon joined the Burlington, MA office as an Assistant Property Manager.

National News

US retail sales barely rose in August as consumers slowed spending after robust shopping in July. The Commerce Department said sales ticked up just 0.1% last month, the smallest increase in six months. Auto sales fell 0.8% last month, and clothing stores sales plunged 1.7%. Sales at gas stations jumped 1.7%. Excluding gas stations, retail sales slipped 0.1%, the first decline since January. Among retailers still reporting monthly sales, L Brands was up 1.0% and Costco was up 9.2%. See sales reports below.

Accelerating News

American Eagle Outfitters plans to open 50 to 80 Aerie stores next year. The company currently has 109 Aerie stand-alone stores...Women’s apparel retailer New York & Co. is changing its name to RTW Retailwinds. The company has 425 stores…Online furniture retailer Burrow has opened its first physical store, called Burrow House, in the SoHo section of NYC…Hollywood Feed has acquired Rucker Pet, bringing Hollywood Feed’s Atlanta store count to 16 and its nationwide store count to more than 80. Hollywood Feed plans to open 8 new stores in the coming months…Five Below, which recently opened its 700th store, is on track to open 125 stores this year….Zips Car Wash acquired 4 Wash Wizard Car Wash locations in  So. Carolina. Zips will now operate 12 stores across the state and 28 locations up the Eastern Seaboard…Amazon opened its third cashier-less Amazon Go convenience store in its hometown of Seattle, its largest store yet…Dollar General plans to open approximately 900 new stores in fiscal 2018. It will also remodel 1,000 locations and relocate 100 stores….The Coca-Cola Company has agreed to acquire U.K.-based Costa Limited for $5.1 billion. Costa operates nearly 4,000 coffee cafes across 32 countries…Lululemon  opened four net new stores and completed seven remodels in the last quarter, and expects to open about 40 new locations by the end of the year. The company also opened 23 temporary stores, and plans to more than double that number in Q4... Taco Bell plans to open 300 new small-format restaurants across the country in the next four years... Milan-based 10 Corso Como has opened its first US store, a 28,000 s/f space in NYC’s Seaport District. Taking up the entire first floor of the Fulton Market Building, the store features fashions, books, beauty items, and design objects along with an Italian café and restaurant, garden, and art gallery... Discount Tire opened the franchise’s 1,000th store, in Phoenix, AZ. The tire retailer currently has stores in 34 states with plans to expand in 3 more states in the near future…Amazing Lash Studio opened its 200th studio, in East Brunswick, NJ. The chain has 200 studios in 33 states...First Watch, the daytime-only restaurant brand, plans to open at least 100 more restaurants by the end of 2019. The company has more than 330 restaurants in 29 states, including about 260 First Watch restaurants and 70 eateries under The Egg & I brand. The ultimate goal for the brand is 1,400 locations…Crate & Barrel will open a full-service restaurant in its store at Oakbrook Center, Oakbrook, IL next spring. The restaurant is a partnership between the retailer and Chicago’s Cornerstone Restaurant Group...Tokyo Joe’s opened its 50th Restaurant, in Wheat Ridge, CO, the 4th Tokyo Joe’s to open in 2018...AT&T plans to open 1,000 new stores. In addition to standard retail locations, AT&T plans to open pop-up stores in apartment buildings, condos and other locations in dense urban environments. The company, which claims it can open these smaller stores within 60 days of signing a lease, plans to launch 100 pop-ups this year…Amazon is considering a plan to open as many as 3,000 new Amazon Go cashierless stores by 2021, a move that could make it one of the biggest chains in US. The online giant will open about 10 locations by the end of this year, and about 50 locations in major metro areas in 2019...Sprouts Farmers Market has expanded its US footprint to 19 states with the opening of its first PA store. Sprouts opened 16 stores in the first half of 2018, including a location in So. Carolina in June which was the 300th Sprouts store…Wegmans will open its 98th store this month in Lancaster, PA... Inspire Brands, parent company of Arby’s, Buffalo Wild Wings and Rusty Tacos, has agreed to buy Sonic Corp. for $2.3 billion. Following the completion of the deal, Sonic, parent company of quick-service burger chain Sonic Drive-In, will be a privately held subsidiary of Inspire, which is majority-owned by private equity firm Atlanta-based Roark Capital Group. The deal will make Inspire Brands one of the largest foodservice companies in the country with more than 8,000 company-owned and franchised locations when it adds Sonic’s roughly 3,600 units to its group, making it one of the top 10 largest restaurant companies in the US.

Decelerating News

A total of 82 former Toys “R” Us and Babies “R” Us stores and other real estate assets will be auctioned this month. The auction will include 52 ground-leased properties, 29 building leases and one parking lot lease, including Toys “R” Us and Babies “R” Us, as well as side-by-side or combined stores...Henri Bendel is shutting all 23 Bendel’s stores nationwide, including its landmark flagship at 714 Fifth Avenue, after 123 years. The closing was announced by its parent company L Brands, which also owns Victoria’s Secret and Bath & Body Works...Supervalu Inc. has agreed to sell 19 of its 36 Shop ‘n Save grocery stores to Schnuck Markets Inc. 15 of the 19 stores have pharmacies, which will also be purchased by Schnucks. The pharmacies will remain open under the Schnucks banner. Schnucks is additionally acquiring 4 of Shop ‘n Save’s 7 fuel centers. Supervalu operates 3,495 wholesale primary stores and 111 grocery stores under three banners. Schnucks operates 99 stores in the Midwest... Del Frisco’s Restaurant Group Inc. is selling all 14 locations of the Sullivan’s Steakhouse chain to Romano’s Macaroni Grill for $32 million. The deal is expected to close by Sept. 30. Macaroni Grill operates 85 company-owned restaurants in 22 states and 23 franchise locations globally.

New England News

Del Frisco’s Restaurant Group Inc. opened its second Double Eagle Steakhouse in Boston, the 15th for the brand. Del Frisco’s owns 84 restaurants including Barcelona Wine Bar, Bartaco, Del Frisco’s Grille and Sullivan’s Steakhouse...Trillium Brewing plans to open a farmhouse brewery in Connecticut. Trillium has MA breweries in Fort Point and Canton. Trillium is planning to move from its small Fort Point brewery to a two-floor restaurant, taproom, and retail space around the corner at 50 Thomson Place, which will have increased brewing capacity and a roof deck...Sullivan Tire and Auto Service has acquired Montvale Tire Car Care Centers.The acquisition extends the network of Sullivan Tire Auto Service Centers to 71 throughout New England, including 43 in MA... Save-A-Lot grocery store in Taunton closed this month. The discount grocery opened in 2006 in the rear of Mill River Professional Center. Save-A-Lot stores in Brockton and Fall River remain open for business.

Mall News

Urban Air Adventure Parks plans to double its shopping center presence to 100 locations this year, and double them again by the end of 2019. UrbanAir looks for mall and shopping center spaces ranging from 30,000 60,000 s/f...Turnpike Mall, a 214,900 s/f shopping center on 26 acres in Augusta, ME, has been offered for sale. Located off exit 109A from I-95, The Turnpike Mall was built in 1967 and had extensive renovations in 2001 and 2006. Of the mall’s nine interior units, three have tenants. There is an anchor vacancy of 77,535 s/f, the former Sears, and a smaller vacancy of 26,500 s/f.

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 Sales at retail stores and restaurants rose 0.1% from the prior month to a seasonally adjusted $509 billion in August, the smallest rise since February.

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® increased in August, following a modest increase in July. The Index now stands at 133.4 (1985=100), up from 127.9 in July. The Present Situation Index improved from 166.1 to 172.2, while the Expectations Index increased from 102.4 last month to 107.6 this month.

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

PURCHASING MANAGERS INDEX

Manufacturing expanded in August as the PMI® registered 61.3 percent, an increase of 3.2 percentage points from the July reading of 58.1 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

Thursday, August 30, 2018

PREVIEW: The KeyPoint Report for Greater Hartford, CT

With the releases of the KeyPoint Report on Eastern Massachusetts/Greater Boston behind us, and the report for Southern New Hampshire in the works, it’s time to move on to 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 2018 retail market was a relatively stable one.

Retail Inventory and Vacancy: Total retail space in Greater Hartford currently totals 37.6 million square feet, a nominal decrease of 47,200 square feet from last year. The change is primarily attributed to a low level of new development and a number of conversions to non-retail space. The region was able to weather the Toys R Us/Babies R Us liquidation, which added more than 172,000 square feet of vacancy to the region, and at the same time benefit from the absorption of other existing vacancy, ending the year with a decline in the vacancy rate to 10.6%. This reflects a significant improvement from the past two years when the vacancy rate was stuck at 11.1%. Furthermore, the resulting absorption rate of 164,600 square feet was the strongest since 2015.

Size Classifications: During 2018 changes in vacancy rates among size classification generally show improvement in vacancy. However, the most glaring change occurred in the 25,000-49,999 square foot segment. This particular classification was impacted substantially by the store closings resulting from the Toys R Us liquidation, resulting in a jump in the vacancy rate from 2.5% in 2017 to a current level of 6.2%. The only other size classification to show an increase was the 100,000-199,999 square foot bracket, singularly impacted by the Sam’s Club closing in Manchester. Another particularly notable change this year occurred in the smallest segment, the Under 2,500 square foot classification, which experienced a decline from 17.9% to 14.9%, the strongest improvement in the region. As the largest segment of retail in Greater Hartford, this dramatic improvement had the most positive effect on the region as a whole. Also showing solid improvement was the 50,000-99,999 square foot size range, which experienced a vacancy rate decline of 240 basis points to 8.3%. This was a case of addition by subtraction following the demolitions of a vacant Showcase Cinema in East Windsor, which is earmarked for a new casino, and a former Walmart store in New Britain, now the site of a new self-storage facility.

Town Rankings: The ten largest retail markets among Greater Hartford communities, based on square feet of retail space supply, remain unchanged. It should be no surprise that the top three towns are Manchester, West Hartford, and Enfield, all regional retail hubs serving Greater Hartford. Manchester dominates the region with 5.4 million square feet of retail space; West Hartford comes in a distant second with 3.0 million square feet. However, it should be noted that the 1.3 million square foot Westfarms regional mall, which straddles the West Hartford/Farmington line, has a Farmington address but is very much rooted in the West Hartford retail hub. Consequently, West Hartford is effectively a 4.0 million square foot market. Regarding vacancy, the lowest rate was found in Glastonbury, coming in at 4.2%. This was a significant improvement from an 8th place finish last year when its rate was 8.9%. Newington and Rocky Hill tied for second, both inching up from sub-4.0% rates last year to 5.4% in 2018. Bloomfield followed, moving into the top ten this year with a 6.0% vacancy rate. Among towns with the highest vacancy rates, Enfield finished the year at 20.6%, impacted largely by vacant Macy’s and Sears stores at Enfield Mall. Runner-up was East Windsor at 19.4%, followed by East Hartford at 17.2%. Only seven of the top ten towns have vacancy rates above 10.0%.

Retailer Activity: At Home led all retailers in square footage gain this year, recently opening its first Connecticut store in Manchester. Walgreens followed, converting seven Rite Aid units to its namesake pharmacies. Burlington rounded out the top three, adding its fifth store in the region, replacing a vacant Sports Authority unit in Farmington.  T-Mobile added five locations to the region and was the only retailer to add more than two locations in 2018. Roz & Ali, Dollar General, and O’Reilly Auto Parts were among numerous names to add two stores. Sam’s Club led all retailers in space contraction, closing its only store in the region in Manchester. Toys R Us followed with three store closings. Babies R Us was third, shutting down two stores. The two liquidated chains vacated a combined 172,200 square feet. Rite Aid reduced its store count by 10 locations, seven converting to Walgreens and three closing. It has two pharmacies remaining in the region which may eventually convert to Walgreens or close. Pizza Hut and Subway each closed four units.

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

The KeyPoint Report examines the retail real estate marketplace for Greater Hartford, Connecticut, with a focus on changes between August 2017 and August 2018. 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. The complete report contains much more detailed information on these categories and more, and will be available soon at KeyPointpartners.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 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.


Read the complete 2018 KeyPoint Report on Eastern Massachusetts/Greater Boston,
including the special section on malls, available now!
AND watch for The KeyPoint Report on Southern New Hampshire, available soon!
See current and past reports at KeyPointPartners.com/Reports

KeyPoint Partners Company News

Employee News: Nick Schaejbe was promoted to Property Manager and Cheryl MacDougall was promoted to Assistant Property Manager in the Burlington, MA office; Rich Couillard has relocated to the Brookline, MA office as an Assistant Property Manager. Vijay Pathak joined the Burlington, MA office as an Assistant Property Manager, and Andri Shehu has joined the Burlington, MA office as a Property Accountant.  Jon Maimon joined the Brookline, MA Office as a Property Manager...New Business: The Leasing Team has added Wareham Marketplace, a newly-constructed retail center on Cranberry Highway in Wareham, MA. Tenants now open include Aldi and AutoZone, with Wendy’s and Mattress Firm opening soon.

National Retail News

US retail sales rose by 0.5% in July, Commerce Department figures showed. Excluding autos and gas, sales climbed 0.6%. 9 of 13 major retail categories showed increases, highlighted by 1.3% gains at clothing stores and food services and drinking establishments. Food and beverage stores reported a 0.6% advance, the biggest since December. Among retailers still reporting monthly sales, L Brands was flat and Costco was up 8.3%. See sales reports below. The planned merger between Albertsons Cos. and Rite Aid has been called off due to concerns that investors wouldn’t approve of the $24 billion price tag hours before they were set to vote on it. Albertsons and Rite Aid announced the proposed merger in February, in a deal that was approved by the boards of both drug chains. Under the terms of the agreement, neither Rite Aid nor Albertsons will be responsible for any payments to the other party as a result of the termination.

Accelerating Retail News

Starbucks opened its first-ever standalone Princi bakery and café, in downtown Seattle. Princi is the exclusive food supplier in all Starbucks Reserve Roastery locations…Focus Brands Inc. will acquire Jamba (whose wholly-owned subsidiary is Jamba Juice Company) in a transaction valued at approximately $200 million. The deal is expected to close during the third quarter of 2018.  Jamba Juice has more than 800 locations worldwide…Brookfield Asset Management Inc. will acquire all the outstanding shares of common stock of Forest City in a transaction valued at $11.4 billion. Forest City operates  a large portfolio of retail space, including regional malls and specialty retail centers, primarily in NYC.  The company’s portfolio also includes 6.3 million s/f of office, 18,500 multi-family units, and 5 large-scale development projects in the NY Metro area, San Francisco, and Washington, DC...Online furniture retailer Wayfair will open its first retail outlet in Florence, KY. The 20,000 s/f store will open early next year, and will sell returns and closeouts...Casper will open 200 stores across North America over the next 3 years. Casper opened its first permanent retail shop in NYC earlier this year after gaining popularity with a series of pop-up shops.  The 200 stores include 18 of these temporary locations that Casper will transition to permanent shops. Many of Casper’s temporary stores are in malls, and the company expects to keep opening shops in malls... Tiffany & Co. will begin a massive renovation of its Manhattan flagship on 5th Avenue at 57th Street, starting this spring…Bealls Inc. will open a chain called Home Centric, the first of which opened this May in Cary, NC. At an average 15,000 s/f, Home Centric’s product mix includes brand and private label products for furniture, wall décor, rugs, lamps, housewares, bed and bath. A 2nd Home Centric will open this fall in Tennessee; a third will open in next spring in Florida. 5 in total are projected for the end of 2019. Bealls operates over 530 stores across 16 states...A marijuana-themed restaurant chain wants to expand its Wisconsin footprint with a new shop in the Milwaukee region. Colorado-based Cheba Hut operates in 7 states and entered the Wisconsin market in 2013 with a franchise in Madison... CAVA, a restaurant chain focusing on casual Mediterranean cuisine, has agreed to acquire Zoe’s Kitchen Inc for around $300 million including debt, with backing from a group of investors. The deal will expand CAVA’s footprint from 66 locations to 327 in 24 US states.  Zoe’s was founded in 1995 and has 261 locations in 20 US states... Google is reportedly planning a two-level flagship retail store in the Fulton Market district of Chicago. Google’s has previously opened in-store shops and pop-ups in various US locations, including in NYC and LA. The Chicago location is about two blocks south of the company’s Midwest headquarters, and will occupy the first and second floors of several connected, two-story brick buildings...FAT Brands Inc., parent company of Fatburger and Buffalo’s Express, are developing 13 new Fatburger and Buffalo’s Express restaurants in CA and Washington state.

Decelerating Retail News

Furniture retailer and wholesaler Heritage Home Group, which owns the Thomasville & Co. brand, filed for Chapter 11 bankruptcy this week, hoping to sell off assets. The company, formed out of the Furniture Brands’ 2013 sale in bankruptcy to private equity company KPS Capital Partners, faced years of declining sales...National Stores Inc, which operates the Fallas, Factory 2-U, and other discount apparel and housewares stores, filed for Chapter 11 bankruptcy. The family-owned company plans to close 74 of its 344 US stores... Noon Mediterranean, the fast-casual chain formerly known as Verts Mediterranean Grill, has also filed for bankruptcy protection. The chain recently shuttered 7 units and laid off 89 employees. Before the filing, the chain had 19 units, largely on the East Coast and in Texas...Guideboat, the upscale clothing chain started by Stephen Gordon, founder of Restoration Hardware, is liquidating its stores after a five-year run. Guideboat had 4 stores, 3 in Northern CA and 1 in Austin, TX. 3 have now closed, with the original store in Mill Valley, CA to be shuttered soon...Lowe’s plans to close all 99 of its Orchard Supply Hardware stores by the end of the year in order to focus on its core warehouse model. Orchard Supply Hardware stores are located mainly in California, but also in Oregon and Florida... Sears Holdings is closing 46 more stores in November across the US. Liquidation sales at the 33 Sears stores and 13 Kmarts have begun. Sears said in January it was planning to shut more than 100 stores, then announced another 100 closures in May. Sears was operating 894 stores as of May 5, the latest available total provided by the company.

New England News

Outdoor apparel retailer Filson is opening its first New England store in Boston’s Seaport this month. The 3,177 s/f store will be Filson’s second-largest. The company has launched 14 of its 17 global stores within the last 5 years...Fool’s Errand, a third restaurant from chef Tiffani Faison, opened this month in Boston’s Fenway area. The 400 s/f “snack bar for adults” has no seats. Servers on the floor take snack and drink orders for different vermouths, sherries, crudo, finger sandwiches, and more.

Mall News

Brookstone filed for Chapter 11 bankruptcy protection and will close all of its 101 stores in US malls. The company will continue to operate its 35 airport stores and e-commerce and wholesale businesses...Sally Beauty plans to close as many as 100 stores, or 1 - 2% of its footprint of 5,177 stores...Samuels Jewelers filed for Chapter 11. The 120-store chain, which has roots dating back to 1891, is now for sale and is talking to several interested parties. Samuels Jewelers operates in 23 states under the names Samuels Diamonds, Samuels Jewelers, Schubach Jewelers, Rogers Jewelers, and Andrews Jewelers. The company says most of its stores are profitable, and they are all still operating. Samuels is pursuing a going concern sale, but has enlisted Gordon Brothers and Hilco to sell off excess inventory… American Dream Meadowlands, the mammoth retail and entertainment destination now taking shape in East Rutherford, NJ, will reportedly open this spring. The long-delayed center will include an indoor Nickelodeon Universe theme and water parks, Lego Discovery Center, Sea Life aquarium, 16-story indoor ski slope, miniature golf course and some 450 retail stores and a 150,000 s/f food hall. American Dream, formerly known as Xanadu, broke ground more than a decade ago, but its construction stalled, delayed by various problems, including financing difficulties. In 2011, Canada’s Triple Five Group officially took over control of the project and rebranded it as American Dream. Triple Five’s portfolio includes the largest shopping center in North America, West Edmonton Mall in Alberta, Canada, and the largest US center, Mall of America, Bloomington, MN.

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

US retail sales rose more than expected in July as households boosted purchases of motor vehicles and clothing, the Commerce Department said. Sales increased 0.5% last month. Excluding purchases of autos and gasoline, sales climbed 0.6%.

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® increased marginally in July, following a modest decline in June. The Index now stands at 127.4 (1985=100), up from 127.1 in June. The Present Situation Index improved from 161.7 to 165.9, while the Expectations Index declined from 104.0 last month to 101.7 this month.

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

PURCHASING MANAGERS INDEX

Manufacturing expanded in July as the PMI® registered 58.1 percent, a decrease of 2.1 percentage points from the June reading of 60.2 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

Friday, July 27, 2018

Preview: Southern New Hampshire Report

While the 2018 KeyPoint Report for Southern New Hampshire, based on our proprietary  GRIID™ retail database, is in production, we will again share some of the early results:

Inventory and Vacancy Rate: The retail inventory in Southern New Hampshire included 29.8 million square feet in 2018, indicating no appreciable change from a year ago. Vacancy increased 41,200 square feet, equating to a vacancy rate of 9.3% compared to 9.1% last year. At the same time, the higher vacancy rate can be attributed to store closings involving just two retail firms, Toys R Us and Walmart. Toys R Us closed four namesake stores and two Babies R Us stores while Walmart closed two Sam’s Club units. Offsetting these store closings were store openings that filled a number of large format vacancies. Three vacant Sports Authority stores were, or will soon be, occupied by replacement tenants including HomeGoods and Sierra Trading Post in Nashua, Cost Plus World Market in Salem, and Guitar Center, Party City, and DSW in Manchester. BJ’s already opened in the vacant Sam’s Club in Manchester. A vacant Shaw’s anchored strip center in Merrimack is under redevelopment with Planet Fitness now open. Altitude Trampoline Park also will anchor this center, now known as Merrimack 360, and is expected to open later this summer.

Size Classifications: Although there was a modest uptick in vacancy in Southern New Hampshire in 2018, the good news is that the increase was confined to only two size classifications, 25,000-49,999 SF and 100,000-199,999 SF, which can be attributed to the same store closings noted above, Toys R Us, Babies R Us, and Sam’s Club. Vacancy rates in both categories rose by more than 200 basis points as a result. Encouraging this year is that the region experienced significant vacancy declines in all other size categories except 200,000+ SF which includes only one occupied tenant, the Walmart Supercenter in Amherst. The most improvement occurred in the 5,000-9,999 SF and the 50,000-99,999 SF brackets. Vacancy rates were lower in both segments by 130 basis points.
Regional Submarket Rankings: There has been no change in the top ten largest regional markets: Nashua continues to rank first with 6.4 million square feet of inventory; Manchester follows at 5.3 million square feet; and Salem is a distant third at 3.9 million square feet. Seabrook and Bedford follow with 2.0 million square feet and 1.5 million square feet, respectively.

Among towns with at least 500,000 square feet of retail space, Salem remains with the lowest vacancy rate at 6.0%, although up a bit from last year. Derry again is this year’s runner-up, coming in at 6.1%. Merrimack jumped up from 10th place to number three this year, resulting from the Merrimack 360 redevelopment project, eliminating nearly 78,000 square feet of vacancy including an unoccupied Shaw’s Supermarket.  Among towns with the highest vacancy rate, Seabrook moved up from 8th to take over the top spot with a vacancy rate of 16.3%, the Sam’s Club closing largely contributing to the rising figure. Londonderry remains in second place followed by Manchester, which dropped out the number one ranking from last year.

Retailer Activity: Retailers adding the most space in the region include BJ’s Wholesale Club, which back-filled the vacant Sam’s Club in Manchester, followed by Cardi’s Furniture and NH1 Motorplex Indoor Karting, with both filling vacant space at Seacoast Shopping Center in Seabrook. With respect to store count, Metro PCS added three units while Sbarro, Cabinet Depot, and Orangetheory Fitness tied for second with two additional locations. Sam’s Club, Toys R Us, and Babies R Us ranked highest in square footage contraction. Subway reduced its store count in the region by six units, followed by Toys R Us with its four closings. Teavana, Burger King, and Best Buy Mobile all closed three locations. 

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

This KeyPoint Report examines changes in supply, vacancy and absorption, retailer activity, and market composition by store size and retail categories during the period from July 2017 to July 2018. The study area includes 39 cities and towns, representing more than 835 square miles and approximately 567,500 permanent residents (42% of the state population).

KeyPoint Partners News

New Business: VP of Leasing Michael Branton and Leasing Associate Patrick Busa are handling leasing for 47-53 Long Pond Road, an 8,614 s/f center adjacent to The Grove in Plymouth, MA.

National News

US retail sales rose 0.5% in June, Commerce Department figures showed, capping a quarter that probably saw consumer spending pick up after a tepid start to the year. Excluding purchases of autos and gasoline, sales climbed 0.3%. A tight labor market and lower taxes have supported solid gains in household purchases, the biggest part of the economy. Economists expect the pace of gains in household purchases to settle back in coming quarters. Among retailers still reporting monthly sales, L Brands was up 3.0% and Costco was up 9.7%.

Accelerating News

Chick-fil-A will launch its own line of meal kits called Mealtime Kits, to be tested at 150 of the company’s locations across the Atlanta area beginning in August. Party City will open about 50 Toy City pop-up stores this year alongside its Halloween City pop-up shops…Millstone Capital Advisors announced its purchase of the Native Foods Café fast-casual restaurant chain, which has 13 restaurants in California, Colorado, Oregon, and Illinois…Rent-A-Center will be taken private by buyout firm Vintage Capital Management in a $1.37 billion deal including net debt…Barnes & Noble will open several new, smaller 14,000 s/f prototype stores this year, which will feature a new design. Barnes & Noble operates 630 bookstores nationwide... Coffee Bean and Tea Leaf aims to more than triple its number of US cafes by 2028. A franchisee will open a store in NYC later this year, with a total of 100 new locations planned in NY by 2028. The chain has 311 stores in other parts of the US…Automotive styling franchise Tint World aims to have 300 stores open by 2025, a 400% increase from its current footprint of about 60 locations…Smoothie King, which operates nearly 1,000 locations worldwide, has a deal with a franchisee to develop 60 locations in new markets. The chain expects to open 150 new US locations in 2018, the most ever opened in a single year…Five Below ended 2017 with 625 stores, having grown by 103 net units. For 2018, the plan is 125 stores. The company is on track to open its 1,000th store by 2020...Arby’s has opened of its 1,000th Inspire design restaurant. With the completion of the Pearland, TX restaurant, nearly 1/3 of Arby’s 3,400 restaurants features the new design…Golden Gate Capital has acquired The Learning Experience, which has more than 300 locations operating or under development…Macy’s will open about 60 new standalone Bluemercury stores through 2019. The growth will bring Bluemercury’s store count to about 220...Primark is opening a 9th US store in Brooklyn, NY.  The company opened its first US store in Boston in 2015 and has locations in PA, NJ, CT and NY. The retailer plans 2 more US stores this year. Primark operates as Penney’s in Ireland and has 352 stores in 11 countries... High Bluff Capital Partners, parent company of Quiznos, has acquired fast casual Taco Del Mar. Terms of the transaction were not disclosed. There are currently more than 100 locations in the US and Canada...Athletic wear retailer Fabletics will open 75 new stores, bringing its total to 100…Seafood restaurant Slapfish will open up to 10 additional locations by the end of the year. The company now has 13 units…J.C. Penney will open a multi-level, 75,000 s/f store at Kings Plaza shopping center in Brooklyn, NY in August...uBreakiFix opened 38 new stores in the second quarter, marking a 58% increase over last year’s second quarter growth. These bring the brand’s total to 408 stores across North America. Between July 1 and September 30, uBreakiFix expects to open 35 new stores...Dollar Tree celebrated the opening of its 15,000th store this month...Domino’s wants to open about 2,350 more stores over the next 10 years. Currently, there are about 5,650 US Domino’s locations...Starbucks will open its first US “signing store” in October, in Washington, D.C., near Gallaudet University, the world’s only university designed for deaf and hard of hearing students. All employees will be required to be proficient in American Sign Language (ASL)…Moe’s Southwest Grill will expand in Boston and Philadelphia. Moe’s currently has 700 US franchised locations…Jennifer Furniture will open 5 showrooms in New York and New Jersey and more next year…Schlotzsky’s is converting its 400-plus units to “fast fine”, adding “Austin Eatery” to its name and serving beer and wine. Today there are 18 Austin eateries already converted. By the end of 2019, all 400-plus units will be Austin Eateries...Orangetheory Fitness opened its third  Portland studio, the franchise company’s 1,000th  location. The company has a goal of 2,500 studios by 2020.

Decelerating News

10 more Sears and Kmart stores have been added to the list of locations slated for closure in September. With the additions, a total of 78 stores – 62 Sears and 16 Kmart locations – will close in September.  Sears Holdings has closed more than 500 stores over 15 months through the end of its fiscal quarter on May 5... Rockport has agreed to sell itself in bankruptcy to private equity firm Charlesbank Capital Partners. Rockport expects the sale, which will require court approval, to close by July 31...The Fresh Market Inc. plans to close 15 stores in 9 states...Women’s clothing retailer Annie Sez plans to either close its remaining 10 locations or convert them to Mandee stores...Toys “R” Us announced that its subsidiary, Toys “R” Us Property Company (Propco), has hired Raider Hill Advisors to oversee the sale of approximately 284 properties in 46 states..TRT Holdings, owner of Gold’s Gym, is moving out of the health club business to focus on its core business, Omni Hotels & Resorts, and will sell the fitness chain. Gold’s Gym has more than 700 locations across six continents.