Thursday, May 16, 2013

Eastern Massachusetts KeyPoint Report Preview


The annual KeyPoint Report for Eastern Massachusetts/Greater Boston, based on our GRIID™, isn’t quite ready for public consumption yet, but we are at a point where we can skim off the top and share some of the key findings with you. So here goes:

Vacancy Rate: After suffering through the most dreadful economy in more than half a century, the Eastern Massachusetts retail climate is finally showing some giddy-up in the pace of activity. Earlier this year the retail vacancy rate fell below 8.0%, perhaps its version of the “Mendoza line”, for the first time since 2008.

The vacancy rate in the region currently stands at 7.8%, declining more than a full percentage point since last year. Although this is the third year in a row that the vacancy rate has declined, it is the largest percentage drop in more than a decade. In order to accomplish that, nearly 2.0 million square feet of unoccupied space in the region were absorbed. Net absorption in Eastern Massachusetts ended the year at 2.05 million square feet, indicating that new construction was limited.

Size Classifications: Another bright note in this year’s results is the fact that not only was there improvement in overall vacancy, but also vacancy rates in all size classifications dropped significantly -  other than the 200,000 square feet and above category, which remains fully occupied. Last year, when we saw a nominal decline in vacancy, results across all size classifications were mixed, with vacancy in small tenant categories creeping higher.

Town Rankings: Among towns with at least 500,000 square feet of retail space, there was little movement in the top 10 largest retail markets, with Braintree replacing Leominster in the 10th spot. Following perennial number-one Boston are Cambridge and Natick.

There are five new towns breaking into the top 10 communities with the lowest vacancy rate. These include Avon, Braintree, Bedford, Burlington, and Lexington. Abington remains in the top position with a vacancy rate of a scant 1.1% while 10th ranked Lexington comes in at 3.7%. There were 23
towns ending the study period with vacancy rates under 5.0% compared to just 15 last year.

At the opposite end of the scale, there are a number of towns that continue to be burdened with excessive vacancy. Six towns remain among the top 10 with the highest vacancy rates from the same group last year, including North Reading, Westborough, Norwood, Swansea, West Bridgewater, and Lawrence. Rates among the top 10 range from 20.7% in North Reading to 14.9% in Lawrence. All the carryovers have trended down significantly, with the exception of North Reading, which inched up from 19.4% last year. North Reading’s poor ranking requires some explanation, however. The vacancy rate in towns with limited inventory can be skewed heavily by one or two large format spaces, as is the case in North Reading. Vacant Stop & Shop and Sears Hardware stores represent 68% of total vacancy in that town.

Retailer Activity: Among the top growing retailers in Eastern Massachusetts, Market Basket added 221,700 square feet to the region, the most of any retailer, by opening three new stores in Brockton, West Bridgewater, and Westford and expanding its Chelmsford store.  Adding the most units was fast food restaurant chain Subway with 33 new locations. By closing its nine locations in Eastern Massachusetts, Foodmaster tops the list of contracting retailers, vacating 235,000 square feet of space. Leading the decline in store count with 10 stores are Bank of America and Fashion Bug, which was phased out of business when acquired by Ascena Retail Group as part of its Charming Shoppes acquisition. All 600 Fashion Bug stores were closed.

The full report contains much more detailed information on these categories and more, and features an updated, easy-to-read design. It will be available soon at KeyPointPartners.com.

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 11-month period beginning April 1, 2012 and ending Mary 31, 2013. The study area includes 189 cities and towns, representing more than 3,500 square miles (44% of Massachusetts’ land area) and approximately 5.05 million people (76.2% of the state population).  KeyPoint Partners’ GRIID™ database maintains detailed information on virtually all retail properties in three key regions: Eastern Massachusetts, Southern New Hampshire and Greater Hartford, Connecticut. These markets encompass approximately 44% of all retail space in New England. GRIID™ has information on more than 256 million square feet of retail space and approximately 59,600 retail establishments. The KeyPoint Reports contain a summary and analysis of market trends and activity for
each studied area.

Company News

New Team Member: Laura Schmitt joined KeyPoint Partners as a Property Manager in the Burlington, MA office. Laura comes to KPP from Equity One Realty & Management and The Dartmouth Group. Laura Ferrara has been promoted to Property Manager in the Burlington office. Laura worked at KPP from 2000 to 2003, spent time as a residential realtor, then rejoined the company in 2007 as an Assistant Property Manager...New Business: Vice President of Leasing Don Mace will handle leasing for Horizon Commons, a 107,000 SF center at 1899 Silas Deane Highway in Rocky Hill, Connecticut. Tenants at the center include Kohl's and Aldi Market.


Industry News: National

US comparable chain store sales for April posted a modest 3.0% gain as measured on a year-over-year basis by ICSC Research's tally of 15 major retail chain stores. The April pace of sales was the strongest since January’s 4.5% gain. Although the April sales performance was an improvement from the pace of recent months, adverse seasonal weather still dampened the sales pace. Among individual retailers, Gap was up by 7.0%, and L Brands (formerly Limited) rose 2.0%; Costco was up 4.0%, and TJX was up by by 8.0% (Note: TJX will no longer report monthly, and will switch to quarterly sales reports). Rite Aid was down 4.6%, and Walgreens was up by 1.2%.  See retail sales results below.

Industry News: Accelerating

New York’s Fairway, a 12-store grocery chain, plans to eventually open 300 outlets across the country. Sterling Investment Partners, a private equity which that acquired an 80% stake in the company in 2007, expanded Fairway in New York, New Jersey and Connecticut...Pep Boys will open 31 Service & Tire Centers and 7 supercenters. Pep Boys is also test-marketing a new store concept, embodied in a prototype store that opened recently in Tampa, FL designed to appeal to a broader swath of customers...Sherwin-Williams’ Paint Stores Group expects to open 70 to 80 new stores. Sherwin-Williams currently has more than 3,500 US stores...RadioShack Corp. is updating its brand and will begin remodeling select locations with a new look and feel over the next few weeks. RadioShack has more than 4,300 company-operated stores and approximately 1,000 dealer outlets across the US...Icing, a division of Claire’s Stores, is being re-branded with a new store design, new logo and updated imagery. The jewelry and accessories retailer plans to open 35 stores this year, including a flagship in Chicago...Tractor Supply Co. will open 100 to 105 new stores in 2013...The Fuzzy Peach has begun national expansion of their frozen dessert stores. The new store count commitment will be 26 locations. The Fuzzy Peach recently celebrated the opening of their 11th store in Boiling Springs, NC...Uniqlo opened its 7th US store in April, and plans more openings in the fall...Getty Realty Corp. acquired 36 convenience stores and gas stations in the New York and Washington D.C. metropolitan areas for $72.5 million.The acquisitions involve sale-leaseback transactions with Capitol Petroleum Group LLC and include 16 Mobil-branded properties,13 Exxon, and 7 Shell-branded locations. Getty Realty Corp. owns and leases approximately 1,050 US convenience stores and gas stations...Salsarita’s Fresh Cantina grew to about 80 units from 2000 to 2011. In 2013 the brand plans to add eight to 10 units, with 20 more units planned for 2014, including stores in Texas, Kansas, New York, and Michigan.....WOW Café will roll out a new look as part of a larger rebrand strategy for the 11-year old company, to WOW Café: American Grill & Wingery. The company will roll out the new design in 20 restaurants over the next year. There are 70 WOW Café: American Grill & Wingery restaurants nationwide. The company expects to open approximately 20 locations in 2013...The Limited opened two stores in outlet centers this month, one in Nashville and another in Michigan. Two other outlet stores will open in early summer in Texas and Illinois. Including the stores set to open in 2013, the company has opened 68 since 2008. The Limited operates 260 US stores...Frozen-yogurt chain TCBY says 68 locations are under development so far this year, and the brand hopes to open more than 100 units in 2013. TCBY currently has 520 units...Meijer will open its 200th store on May 16, the first of six new stores Meijer will open this year.

Industry News: Decelerating

7-Eleven Inc. tapped NRC Realty & Capital Advisors to help sell 139 convenience stores and/or gas stations. Of the properties, 83 are in Texas, 31 in Florida, 11 in Ohio, 8 in Pennsylvania, 5 in Utah and 1 in Wisconsin. The property sizes range from 10,000 to 75,000 s/f, and store sizes vary from kiosks to 6,700 s/f...The Jones Group Inc. will shutter 170 underperforming US stores by mid-2014. The stores identified for closure include 50 units previously announced in the fourth quarter. Jones owns the Nine West, Jones New York and Anne Klein banners among others.

Industry News: New England

Potbelly Sandwich Shop has opened its newest MA location at Wayside Commons in Burlington...Nordstrom will open a 33,000 s/f Nordstrom Rack at The Shoppes at Blackstone Valley in Millbury, MA in fall 2013 in the former Wine Nation space. Nordstrom came to MA in 2007 with its Natick full-line store, and went on to open 3 more full-line and 4 Racks, including the recent new Rack store in Boston’s Back Bay...Shake Shack has applied for a permit to operate a restaurant at 57 John F. Kennedy St. in Harvard Square. Shake Shack opened its first Boston-area restaurant in Chestnut Hill in March...After a 20-year run, Pride & Joy has closed its brick-and-mortar retail store in Thornes Marketplace, Northampton, MA...The stalled Westwood Station project is back on track. The 2 million s/f project by New England Development, Eastern Development, and National Development will include Wegmans and Target, each occupying 130,000 s/f anchor locations. The plan also calls for as many as 650 apartments and condos, other stores, offices, a hotel, and an assisted-living facility. About 550,000 square feet of retail space and 350 apartments will be built in the first phase...Cohasset, MA-based Wicked Good Cupcakes brings its concept – cupcakes served in mason jars – to Faneuil Hall in Boston, starting this month...Cheeseboy is seeking to hire 30 team members for its new 1,200 s/f restaurant in Downtown Crossing, expected to open this spring. Cheeseboy operates 8 other locations, including four in MA -- at South Station, the Prudential Center Mall, South Shore Plaza and the Natick Mall...Eastern Mountain Sports is closing its store on Boylston St. in Boston. The shop will be replaced by sandwich chain Pret A Manger, which has 2 Boston locations. Pret A Manger operates more than 300 shops worldwide...Sydney Associates and Spellman Ventures of Natick will break ground on a new 12,000 s/f building at 355 Fresh Pond Parkway, Cambridge, MA which will feature metal and glass storefronts. The new building will replace the former Fresh Pond Seafood store, which closed in 2006 and has sat vacant ever since...WS Development will develop a 500,000 s/f outlet center in Cheshire, CT, expected to open in summer 2015 at the I-84/I-691 Interchange along Route 10. The complex will include public open space, walkways, recreation amenities, a residential component and full service grocer...the Kmart store on Woodbury Avenue in Portsmouth, NH will close in mid-August after 35 years.The closure is part of a series of actions the company is taking to reduce expenses...Local bakery chain Cupcake Charlie’s is opening at Patriot Place, the entertainment-and-shopping complex next to Gillette Stadium. Foxborough will be Cupcake Charlie’s fourth location...Boston developer Samuels & Associates has sold the 265,000 s/f Riverway Plaza in Weymouth, for $21.5 million to CBRE Global Investors. Riverway Plaza is a redeveloped shopping center on Route 3-A on the Hingham/Weymouth line. It is fully tenanted and anchored by Lowe’s and Staples. The stores include CVS, Dollar Tree, Margarita’s and D’Angelo’s/Papa Gino’s.

April Retail Sales Report



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

Commerce Department Monthly Sales

Retail sales edged up 0.1% in April from March, the Commerce Department said, an improvement from a 0.5% decline in March, which was the largest drop in 9 months. Core retail sales, excluding gas, autos, and building supplies, increased 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®, which had declined in March, increased in April. The Index now stands at 68.1 (1985=100), up from 61.9 in March. The Present Situation Index increased to 60.4 from 59.2. The Expectations Index improved to 73.3 from 63.7 last month.

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

Purchasing Managers Index

Manufacturing expanded in April as the PMI™ registered 50.7 percent, a decrease of 0.6 percentage point when compared to March's reading of 51.3 percent. This month's reading reflects the fifth consecutive month of growth in the manufacturing sector. 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