Thursday, July 25, 2013

Southern New Hampshire Report Preview

The annual KeyPoint Report for Southern New Hampshire, based on our GRIID, isn’t quite ready for public consumption yet, but  we are able to share some of the key findings with you:

In Southern New Hampshire, in 2013, things are moving clearly in the right direction.

Vacancy: For starters, retail inventory in the region is up nearly 800,000 square feet from a year ago, a substantial 2.7% increase,  thanks in large part to the 410,000-square-foot Merrimack Premium Outlets coming on line in mid-2012. Better yet, retail vacancy in the region has been reduced by approximately 220,000 square feet, a 7.2% drop from the vacancy level last year. The number of vacant storefronts is down 8.1%, and the vacancy rate has declined from 10.6% in 2012 to a current level of 9.6%. As a result, there has been more than 1.0 million square feet of net absorption in the region.

Size Classifications: In assessing vacancy rates by store size, it was encouraging to see that - although rates are still much too high -  vacancy in smaller store sizes showed considerable improvement.  These smaller store vacancies have been the most troubling in recent years, with vacancy rates soaring into the mid to upper teens.  The most improvement occurred in the 2,500-4,999 square foot bracket where the vacancy rate declined by 300 basis points to a level of 11.4%. Among stores less than 2,500 square feet, vacancy dropped 200 basis points, resulting in a current rate of 15.0%. However, much of this vacancy is confined to the urban cores of the larger cities in Southern New Hampshire, particularly Manchester.

Somewhat surprising was the jump in vacancy in the 50,000-99,999 square foot classification. The increase can be explained entirely by two locations: A 117,800-square-foot Walmart store was only partially replaced by a 46,500 square foot Ocean State Job Lot in Derry, creating a 71,300 square foot vacancy.  In Nashua, Market Basket vacated a 52,400 square foot store. The Walmart and Market Basket vacancies were both the result of relocation to larger units.

Towns in the Study Area:

Town Rankings: There has been no change in the top ten largest regional markets.  Nashua continues to rank first with 6.2 million square feet of inventory. Manchester follows at 5.4 million square feet and Salem is a distant third at 3.9 million square feet. These are the only cities or towns in excess of 2.0 million square feet.

Towns with the highest vacancy rates in Southern New Hampshire also remain the same as last year. Manchester leads the pack while Londonderry moved into second place. In third place Derry, replaces Seabrook in the top five, all of which have double digit vacancy. The five healthiest markets in the region are the same as last year. With a 4.1% vacancy rate, Bedford is the top performer, followed again by Amherst, Salem, North Hampton and Milford.

Retailer Activity: Market Basket is the largest contributor to new retail inventory in Southern New Hampshire, adding 95,800 square feet. New stores in Bedford and Nashua, as well as the Seabrook expansion, were more than enough to offset two smaller store closings in Nashua. Ocean State job Lot entered Southern New Hampshire with its acquisition of the traditional Walmart store in Derry, partially occupying the building with a 46,500 square foot unit. Tractor Supply also was a growing retailer in the region, adding two stores in Plaistow and Brentwood, and an additional 38,200 square feet. The only retailers to add more than two new locations were Subway and Sleepy’s. Both added three stores.

A number of retailers no longer operate stores in the region. Most notably, Fashion Bug closed stores in Nashua, Derry, and Hudson, part of its companywide liquidation. H&M closed its only store in Southern New Hampshire, a 28,000 square foot unit in Salem. Mattress Giant is another retailer that vacated the region during the year; its three stores in Manchester, Nashua, and North Hampton were acquired by Sleepy’s.

The complete 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. The KeyPoint Report for Eastern Massachusetts/Greater Boston is available now, and the KeyPoint Report for Greater Hartford, CT will follow a little later this year.


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

This report examines the retail real estate marketplace for Southern New Hampshire, with a focus on changes between May 2012 and June 2013. This report provides an analysis of changes in the region's retail activity and examines supply, vacancy, absorption, retailer activity, and market composition by store size and retail categories. The Southern New Hampshire market includes 39 cities and towns representing more than 835 square miles and approximately 553,900 permanent residents (42.0% of the state population).

Company News

New Team Members: Anastasia Magnitskaia joined the Brookline, MA office as an Assistant Property Manager. Anastasia has prior property management experience at Barkan Management Co. Jacob Noble joined the Boston office as an Assistant Parking Manager. Jacob has extensive accounting and property management experience, most recently at Lincoln Property Company. Buffy Berthiaume joined the Burlington, MA office as an Assistant Property Manager. Buffy’s most recent property management experience was at The Hamilton Company.

Industry News: National

According to the International Council of Shopping Centers Chain Store Sales Trends, June final year-over-year comparables store sales rose by 4.1% , the strongest showing since January’s 4.5%. The tally was based on 13 retailers. L Brands (Limited) was flat, Gap rose 7.0%, Costco gained 5.0%, Rite Aid was up 0.7%, and Walgreen’s rose 2.5%.  See our sales report on Page 4...Taco Bell has become the first national fast food chain to drop kid's meals, saying it will discontinue the toy and food combos at some locations this month and across the brand by next year. Taco Bell is owned by Yum Brands, which also owns KFC and Pizza Hut.

Industry News: Accelerating

Nordstrom Inc.  plans to have over 230 Nordstrom Rack stores in operation by 2016. There are currently 127 Racks, with plans to open 24 this year and another 30 in 2014...Ulta Salon, Cosmetics & Fragrance Inc., after increasing to 576 stores across 46 states last year, is planning another 125 net new stores this year. The company targets an eventual 1200-store count...Lululemon Athletica Inc. will start opening stand-alone men’s stores by 2016...Lowe's agreed to pay $205 million for 60 Orchard Supply Hardware stores in California after Orchard filed for bankruptcy relief. The acquisition will provide the retailer with a smaller store format and give it access to a new customer base in California, where it already operates 110 outlets...The HoneyBaked Ham Co. plans to open 30 more franchise locations across the Northeast over the next five years. With 20 locations in New York, New Jersey, Connecticut, Massachusetts, and New Hampshire, the company thinks the area is ripe for expansion, along with Vermont, Maine, and Rhode Island. The company has more than 400 locations...Lumber Liquidators has opened its 300th store, in Las Vegas, Nevada. The Company operates stores in 46 states and Canada...Johnny Rockets has been acquired by an affiliate of private-equity group Sun Capital Partners Inc. Terms of the deal were not disclosed. Johnny Rockets was sold by RedZone Capital Management Co. Johnny Rockets operates and franchises about 300 restaurants in 30 states and 16 countries, and has about 220 US locations...Urban Outfitters has signed a lease for 56,730 s/f on three levels at 1333 Broadway in Manhattan, where the retailer will create a new “lifestyle center” concept. UO will take occupancy in September...RadioShack has unveiled a new logo after opening its first concept store which highlights a new direction for the retailer. The New York store includes new displays that showcase top brands and applications that help customers understand more about products. RadioShack is planning several different prototypes in New York, New Jersey and Texas in coming weeks which will eventually lead to the remodeling of its 4,300 stores...Kroger has agreed to acquire Harris Teeter Supermarkets for about $2.5 billion. Harris Teeter operates 212 supermarkets, primarily in the Carolinas, where Kroger does not have a significant presence...Saks Fifth Avenue Off 5th will open a new 28,000 s/f store in Atlanta, Georgia this month in the Outlet Shoppes at Atlanta at Woodstock, the third Off 5th in metropolitan Atlanta...International clothing retailer UNIQLO will open 10 stores this fall: 3 in New York, 2 in New Jersey, 1 in Connecticut, and 4 in California, expanding the brand's presence to a total of 17 US stores...West Elm is opening its first location in Missouri at the St. Louis Galleria. The 8,385 s/f store will open in July...Men’s Wearhouse agreed to buy the Joseph Abboud clothing brand for $97.5 million in cash as the chain seeks to offer exclusive brands. The purchase gives the retailer an exclusive label to sell through its more than 1,100 stores...Wal-Mart opened 24 new locations across the country this month, including 12 Neighborhood Market stores and 12 new, relocated or expanded supercenters...Regional shopping center company Crosland Southeast has acquired 24 former Blockbuster stores from Blockbuster Corporate. Blockbuster vacated all stores at closing, and Crosland Southeast has already sold 11 of the 24. Nearly all of the 13 stores retained in Crosland Southeast’s portfolio are pre-leased to other retail and medical tenants...An affiliate of private equity firm Roark Capital Group has acquired 65 unit Miller's Ale House from Jack Miller and SKM Equity Fund III, L.P...Wendy’s is selling 425 restaurants to franchisees in a move to help boost profit margins. The sale of the restaurants will help expand adoption of the company’s new restaurant designs.

Industry News: Declerating

9 Qdoba Mexican Grill locations closed this month, and another 36 units are expected to shutter in Chicago, Southern California, Boston, Cincinnati, Ohio, New York City, Florida and Tennessee as part of a plan to remove underperforming restaurants. Parent company Jack in the Box Inc. said 67 company-operated Qdoba restaurants would close by Sept. 29, the end of the company’s fiscal year...Jean Coutu Group has sold its remaining shares of Rite-Aid Corp., ending the chain’s unsuccessful attempt to break into the US market. The company received the Rite-Aid stock in 2006 as partial payment for its American assets, which included 1,521 Eckerd drugstores and 337 Brooks pharmacies in the United States.

Industry News: New England

British Beer Co. opened this month at 103 Hanover St. at the Residences at Portwalk in Portsmouth, NH. The Portsmouth location is the newest of 13 British Beer Co. locations across New England...Whole Foods new store on Route 18 in South Weymouth opened this month, the chain’s 23rd in Massachusetts. Whole Foods purchased the 40,000 s/f store last year from now-defunct chain Johnnie’s Foodmaster, along with five other locations: in Somerville, Charlestown, Arlington, Melrose and Brookline. Whole Foods opened in the Brookline space in April, and plans to have stores in the other four locations by September - the Charlestown store will open August 7. Whole Foods Market operates more than 325 stores...Cheesecake Factory will open at the end of the year at The Mall at Chestnut Hill in Newton...A $1.6 billion rebuilding effort in downtown Quincy has begun. The first phase of construction will result in a 15-story residential building that will be the city’s tallest structure, a cluster of new stores and restaurants, and the restoration of a nine-story commercial building that will get new offices and a residential wing with loft-style apartments...Mohegan Sun plans to start construction this year on a $50 million retail expansion. Slated to open in 2015, “The Downtown District” will add 200,000 s/f to the Uncasville, CT property, including a 40,000 s/f Taste of New England Gourmet Hall for food purveyors, retail shops, a 14-screen premium movie theater, and a Kings bowling/dining venue...Stop & Shop will open its second Nantucket location this month, at 9 Salem St. just blocks from the Ferry. Stop & Shop has more than 400 stores...After 25 years in the Mall at Chestnut Hill, Papa Razzi closed its 4,000 s/f restaurant. All other locations - Wellesley, Framingham, Concord, Newbury Street in Boston, Burlington and Cranston, Rhode Island - will remain open...Dallas-based MGHerring Group closed on the $21 million sale of the Silver City Galleria in Taunton, MA. The deal involved Contrarian Capital Management LLC of Greenwich, Conn., and Tricom Real Estate Group LLC in Dallas. MGHerring will manage the mall. The mall has 90 tenants but about 30 vacancies...Four Shaw's/Star Market stores in Massachusetts and two in Rhode Island will close next month. Shaw’s says the stores have not been profitable for some time...A 38-seat Tavern in the Square eatery will open at South Station. The 780 s/f space is substantially smaller than the chain’s other restaurants that range from 5,000 to 9,000 s/f. Also, Barbara’s Bestsellers, the small, independent book stall in South Station which closed in April, will reopen soon in a 300 square foot space, about 100 s/f smaller than the previous shop.

June 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

Overall retail spending rose 0.4 percent in June from May, the Commerce Department reported. Excluding spending on autos, gasoline and building supplies, so-called core retail sales rose just 0.15 percent, the weakest gain since January.

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 improved in May, increased again in June. The Index now stands at 81.4 (1985=100), up from 74.3 in May.  The Present Situation Index increased to 69.2 from 64.8. The Expectations Index improved to 89.5 from 80.6 last month.

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

Purchasing Managers Index

Manufacturing expanded in June as the PMI™ registered 50.9 percent, an increase of 1.9 percentage points when compared to May's reading of 49 percent. June's reading of 50.9 percent reflects the resumption of growth in the manufacturing sector for 2013, following the only month of contraction for the year in May.

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