Monday, September 16, 2013

Greater Hartford, CT KeyPoint Report Preview

With the releases of The KeyPoint Reports on Eastern Massachusetts/Greater Boston and Southern New Hampshire behind us, it’s time to move onto the report for Greater Hartford, Connecticut. 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, a return to stability may be in sight.

Vacancy:  Total retail space in Greater Hartford totaled 37.1 million square feet at the end of the study, a small decrease from the 37.2 million square feet reported last year. Some spaces converted to non-retail uses or were demolished, contributing to the negligible decline in inventory. The most salient point regarding total inventory in the region is that there was virtually no net change.

New retail construction continued to move at a snail’s pace as most developers remained on the sidelines. Existing conditions in the market may be playing a large part in their decision. The better news is that following a few up-and-down years, the vacancy rate in Greater Hartford fell to 11.3%, its lowest level since 2009, a significant drop from the 12.0% vacancy rate in 2012. This equates to a reduction in the level of vacant space of 282,300 square feet. Still, occupancy levels need to improve substantially before we declare a healthy retail climate in the region.

Size Classifications:  While vacancy showed improvement in 2013, it was not all good news. Only in the 50,000 square feet and higher categories do vacancy rates fall below double digits. Most troubling is the Under 2,500 square foot classification, in which vacancy inched up from 18.9% to 19.1% during the year.

Greater Hartford did show marked improvement in the store size ranges from 2,500 to 9,999 square feet, but trended higher in the 10,000-24,999 square foot range. Among the more prominent names closing stores in this size range were Rite Aid (2), Planet Fitness, Petco, Restoration Hardware, and Nike. In some cases, tenants relocated to smaller units.

Greater Hartford, CT study area
Town Rankings:  The top ten among Greater Hartford retail markets (based on square feet of retail space) remain the same in 2013, with only one change within the rankings: West Hartford jumped over Enfield to take second place this year - a distant second behind Manchester, which continues to dominate all communities with 5.4 million square feet of retail space. West Hartford ended the year at 2.9 million square feet.

Among towns with the highest vacancy rates, East Hartford and Berlin again have the dubious honor of ranking firts and second, finishing at 23.8% and 23.1%, respectively. It’s disconcerting that both rates are somewhat higher than last year. New Britain and East Windsor also ended the year above 20%. Hartford ranked fifth at 16.3%, declining 220 basis points. Among towns with the lowest vacancy rate, Wethersfield leaped from fourth to first, coming in at 4.2% in 2013. The abutting town of Rocky Hill finished second at 5.3%, inching ahead of Enfield, which ended at 5.4%.

Retailer Activity:  Walmart Neighborhood Market, with its first entry into Greater Hartford, a 59,700 square foot store in West Hartford, took the top spot for incremental space in the region. Kohl’s ended in second place with the addition of its new 58,966 square foot store in Berlin, its first smaller prototype in the region.

LA Fitness opened a 35,100 square foot health club in Farmington, good enough to rank third. Sleepy’s and Subway tied for the lead in the number of new stores in Greater Hartford with six apiece. Boost Mobile and Chipotle each added four stores. Gold’s Gym closed two Enfield locations, reducing its retail space by 37,200 square feet, the highest level in the region. TJ Maxx and Sears Hardware were the only other retailers to decline by more than 25,000 square feet. Better Bedding exited the region by vacating four stores which were acquired by Sleepy’s. Midas Muffler and Liberty Tax Service each closed three stores while several retailers closed two units.

The full report contains much more detailed information on these categories and more. Stay tuned!
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 June 1, 2012 and July 31, 2013, a 14-month span. This report provides an analysis of changes in the region's retail activity and examines supply, vacancy and absorption, retailer activity, and market composition by store size and retail categories. The Greater Hartford market includes 26 cities and towns and represents more than 835 square miles and approximately 812,200 persons, equating to 22.6% of the Connecticut total population. The KeyPoint Report for Eastern Massachusetts/Greater Boston and TheKeyPoint Report for Southern New Hampshire have been released, and are available at KeyPointPartners.com.

Company News

Chris Scharff will become a Property Manager in the Burlington Office. Chris has been an Assistant Property Manager in the Boston office.

Industry News: National

August-store comparable-store sales posted a year-over-year gain of 3.6% based on the International Council of Shopping Center’s tally of 12 retail chains. In July, overall industry sales—based on this limited sample of monthly-reporting firms—grew by 4.2%. August sales were slightly softer in the apparel segment, but steady otherwise. The back-to-school apparel demand has been uneven and late, according to the ICSC, but August spending was stronger in the earlier part of the fiscal month. L Brands (Limited) was up 3.0%, Gap rose 2.0%, Costco gained 4.0%, Rite Aid was up 1.1%, and Walgreen’s rose 2.2%.  See our sales report below.

Industry News: Accelerating

Nordstrom will pay $102.5 million to own the site of its future Manhattan flagship store at 225 W. 57th St., which will anchor one of the tallest buildings in the world.The store will occupy the first seven floors of an 88-story residential condominium tower that will stretch 1,550 feet...Modell’s Sporting Goods opened two Long Island, NY locations last month, giving it a total of 155 storefronts...DSW Inc. plans to test a store format that is roughly half the size of standard DSW stores. The test stores will be around 10,000 s/f. The company expects to open 30 stores in 2013, including two small shops. The chain runs 377 US stores and manages shoe departments for 351 department stores...H&M will open its largest location to date, a 63,000 s/f flagship in New York City’s Herald Square. H&M is also on track to open a 42,500 s/f store at 4 Times Square by the end of this year in a space which was previously occupied by ESPN Zone...Uniqlo will open 10 US mall stores in October and November, giving it a total of 17 US locations. Uniqlo will open four stores in California, three in New York, two in New Jersey and one in Connecticut...Corner Bakery Cafe plans to open nearly 50 new franchised units across the country including nine cafes in San Diego, seven in Oklahoma, 10 in Northeast Florida and 21 throughout the Boston area. The company has franchise agreements for a total of 300 cafes in the next 3 to 4 years...Zumiez plans to open 58 new stores in fiscal 2013...Five Below has opened 32 new stores in 2013, and is on track to open 24 stores during the third quarter and reach its goal of 60 new stores in fiscal 2013...Ares Management and the Canada Pension Plan Investment Board have reached an agreement to purchase Neiman Marcus for $6 billion from a group of investors led by TPG Capital and Warburg Pincus. The transaction is expected to close in the fourth quarter of 2013 subject to regulatory approvals and other conditions...Walgreen Co. and Kerr Drug have entered into a definitive agreement under which Walgreens would acquire certain assets of Kerr Drug’s retail drugstores and specialty pharmacy business. Financial terms of the agreement were not disclosed. The acquisition is structured as an asset transaction and includes Kerr Drug’s 76 retail drugstores and its specialty pharmacy business as well as a distribution center. Kerr Drug will retain ownership of its long-term care pharmacy business. The transaction is subject to satisfaction of regulatory requirements and other conditions and is expected to close sometime this year. Kerr Drug will continue to operate separately...Fresh casual restaurant Newk’s Eatery has entered a renewed growth mode, with 12 new restaurants planned to open before year end 2013. Newk’s currently operates and franchises 59 units in 11 states...Papyrus North America announced the opening of the a Niquead.D flagship store in New York City, the brand’s second location to date. The new, 900 s/f store features women’s jewelry and accessories, clothing, scents, home d├ęcor, and paper and gift products...Pearle Vision will unveil its new store design this month which includes a new brand logo and signage, modernized displays, and a completely transformed floor plan. Current Pearle Vision licensees will have the opportunity to incorporate all or some of the new elements into existing centers...Jersey Mike’s Subs has signed a development agreement with Paradigm Investment Group to open 10 units in New York, and Connecticut.  Additionally, Paradigm will oversee growth throughout the state of Connecticut, Western Massachusetts, and Southern New York state...Aldi will open its second Bergen County store next month, the 29th Aldi in New Jersey. Aldi expects to add six to eight stores per year in New Jersey and eastern Pennsylvania. The company has over 9,000 stores, including more than 1,200 in this country...In separate announcements, Bi-Lo Holdings and Harris Teeter announced plans to acquire select Piggly Wiggly stores. Bi-Lo will acquire 22 Piggly Wiggly stores in South Carolina and coastal Georgia. Harris Teeter Supermarkets will purchase six Piggly Wiggly stores and one future store location in the Charleston, SC, area...Von Maur Department Stores will open its first location in the Northeast, at Eastview Mall in Victor, NY. Von Maur has 27 stores.

Industry News: Decelerating

Aeropostale plans to shut down 30 to 40 locations this fiscal year. Previously, it had stated its plans to close 15 to 20 stores...Tesco LLC has sold grocery chain Fresh & Easy to private equity firm The Yucaipa Cos., following months of uncertainty about the 200+-unit chain’s future. Some stores will be closing, but specific stores have not been identified, and terms weren’t disclosed.

Industry News: New England

Frozenyo frozen yogurt opened in a 1,200 s/f storefront at the corner of School and Washington streets in Boston’s Downtown Crossing. Frozenyo is based in Washington, and all of its 15 other stores are in the DC metro area, although the chain is seeking franchisees to expand...New Balance Athletic Shoe Inc. of Boston opened a new format 1,994 s/f store at the Burlington (MA) Mall. The format is called the New Balance Life Store, and features such company brands as Aravon and Cobb Hill for women, Dunham for men, and New Balance for both men and women...Athenahealth has revealed plans for the 760,000 s/f Arsenal on the Charles office complex it bought last December for $168.5 million from Harvard University, which call for: 150,000 s/f of new office space; a glass-enclosed atrium for the New Repertory Theatre; a beer garden/restaurant space; an Arsenal museum; outdoor meeting space; parks with pedestrian and bike paths to the Charles River; an accelerator space for health information startups. Athenahealth's plan will likely require zoning changes and state approval to alter historic structures...C. Talanian Realty Co. has sold a three-story, 4,800 s/f Newbury Street building for $6 million. The property includes two retail spaces, two luxury residential units and three parking spaces...Linear Retail Properties has bought the retail condominium located at 145 Charles St. in Boston’s Beacon Hill for $1.65 million. The 3,000 s/f of space is occupied by the King & I Thai Restaurant. Linear Retail now owns 14 retail properties in the City of Boston, including two on Charles Street, and a total of 69 properties throughout Eastern Massachusetts, Southern New Hampshire, and Rhode Island...City Sports opened its new store in Boston’s Financial District. The 8,000 s/f store at 225 Franklin St. was the site of a bank vault for State Street Corp. City Sports has 21 stores in the Boston area, New York, Pennsylvania, Maryland, and Washington, D.C...Bon-Ton Stores Inc. opened this month at the Maine Mall in South Portland, filling the site vacated by Filene’s in 2006. It will join Macy’s, Sears and J.C. Penney as the mall’s anchor tenants...Big Y Foods Inc. and F.L. Roberts & Co. Inc. have announced a partnership to develop convenience stores under the name Big Y Express. The first will open this fall in Lee, MA...Tavern in the Square is working to open four new MA locations: a 40-seat restaurant and bar at South Station; a 5,600 s/f restaurant next to North Station ; an 8,000 s/f Tavern in Northborough; and a 7,000 s/f spot at The Point, a new shopping center under construction in Littleton, The first Tavern opened in 2004 in Cambridge's Central Square. In the past decade, partners opened additional locations in Porter Square, Salem, Burlington and Allston, and acquired the Union Street restaurant in Newton.

August Retail Sales Report

























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

Commerce Department Monthly Sales

The Commerce Department said retail sales increased 0.2% last month as Americans bought automobiles, furniture and electronics and appliances.

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 July, increased slightly in August. The Index now stands at 81.5 (1985=100), up from 81.0 in July. The Present Situation Index decreased to 70.7 from 73.6. The Expectations Index increased to 88.7 from 86.0 last month.

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

Purchasing Managers Index

Manufacturing expanded in August as the PMI™ registered 55.7 percent, an increase of 0.3 percentage point when compared to July's reading of 55.4 percent. August's reading reflects the highest overall PMI™ reading in 2013. 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