Thursday, June 19, 2014

Preview: KeyPoint Report for Eastern Massachusetts

While the 2014 KeyPoint Report for Eastern Massachusetts/Greater Boston, based on our proprietary GRIID™ retail database, is in production, we will again share some of the early results.

Vacancy Rate: What’s that they say…two steps forward, one step back? With respect to vacancy, that’s exactly what happened during the past year. The vacancy rate in Eastern Massachusetts jumped up to 8.5% from 7.8% last year. But the increase in the rate is attributable largely to three retailers: Building 19 and Dot’s liquidated while Shaw’s Supermarkets closed five stores. Although two Building 19 units have reopened as The Rug Dept., the space that remains vacant among these three retail chains represents 62.8% of the incremental vacancy that occurred during the past year.  Without these store closings we would have experienced a slightly more palatable increase in vacancy to approximately 8.0%. The real issue is that, given the uninspiring quality of these particular locations, and the fact that the average store size of the Shaw’s and Building 19 vacancies is more than 50,000 square feet, filling these new vacancies may be challenging.

Size Classifications:  Another trend reversal occurred with respect to vacancy changes by store size. While all but one size classification showed significant improvement in vacancy last year (200,000 square feet and above was fully occupied), the only category showing improvement this year was the 25,000 - 49,999 square foot range, in which the vacancy rate declined from 8.2% to 7.5%. Two of the absorbed vacancies in this size range were in Chelmsford, including Stop & Shop and Marshalls. The site is currently under redevelopment, and will become the 42,113 square foot Chelmsford Town Center. The remaining size classifications remained stable or showed modest increases in vacancy rate -  with the exception of the 50,000-99,999 square foot range. Within this category the vacancy rate jumped from 3.0% to 6.6%, primarily as a result of the closings of Building 19, Shaw’s, and the landmark Hilltop Steak House in Saugus.

Town Rankings: The top 10 town rankings by retail square footage remain intact from a year ago, with one exception: by virtue of a new Walmart Supercenter, Fall River edged up and knocked Peabody out of the rankings. There was some minor, and not particularly noteworthy, shuffling within the top 10.

Among communities with at least 500,000 square feet of retail space, there were five new towns breaking into the top 10 rankings by lowest vacancy rate. These include Foxboro, Hingham, Hudson, Danvers, and Everett.  Abington remains in the top position with a scant 1.2% vacancy rate; bringing up the rear in 10th place was Everett at 3.7%. Foxborough made the biggest leap into the top 10, coming from 58th place last year. This was largely due to the filling of significant vacancies at Patriot Place, and the opening of an Ocean State Job Lot in a vacancy left behind years ago by Bradlees.  There were only eleven towns that finished the year with less than 4% vacancy, compared to fifteen towns last year.

At the gloomy 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 last year, including Malden, which had the highest vacancy rate this year at 22.7%. Newcomers to the list include Haverhill, New Bedford, Shrewsbury, and Fairhaven. Fairhaven, moving from 37th place, was the only town not in the top twenty last year.

Retailer Activity: With respect to expansion by square footage, among the top growing retailers in Eastern Massachusetts, Walmart brought the most new space to the region, adding 344,000 square feet by opening three new Supercenters in Raynham, Swansea and Fall River (the latter two replacing traditional Walmart stores in these communities).  Party City ranked second, a product of its iParty acquisition. Whole Foods ended in third place, primarily through the acquisition of five Foodmaster units and the opening of a new Lynnfield store. Building 19 was the biggest loser by square footage after closing 597,400 square feet of space. As noted, two of the locations, Norwood and Burlington, have reopened as The Rug Dept.

Adding the most new store units this past year was Party City via the iParty acquisition, picking up 24 stores in the region. Subway was next with the addition of 11 units, followed by Orange Leaf and Metro PCS with 9 new stores each. Offsetting the Party City gain, of course, is the loss of 24 iParty stores. The Dot’s liquidation led to the closing of the 16 stores in Eastern Massachusetts, and Building 19 followed with 9 store closings, one of which was an annex to the Burlington main store.

The full report contains much more detailed information on these categories and more, and will be available soon at KeyPointPartners.com.
Bob Sheehan, Vice President of Research
BSheehan@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 12-month period beginning June 1, 2013 and ending May 31, 2014. The study area includes 189 cities and towns, representing more than 3,500 square miles (44% of Massachusetts’ land area) and approximately 4.96 million people (75.8% 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 approximately 259 million square feet of retail space and approximately 59,900 retail establishments. The KeyPoint Reports contain a summary and analysis of market trends and activity for each studied area.

KeyPoint Partners Company News

New Business: The Property Management team has a new assignment: Durgin Square, a 134,838 square foot Shaw's-anchored center in Portsmouth, NH.  Employee News:  Promotions: Joanellen Sullivan has been promoted to Supervisor and Jane Herrick has been promoted to Senior Accountant in the Accounting Department in the Burlington, MA office. Colleen Greiner has been promoted to Property Manager. Colleen recently completed her Certified Property Manger (CPM) designation. Tim Mai and Richard Couillard joined the Burlington, MA office as a Property Accountants. Tim’s most recent experience was at Winn Companies. Richard is a recent graduate of Southern New Hampshire University. Hope Middleton has joined the Burlington, MA office as an Assistant Property Manager.



































KSmith@KeyPointPartners.com

National News

May comparable-store sales posted a year-over-year gain of 4.6% based on the ICSC’s final tally of 11 retail chains. According to the ICSC, after a winter of deferred spending due to weather, consumers picked up their spending pace in April and May. L Brands (Limited) was up 3.0%, Gap was up 1.0%, Rite Aid was up 3.5%, Walgreen’s rose 8.4%, and Costco gained 6.0%. See our sales report below.

Accelerating News

Dick’s Sporting Goods Inc. opened three new stores last month in Kansas, Virginia, and North Carolina. With the openings, Dick’s operates 570 stores nationwide Dick’s will open 50 new Dick’s stores during fiscal 2014, relocate 5 stores and remodel 5 stores. The company also intends to open 8 new Field & Stream stores, relocate two Golf Galaxy stores and open one new Golf Galaxy store in 2014...Burlington Stores Inc. expects to open 25 net new Burlington Coat Factory stores during the fiscal year....Zumiez plans to open approximately 55 stores in fiscal 2014...Gap’s Athleta brand is on track to end the year with about 100 US stores...Fred Segal will open up to 10 luxury lifestyle centers in the US and across the world during the next 5 to 10 years which will combine fashion with dining, entertainment, cultural events and health and wellness in footprints of up to 50,000 s/f. The first will open within the year...multichannel women's apparel, home, and beauty retailer Soft Surroundings will open six new retail locations in 2014 in Richmond, Virginia; Lynnfield, Massachusetts; Alpharetta, Georgia; Madison, Wisconsin; Portland, Oregon; and Paramus, New Jersey. Soft Surroundings has12 stores...online retailer Gypsy05 will open its first two retail locations at the end of this month in Beverly Hills, and Malibu, California...Home furnishings retailer Conn’s Inc. plans to open 17-20 new stores while closing 10 existing stores during fiscal 2014...Dollar General expects to open 214 new stores in the first quarter. The company also plans to open 700 new stores in its 2014 fiscal year and remodel or relocate another 500. Dollar General also plans to expand into three new states in the next year, Maine, Rhode Island, and Oregon, increasing the company’s presence to 43 states. Dollar General has more than 11,000 stores in 40 states...Urban Outfitters has opened a 57,000 s/f “lifestyle center” store in Manhattan’s Herald Square, the brand’s largest location to date, and its13th store in New York City. It includes a hair salon, bookshop, coffee bar and photography shop...The Men's Wearhouse Inc. will open 100 new stores over the next 3 years following its merger with Jos. A. Bank Clothiers Inc. Men's Wearhouse is acquiring Hampstead-based Jos. A. Bank Clothiers Inc. for $1.8 billion. The merger will give the retailer flexibility to expand its 670-store portfolio...Restoration Hardware is eliminating small stores in favor of larger, dominant stores to better showcase the company's products. In addition to the recently opened full-line Design Gallery in Greenwich, CT, the company plans to open large-format stores in Los Angeles and Atlanta this year. The company has signed leases for 6 larger stores and is negotiating leases for more than 25 other locations...Gymboree Corp. plans to open 50 new stores and close 25-30 existing stores during the fiscal year...For the fiscal year, Ann stated that it plans on opening a total of 50 new stores while closing 30 stores across its brands...H&M will open its largest store to date, a 57,000 s/f flagship on Manhattan’s Fifth Avenue, on July 17...DSW will help Yellow Box footwear launch retail stores in the coming months, with three to five opening this year. Yellow Box is a footwear wholesaler best known for its jeweled sandals for women. The company sells its footwear online and through affiliated retailers. Plans call for DSW to eventually design and operate Yellow Box retail stores throughout the US...Sprouts Farmer’s Market may exceed its goal of opening 1,200 US stores in the next decade and a half. Sprouts, which now has about 170 stores, may increase its store count by as much as 14% a year, which means it would reach the 1,200 stores it forecast within about 15 years...Cabela’s will open stores in three new markets Huntsville, AL; Oklahoma City, OK; and Woodbury, NY this summer, and plans to open an additional 21 over the next two years. The company operates 56 stores across North America...Five Below opened 8 stores in the Houston, TX area this month. Last year, the retailer opened 60 new stores, and plans to open approximately 60 stores this year. With the Houston openings, there will be 338 Five Below stores in 20 states...Whole Foods' new supermarket at Colonie Center, NY, opened this month, is the first in a number of Albany area stores. Whole Foods currently has 385 stores, with another 105 in development, including 15 in the Northeast..Discount Tire/America’s Tire has opened 6 stores in 5 states so far this year, expanding to more than 885 locations in 28 states.

Decelerating News

Sears Holdings Corp. says  it will close 80 stores or more in the year ending in January. The retailer operates 1,980 Sears and Kmart stores in the United States...American Realty Capital Properties Inc. plans to sell most of its multitenant shopping-center buildings to affiliates of Blackstone Group LP (BX) for $1.98 billion in cash. American Realty expects to use the proceeds to fund its purchase of more than 500 Red Lobster seafood restaurants in a $1.5 billion sale-and-leaseback deal...Carlson is selling the TGI Fridays brand to Sentinel Capital Partners and TriArtisan Capital Partners, the merchant  arm of Morgan Joseph TriArtisan.. Terms of the deal were not disclosed. Fridays has 934 locations...American Eagle Outfitters Inc. has identified 150 stores to close in North America in the next 3 years, including nearly 100 AE stores. For 2014, the company is planning to close approximately 50 AE and 20 aerie stores...Express Inc. will close approximately 50 stores during the next 36 months, primarily at the end of their leases, even as it ramps up expansion of its of its new outlet-store concept, debuted outlet this past April...7-Eleven has retained NRC Realty & Capital Advisors LLC to coordinate the sale of 75 gasoline stations and/or convenience stores, including 31 locations in Florida, 14 in Virginia, 6 in Massachusetts and Illinois, 3 in Texas, 2 in New York, Delaware, New Jersey and Utah and 1 each in Arizona, Connecticut, Indiana, Maryland, Michigan, Pennsylvania and Vermont.

New England News

CVS last month opened its 49th MinuteClinic retail clinic in Massachusetts, in Dedham. CVS operates 812 of the walk-in clinics across the US...Katz Properties has purchased the 20,000 s/f Embassy Cinema in Waltham for $3.1 million from Ship To Shore LLC...Gap Inc. is in talks to open a new Gap Outlet on Washington Street, across from the Millennium Tower site in Downtown Crossing, in the space previously occupied by the F.Y.E store, which closed in January 2012...After 18 years, the 10,000 s/f Willow Books and Cafe at 279 Great Road in Acton is on the market. The sale does not include the real estate...Construction is almost complete on a 20,000 s/f retail development at 555 Boston Providence Hwy (Rte. 1) in Walpole, MA. Tenants will include Milan Nail and Spa, Salon Bene, Piezoni's Pizza, and Bay State Endodontics, all opening this summer...Despite delays and multiple owners, work is expected to be completed by year's end to replace a portion of the former Polaroid headquarters in Waltham, MA with a 250,000 s/f mixed-use development. The latest tenant to sign at 1265 Main is Flank, the New American Beefsteak. Most of the development's 130,000 s/f of retail space has been leased, including an 80,000 s/f Market Basket, a 25,000 s/f Marshalls; Starbucks; and a 6,000 s/f Jake 'n Joe's Sports Grille...Cushman & Wakefield brokered the sale of Durgin Square, a 137,838 square foot, Shaw's Supermarket-anchored center in Portsmouth, NH, to Dividend Capital for $24.7 million (see KeyPoint Partners Company News on Page 1)...Savers opened a new store this month at 222 Boston Post Road Plaza (Route 20), Marlborough, MA...Carvel ice cream has embarked on a big push to find franchisees willing to open new stores in Massachusetts. The chain currently consists of about 275 full-service shops and 125 express locations across the country, with a large concentration in New York and New Jersey.

May 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 gained 0.3% in May on the heels of recent data showing solid job growth and strong expansion in manufacturing and services industries. While that was below economists' expectations for a 0.6% rise, April's retail sales were revised to show a 0.5% increase.

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 decreased in April, improved moderately in May. The Index now stands at 83.0 (1985=100), up from 81.7 in April. The Present Situation Index increased to 80.4 from 78.5, while the Expectations Index edged up to 84.8 from 83.9 in April.

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

Purchasing Managers Index

The May PMI® registered 55.4 percent, an increase of 0.5 percentage point from April’s reading  of 54.9 percent, indicating expansion in manufacturing for the 12th consecutive month.

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