Preview: Ten-Year Grocery Real Estate Report

As we noted in last month’s issue, we’ll soon be releasing the 2014 KeyPoint Report for Eastern Massachusetts/Greater Boston, based on our proprietary GRIID™ retail database. This year’s report includes a special historical section which we’ve called A Ten-Year Look at the Grocery Landscape. Here’s a preview of that section:

Overview: The last decade has seen significant changes in grocery shopping options - and in the grocery real estate landscape. The proliferation of dollar stores and their reallocations of floor space toward grocery items have made these value retailers an increasingly popular alternative to traditional grocers. At the other end of the spectrum, wholesale clubs are capturing a greater share of grocery expenditures, due to their pricing advantage on volume purchases, and considerable store growth by home-grown BJ’s.

Other retailers have been diverting food dollars away from traditional supermarkets as well, notably Walmart, which has relocated a significant number of traditional stores to Supercenters, and expanded others. Many Target stores have also added full line grocery departments. Finally, we’ll see an increasing share of grocery dollars allocated toward internet retailers.

Regional Grocers: Among regional grocers, growth came via acquisition. Hannaford took over the Victory chain. Whole Foods acquired five Foodmaster stores. Stop & Shop picked up two Foodmaster units, and remains the dominant supermarket in the region. Shaw’s was a chain that many thought had little long-term viability; however, under new ownership, Shaw’s appears to have stabilized, and maintains its number two position. Market Basket, the third largest chain in the region, added nearly 700,000 square feet in just the past five years (although as noted in recent industry news, not all new stores are open, due to their well-publicized family squabbles).

Dollar Stores: Dollar store growth was dominated by Dollar Tree. Ten years ago Family Dollar was the category leader - Dollar Tree now operates 693,700 square feet compared to Family Dollar’s 587,500 square feet. Dollar General, a newcomer to the region,  is expected to show significant future growth.

Wholesale Clubs: Wholesale clubs include the big three of BJ’s, Costco, and Sam’s Club. Neither Costco nor Sam’s Club has made significant headway in the region, ending the decade with the same store counts with which they began. At the same time, BJ’s has added seven new clubs, and now operates 21 stores. Wholesale club sales growth has been stronger than traditional grocers.

The full Ten-Year Grocery Study includes charts illustrating the relative changes in square footage of grocery retailers, dollar stores, and wholesale clubs in our Eastern Massachusetts study area from 2004 through 2014.

The Eastern Massachusetts KeyPoint Report, with the Ten-Year Grocery Study plus much more information, will be available to view and download later this month at KeyPointPartners.com.

Bob Sheehan, Vice President of Research

BSheehan@KeyPoint Partners.com

The KeyPoint Reports examine changes in supply, vacancy and absorption, retailer activity, and market composition by store size and retail categories during a 12-month period, and include detailed information on virtually all retail properties in Eastern Massachusetts, Southern  New Hampshire and Greater Hartford, Connecticut. These markets encompass approximately 260 million square feet of retail space - approximately 44% of all retail space in New England - and nearly 60,000 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 Leasing Team has added Summer Hill Plaza, a Stop & Shop-anchored center in Kingston, MA, to its portfolio. Michael Branton will handle the assignment. Don Mace will handle leasing for TJ Maxx Plaza in Tyngsboro, MA. KPP will relocate the current Middleboro, MA office to Colony Place in Plymouth, MA, an 800,000 s/f power center which KPP has managed for several years. Colony Place is shadow-anchored by Walmart and anchored by Best Buy, Dick's Sporting Goods, Michael's, Bed Bath & Beyond, and other national retailers.  The PM Team has also added five retail properties from Linear Retail, in Milford, Peabody, Reading, and Wellesley, MA and East Greenwich, RI. Employee News:  Rosanna Anziani and Herman Murphy have joined the Burlington, MA office as a Property Accountants. Rosanna's recent experience was at Partners Healthcare Systems. Herman has many years of property accounting experience at Hunneman Management & Development.

National News

June comparable-store sales posted a year-over-year gain of 5.3% based on the ICSC’s final tally of 11 retail chains. This caps a calendar quarter rebound over the April-to-June period with a same-store rate of 5.4%, nearly twice the pace of the January-to-March calendar quarter, according to the ICSC. L Brands (Limited) was up 2.0%, Gap was down 7.0%, Rite Aid was up 3.9%, Walgreen’s rose 1.3%, and Costco gained 6.0%. See our sales report below.

Accelerating News

dd's DISCOUNTS, a division of Ross Stores, Inc. opened its first New Jersey  store last month.  dd's DISCOUNTS operates 140 locations in 11 states and plans to open approximately 20 locations in 2014...West coast retailer Smart & Final could be heading East with a warehouse club concept called Extra it believes has potential for more than 1,250 stores nationwide. Smart & Final operates a 247 stores, including 195 Smart & Final stores, 81 of which are the company’s larger format Extra concept and 114 in what the company calls its legacy format. The company plans to open 6 new stores this year on top of the 7 it has already opened. Plans call for 20 new Extra stores next year, and more than 180 new Extra stores in the 6 western states in which it currently operates...Sport Chalet Inc. is being sold to Vestis Retail Group, which owns Bob's Stores and Eastern Mountain Sports, creating one of the largest sporting goods retailers in the country with more than 150 stores...Online menswear brand Bonobos plans to grow from 10 locations to 40 nationwide by 2016. Bonobos’ physical locations, which average about 1,500 s/f, do not actually sell inventory. Instead, they act as mini-showrooms where customers can try on items, receive one-on-one style and fit advice, and place their order on the company’s website...CVS Caremark opened its 35th MinuteClinic in PA earlier this month. It plans to open 150 new MinuteClinics by the end of the year and operate 1,500 clinics by 2017. There are over 800 MinuteClinic locations in CVS/pharmacy stores in 28 states and DC...Online beauty seller Birchbox has opened its first brick-and-mortar store, in Manhattan’s SoHo neighborhood. The two-level store offers an assortment of 2,000 products from 250 brands. Similar to the Birchbox site, the store is organized by category as opposed to brand...Teriyaki Madness announced five new franchise deals that will move the brand into new markets in Arizona, California, Florida, Michigan, New Jersey, Ohio and Tennessee. The company is on pace to have 100 national locations by 2016...CVS Caremark has agreed to buy the assets of Navarro Discount Pharmacy, the largest Hispanic-owned drug store chain in the US. The transaction includes Navarro's 33 retail drugstore locations and Navarro Health Services...Olive Garden has begun the roll out of a new restaurant remodel design and logo. The updated design will be implemented at more than 75 Olive Garden locations during the next year. The look includes the removal of walls to create a more open atmosphere; distinctive decor in each dining area; a more modern lobby and bar area; flexible seating that better accommodates large parties; and vibrant colors, fabrics and textures...Phillips Edison-ARC Shopping Center REIT Inc. announced the acquisition of 20 grocery-anchored shopping centers during the second quarter of 2014. The Company's portfolio now consists of 120 properties in 27 states. The newly-acquired centers expanded the Company's presence in Florida, Georgia, Kentucky, Pennsylvania, Virginia, South Carolina and Texas, and added the first properties in Massachusetts, Nevada, Tennessee and Washington, adding approximately 2.1 million s/f the Company's portfolio. The aggregate purchase price for all acquisitions totaled approximately $315 million.

Decelerating News

Coach Inc will close about 70 stores in North America...Juicy Couture shut down all US stores by the end of June. More than 60 international stores will remain open...Bebe Stores Inc. will close all 16 mall-based 2b stores...Crumbs Bake Shop Inc. suspended operations and closed all its stores earlier this month. It operated about 48 stores in 10 states and DC, including 3 Boston locations. However, an investor group that includes the Fischer Family and Marcus Lemonis, Chairman and CEO of Camping World and Good Sam Enterprises, plans to provide financing for the cupcake chain as a prelude to an acquisition... Lumber Liquidators now expects to open 33 to 37 new store locations in the expanded showroom format in 2014, from the previous range of 35 to 40 new store locations. ..Nordstrom Inc. will close its underperforming full-line store in Orlando when the lease runs out next month. The company will continue to serve Orlando customers through its Nordstrom Rack at Millenia Crossing, one of 10 in the state, as well as the company’s other 8 full-line stores across Florida. Nordstrom plans to open 27 new Rack stores in 2014, but only 3 full-line stores...Wolverine Worldwide plans to close 140 stores over the next 18 months and consolidate store operations. About 60 stores, primarily Stride Rite, will close by the end of the current fiscal year, with the rest closing by the end of 2015.

New England Industry News

Walmart broke ground last month on a 155,000 s/f store at Route 28 and Tobey Road in Wareham, MA that will replace its 20-year-old 125,000 s/f location on Cranberry Highway. Scheduled to open next year, the new WalMart will include a full grocery store along with pharmaceuticals and a full general merchandise section...The Reading, MA Walgreens has closed for good. Walgreen Co., the nation’s largest drugstore chain, announced in March it would close 76 unprofitable stores around the country in the second half of the fiscal year. The company has 8,210 stores nationwide...Room & Board, a furniture chain which specializes in what it describes as modern American-made furniture, opened its first New England store on Boston’s Newbury Street, Room & Board's 14th US location...Men’s apparel retailer Blank Label opened its second Boston store in Downtown Crossing last month, and plans six more new East Coast stores by 2016...The country’s two biggest frozen yogurt chains, Menchie’s and Yogurtland, plan to expand in MA. Yogurtland first opened shops in the area last year, and now has three in Brookline, Cambridge, and Newton, with plans to add 7 to 10 franchised locations within the next three years. Menchie’s opened its first MA shop last month in Mansfield, and plans to add at least 2 stores in the next year or two...Florida-based nightclub operator Latitude 360, a restaurant and entertainment venue with bowling lanes, bar, dance floor, HD sports theater, dine-in movie theater, high-tech game room, and live music, has signed a letter of intent with the Abbey Group, owner of the 615,000 s/f Lafayette City Center in Boston’s Downtown Crossing, for a 63,000 s/f space. Latitude has other locations in Florida, Indianapolis and Pittsburgh, with another under construction in Albany, NY and one planned for the Kingston Collection, formerly known as Independence Mall, in Kingston, MA...The Somerville Redevelopment Authority selected Magellan Development Group to facilitate the $1 billion, 2.3 million square feet of new development along seven blocks in Union Square. The plan comes as the extension of the Green Line into Somerville creates development opportunities...Tastings LLC, which does business as Tastings Wine Bar & Bistro at Patriot Place in Foxboro, filed under Chapter 7 of the bankruptcy code. The move usually results in liquidation...IKEA in Stoughton completed a 58,575 s/f expansion that had begun in September 2013. The building now features 415,575 square feet of retail space...Somerville Brewing Co.’s American Fresh Taproom will be a part of the Assembly Row development’s SomBlox section, which will feature retailers and restaurants in converted shipping containers situated around a beer garden. Opening is planned for August 1...L'Occitane  celebrated its grand opening in Cranston, its first store in Rhode Island. L'Occitane has over 200 stores nationwide...Michaels announced the grand opening of its new Burlington store, featuring a new design, which will replace its current location at Crossroads Plaza...A neighborhood group in Boston’s North End voted to oppose a zoning application that would allow Pomodoro Restaurant to move to a nearly 4,500 s/f building on Hanover St. Pomodoro is unable to renew its lease at its present location.

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

The Commerce Department said US retail sales rose 0.2% last month after an upwardly revised 0.5% advance in May. Core sales, which strip out automobiles, gasoline, building materials and food services, increased a solid 0.6% in June.

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 increased in May, improved again in June. The Index now stands at 85.2 (1985=100), up from 82.2 in May. The Present Situation Index increased to 85.1 from 80.3, while the Expectations Index rose to 85.2 from 83.5 in May.

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

Purchasing Managers Index

Manufacturing expanded in June as the PMI® registered 55.3 percent, a slight decrease of 0.1 percentage point when compared to May's reading of 55.4 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