Wednesday, December 16, 2015

The Year in KeyPoints: Our Annual Review

The end of another KeyPoints publishing year approaches swiftly. As always, in these pages we’ve explored some of the most important events and trends in the retail real estate industry, and shared our own unique research. Below is a recap of the topics on which we’ve commented in 2015 - stay with us in 2016 to see where these stories go from here:

January: Millennials Shift Fashion Direction
VP of Research Bob Sheehan wrote about the changing fortunes of youth apparel retailers: “It appears fashion-forward teen shoppers have become less label-conscious and more price-conscious. They’ve forsaken Abercrombie’s and Eagles. But they still want cool clothes. The answer is affordable fashion, a trend that complacent mall-based merchants like A&F never saw coming. New-school fashion retailers Forever 21 and H&M have been rolling out stores while offering wide selections of affordable fashion”.

February: Merge Ahead? Staples, Office Depot, and the FTC
Bob commented on the proposed merger of the two major office supply retailers: “This month came the announcement that Staples and Office Depot had entered into a merger agreement. In 1996, Staples made its first attempt at a merger with Office Depot, but was denied by the FTC on the basis that a potential monopoly would dictate office supply pricing. While Staples and Office Depot made the case that competition existed in the form of Wal-Mart, Target, Circuit City and Best Buy, among others, the FTC was not swayed. So will the FTC view the merger any differently this time around?” [NOTE:  for the latest on the deal see the National News section].

March: The Bean Boot Marches Forward
Marketing Manager Chris Cardoni wrote about the ongoing success and accelerated expansion of LL Bean: “One old-school retailer with a classic name is striding confidently into the future on the strength of a 104-year-old boot. L.L.Bean, Inc. has grown from a one-man operation to a global organization with 2014 revenue of $1.61 billion. The signature boots sell out every winter; this past winter, Bean sold approximately 450,000 pairs, a new record, and Bean boots are back-ordered until spring or even summer.”

April: Return to RECON: KeyPoint Partners Goes To Vegas
We noted our return as an exhibitor at the retail industry’s premier trade show: “KeyPoint Partners will be an exhibitor at the International Council of Shopping Centers RECON at the Las Vegas Convention Center, the largest retail real estate trade show in the world, and one of the largest conventions of any kind in Las Vegas, with over 1,000 exhibitors and an expected 34,000 attendees.”

Our May through August issues focused on our annual KeyPoint Reports on retail real estate activity in key New England markets, based on our GRIID™. This year’s reports included an analysis of the restaurant sector. All three reports are available at KeyPointPartners.com: May: Eastern MA Report Preview: “We never want to be the bearers of bad news, but somebody has to do it: vacancy in Eastern MA continues to trend upward. In 2015, the region experienced a rise in the vacancy rate from 8.5% to 8.8%. We continue to see national and regional chains close stores.”
June: Southern New Hampshire Report Preview: “Vacant space in the region declined by more than 200,000 square feet, partially absorbed by replacement tenants and partially by conversion to non-retail uses.. As a result, the vacancy rate in the region declined from 10.4% to 9.6% throughout the year, a sign that the retail environment continues to stabilize.”
July: 10-Year Eastern MA Restaurant Report: “Much of the growth in the number of restaurants resulted from the development of fast casual chains, in addition to the phenomenal growth of Subway to become the largest restaurant chain in the world. Its current global store count exceeds 42,000 locations, an average of two store openings per day since 1965.”
August: Greater Hartford, CT Report Preview: “In today’s environment, limiting new development is a good thing. Much of the existing vacancy needs to be filled or demolished before substantial new retail space can be added, and the region took considerable strides toward accomplishing just that. Total occupancy increased by more than 350,000 square feet in 2015, lowering the vacancy rate in Greater Hartford from 11.0% in 2014 to 10.1% this year.”

September: Are Supermarkets About to Get Sandwiched?
Bob Sheehan shared some thoughts on the impact of online grocery shopping: “At one time it seemed that Grocery was the one retail category that was going to avoid the internet sales onslaught. What happened to music, books, electronics could never happen to groceries- or so one thought. But the buzz lately suggests things are about to change. Would you order your weekly groceries online if they’d show up at your door a couple of hours later for a $3.99 delivery charge? Or would you rather fight the traffic and line up at the check-out?”

October: Happy Hallow-days!
Chris Cardoni shared a number of sales forecasts for Halloween and the Holidays: “It’s become a cliché to note how fast one retail season rolls into another, and here we are again in the usual Halloween-to-Christmas retail whirlwind. Walk into any Michael’s store or CVS seasonal aisle and you’ll see the orange and black right next to the red and green. Total spending on Halloween is expected to reach $6.9 billion, compared to $7.4 billion last year. In general, industry forecasters are looking for only modest increases in holiday retail sales.”

November: Walgreens-Rite Aid Deal: Elimination of 3,000 stores...REALLY?
Bob used GRIID™ to explore the number of store closing forecast as a result of the proposed merger of two major drugstore chains: “One has to wonder how many stores Walgreens will have to close in the face of FTC antitrust scrutiny before the deal is approved. So far, reported estimates of store closings range to as many as 3,000 stores. Walgreens indicated it would consider closing as many as 1,000 units in some combination of the two chains, but expects the real number will be closer to 500 stores. Whether anyone, including Walgreens, believes these estimates is another story.”

Which brings us to the close of another action-packed retail year! We thank you for your readership and your support, and we wish you Happy Holidays and a peaceful, profitable New Year!

Mark Becker             Bob Sheehan               Chris Cardoni
Partner/CFO             VP of Research            Marketing Mgr.

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