Wednesday, December 21, 2016

Bits and Pieces for the Holidays - Revisited!

It’s been quite a while since our last “bits and pieces” article - 9 years to be exact.  That article included some not-so-random thoughts about then-current retail topics as we headed into the New Year. We decided to take another shot at it and follow the same Twelve Days (uh…thoughts) of Christmas theme from nearly a decade ago. So here we go…

On the first day of Christmas, my true love said to me:  Who in the world would buy groceries online before examining the goods first? I am now finding out the answer - many people. I thought Grocery would be the last category standing when it came to shopping online, but Ahold Delhaize just announced that it plans to double its e-commerce sales by 2020.

On the second day of Christmas, my true love asked me:  So what do you think? Will Sears be around a year from now? Probably so, based on the company’s sheer magnitude and its considerable real estate holdings. At the same, Sears recently announced its biggest loss in more than four years, and its 20th consecutive quarterly decline in sales.  Expect more store closings and possible brand sales in the coming year.

On the third day of Christmas, my true love asked me:  When is that acquisition going to occur between Walgreens and Rite Aid? Well, they have to find buyers for the excess stores first. With Kroger, Fred’s, and Albertsons as the latest possible purchasers mentioned, it could be getting close, with the merger coming to fruition in 2017.

On the fourth day of Christmas, my true love said to me:  As if Amazon hasn’t caused enough chaos within the retail industry, it’s now coming directly to the battlefield to face brick-and-mortar retailers. First we saw Amazon Books, and now Amazon Go. While Amazon recently denied a report of a 2,000 store expansion for Amazon Go, the success of the concept will likely determine what that number really is.

On the fifth day of Christmas, my true love asked me:  Would you rather shop online or in a store? Well, that depends on the purchase. You read many articles strongly indicating that shoppers prefer the physical store experience. After all, 90% of retail sales, give or take, are rung up through brick-and-mortar cash registers. But it has been over two years since online book sales surpassed brick-and-mortar. Nonetheless,  a recent report shows that physical stores remain the go-to location for cosmetic and grooming purchases. It seems as if there’s no single answer to this question.

On the sixth day of Christmas, my true love asked me:  What about Target’s small store strategy? Target announced last month that “hundreds” of small stores were planned. Dense, urban areas and college towns are Target’s focus for these small-format locations.  For years Target wouldn’t even think about opening a store concept in which its full assortment could not be offered. Times have certainly changed.

On the seventh day of Christmas, my true love said to me:  “Malls are becoming scary places!” I said, “You want to see scary? Come back in 10 years and I’ll show you scary.”

On the eighth day of Christmas, my true love said to me: So what’s the next big thing in retail development?  For sure everything has its day, as we’ve seen with lifestyle centers. While outlet centers, mixed-use, and urban retail are experiencing a renaissance of sorts, in due course the spigot will run dry with these venues as it has for others.  As far as the next big thing, an educated guess might be something focused on omnichannel retailing. Does anyone remember Service Merchandise and Best Products, catalog showrooms where the customer saw the item in-store, and then placed an order at the front desk?  Well, what if shoppers could touch and feel the merchandise before placing an online order, eliminating the guess work and possibly a big disappointment? Watch for it!

On the ninth day of Christmas, my true love asked me:  Can Barnes & Noble make a comeback with its new concept store? While it looks like a great presentation, it’s finally all about price: can you say Amazon?

On the tenth day of Christmas, my true love asked me:  Is Best Buy in the clear or in the eye of the hurricane? Just like B&N, it’s all about the price, baby!

On the eleventh day of Christmas, my true love asked me:  Are millennials having as much influence on retail as baby boomers did back in the 60s? It’s interesting that millennials, or echo boomers as some call them, are actually the children of boomers. And I would answer that question by saying yes, and then some.  Boomers influenced retail fashion in the age of bell bottoms and miniskirts. Millennials, now overtaking baby boomers as the largest generation in history, are definitely changing the way people shop and retailers sell.

On the twelfth day of Christmas, my true love asked me:  Are you headed out to the store, or looking for your laptop? I couldn’t make up my mind!

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

Happy Holidays, and best wishes for the New Year from all of us at KeyPoints!

KeyPoint Partners Company News






















Happy Holidays, and best wishes for the New Year from all of us at KeyPoints!

Mark Becker
Partner/CFO/Editor-in-Chief

Bob Sheehan
Vice President of Research

Chris Cardoni

Marketing Manager


National News

Shoppers increased retail spending just slightly in November, a possible sign of a lackluster holiday season. Retail sales rose only 0.1% in November, after a downwardly-revised 0.6% growth in October, the Commerce Department announced. Consumers bumped up purchases at restaurants and home furnishers, but also trimmed spending at auto dealers and department stores. Online and mail-order retailers posted a lukewarm 0.1% gain, compared to a robust 11.5% increase so far this year. Clothing sales were flat in November.Among retailers still reporting monthly same-store sales, L Brands was up 1.0%, Gap was down 1.0%, and Costco was up 1.0%. See our sales reports on Page 4... GNC Holdings is changing its pricing structure and marketing, and adding tech enhancements to its store environment. The company announced that all corporate stores will close on Dec. 28 and reopen on Dec. 29, when GNC will offer customers a “dramatically improved experience. ” The new initiative will launch in all 4,464 US owned and franchised locations.

Accelerating News

Adidas opened a new, 45,000 s/f four-story flagship store on the corner of 5th Avenue and 46th Street in New York City, the largest store ever for the company…Barnes & Noble opened new-concept stores in NY and MN this month. The stores have a smaller footprint and feature a full-service restaurant and bar. Others will open soon in CA and VA…Starbucks unveiled an ambitious 5-year strategy that calls for approximately 12,000 new stores globally by 2021, including two new formats. The expansion will bring Starbucks’s total store portfolio to approximately 37,000 locations…Apparel rental company Rent the Runway opened its biggest store yet, a 5,000 s/f store in Manhattan that will replace its current Flatiron District flagship…Sweaty Betty, the London-based retailer of activewear for women, opened its 9th US.store and 3rd in Los Angeles. Sweaty Betty plans  at least 50 US stores over the next five years, with eight to 10 locations opening during the next 12 months... Casey’s General Stores, Inc. plans to build or acquire 77 to 116 stores, replace 35 existing locations, and complete 100 major remodels in 2017…Sears Hometown and Outlet Stores have been opening inside existing Ace Hardware locations around the country. The latest is in Santa Paula, CA, inside the Heritage Ace Hardware. This is the 16th new Sears Hometown Store this year. The format makes major Sears brands available to customers in smaller communities... Lidl has acquired an industrial building in Philadelphia in preparation of its upcoming US launch. Lidl, operates nearly 10,000 stores in 27 countries, and plans to open between 120 and150 stores on the US east coast by the end of 2017... PetSmart opened 20 stores across the US and Canada for the quarter ending October 31, 2016. This adds to the 23 stores it opened in the first and second quarters, bringing the total number for the year to 43 new locations. PetSmart is also testing new formats. PetSmart Pet Spa and PetSmart at the Beach are concept stores in which the company is testing innovative ways to combine pet services and an enhanced pet lifestyle experience in a smaller retail footprint. The stores feature a unique, modern design with 5,000-8,000 s/f footprints, smaller than PetSmart’s typical 18,000 -20,000 s/f stores. In addition to brick-and-mortar expansion, PetSmart launched an improved web site, with one-page checkout and new home delivery options such as recurring subscription-based shipping, as well as same-day and scheduled delivery in 16 US markets... Caleres owner of Famous Footwear, has acquired 100-year-old men’s footwear and accessories brand Allen Edmonds from private equity firm Brentwood Associates for $255 million. Caleres operates over 1,200 stores under a variety of banners. Its brands include Naturalizer, Sam Edelman, Via Spiga Vince, Dr. Scholl’s Shoes and George Brown Built... Childcare franchise leader Discovery Point is primed to grow with 47 locations in operation, and five more set to open in 2017, Discovery Point plans to expand in North Carolina, Florida, Tennessee, Georgia, and Texas…Rise Biscuits Donuts announced the signing of a multi-state development agreement that will introduce the Rise concept to Georgia, South Carolina, and Kentucky. MDO Holdings, an investment and management firm with a current portfolio of over 30 companies including such brands as O2 Fitness, Happy+Hale, and Cyclebar, joined the Rise franchise system in June to develop locations in Georgia and South Carolina. In November, MDO Holdings increased their development commitment to include Kentucky, bringing the total to almost 30-units. Their first store is projected to open in early 2017... Shreve & Co. has opened a two-level, 15,000 s/f flagship store in its San Francisco home town, its first new, permanent location in 110 years. The centerpiece is a semi-spiral staircase that offers sweeping views of the store. A waterfall chandelier of lights and crystals is suspended inside the arch of the stairway. A cascade of crystals and lights hangs from the 30-foot ceiling.The store features in-store boutiques, private viewing suites for personalized consultations and an entertainment room.  It also houses an array of services, from a dedicated watchmaker to an estate jewelry appraiser and consultant…Mall of America is adding a 40,000 s/f arcade called Smaaash that includes a multilevel go-cart track, virtual reality and video games, and a restaurant and bar.The venture represents one of the largest investments ever made by a company inside the mall, and means that the mall’s fourth floor - its least-visited floor, which has seen many ventures come and go - is fully leased for the first time in years... Best Buy opened five outlet locations dedicated to major appliances this month in TX, NC, DE, and CA

Decelerating News

American Apparel  received approval to close nine under-performing stores in New York, Washington, D.C., Seattle, Atlanta, Dallas, Memphis, Santa Cruz, Calif., Evanston, Ill., and Burlington, Vt., by Dec. 31.U.S. Bankruptcy court approved an agreement with liquidators Merchant Resources LLC and Gordon Brothers Retail Partners LLC, that gives the company permission to begin “going out of business” sales for the next two weeks.  .. CVS Health has embarked on a streamlining initiative which will include the closing of 70 stores in 2017. The store closings should provide a $265 million benefit to CVS, mostly in 2017.

New England News

Shinola, retailer of high-end watches, bicycles and leather goods, opened its first Boston store in this month in the Prudential Center... Target will open one of its flexible format stores at the Redstone Shopping Center in Stoneham, MA. The 48,000 s/f store will open in July. Flexible format stores are substantially smaller than standard Target locations, less than 50,000 s/f compared to an average 170,000 s/f or more. Target is planning to open 27 flexible format stores in the next 3 years.

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

Retail sales rose 0.1% in November, after a downwardly-revised 0.6% growth in October, the Commerce Department said. Purchases at restaurants and home furnishers were up slightly, but spending at auto dealers and department stores was lower, limiting the overall advance in retail sales.

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 October, increased significantly in November. The Index now stands at 107.1 (1985=100), up from 100.8 in October. The Present Situation Index increased from 123.1 to 130.3, while the Expectations Index improved from 86.0 last month to 91.7.

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

PURCHASING MANAGERS INDEX

Manufacturing expanded in November as the PMI® registered 53.2 percent, an increase of 1.3 percentage points from the October reading of 51.9 percent, indicating growth in manufacturing for the third consecutive month. 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

Tuesday, November 22, 2016

Is The End Getting Closer for the Little Guy?

For many years we have published the KeyPoint Reports, macro-level compilations of retail real estate trends and analysis in the three New England regions that we cover in our GRIID™ database: Eastern Massachusetts, Southern New Hampshire, and Greater Hartford, CT. One area on which we focus in these reports is the change in inventory and vacancy rate by store size classification - without question the most salient finding during the past decade was the impact on small stores less than 2,500 square feet.

Let’s focus on Eastern Massachusetts, the largest region we cover: since 2006 total retail inventory has increased from 176.5 million square feet to 194.2 million square feet, a 10% increase during the past 10-year period. At the same time we’ve seen a rise in the vacancy rate from 5.6% to 9.0%, with vacant space increasing an alarming 76% in the past ten years. The modest gain in total space and the dramatic rise in vacancy relative to prior decades can be attributed largely to 1.) the abrupt slowdown in new retail construction resulting from the Great Recession, and 2.) the mounting effect of online shopping on brick- and-mortar retailing.

No one has paid the price more than the small store owners. While modest growth has occurred in total inventory between 2006 and 2016, stores less than 2,500 square feet experienced a negligible decline of 1.0%. Of more concern, however, is that during the same time frame, vacant space in that size category increased from 2.5 million square feet to 5.7 million square feet, a whopping 124% upsurge, more than 1.5 times the rate of the entire region. The table below illustrates this change relative to the overall region:



For a while the vacancy trend had started to turn the corner. Similar to the region overall, the vacancy rate in this small store category began to decline from a high of 14.1% in 2010 to 12.4% in 2013. But that was as good as it got; since then, small store vacancy has increased each year and now stands at a new high of 14.7% in 2016. The rate could have been even higher were it not for some demolition and conversion to non-retail space among small stores.

While the direct impact from the recession has past, the retail industry continues to see a consumer shift away from brick-and-mortar to online spending. The just-released Forrester’s Holiday Retail Sales Forecast estimates that online sales will account for 13% of retail sales, up slightly from its 12% share of annual retail sales, while the best forecasts of overall holiday sales increases have been in the 3-4% range. Every quarter it is commonplace for national retailers to report sales gains in the low single-digit range, but then enthusiastically report e-commerce sales of double-digit gains. It should be no surprise, then, that for years now the industry in general has been budgeting fewer dollars toward physical store expansion while reallocating capex toward improving e-commerce platforms and enhancing the overall omnichannel retail experience.

But wait a minute: how does the little guy compete in the world of e-commerce? We’re talking about the independents, the mom-and-pop operators with no more than a couple of stores. How do these guys compete with Amazon? The vast majority can’t. But does that fact really have much impact on the retail real estate layout in the region? Within Eastern Massachusetts, our data indicates that there are more than 46,000 individual tenants. Surely the small-space category accounts for only a portion of that total. Well, you’d better take a seat when I tell you the next part: Are you ready? Approximately 22,600 tenants, or roughly one-half, are one- or two-store operators with stores under 2,500 square feet.

I wish I could tell you what is going to happen in the longer term to the little guys in the smaller stores. Let me just say that we should hope for the best and plan for the worst!
Bob Sheehan, Vice President of Research
BSheehan@KeyPoint Partners.com


KeyPoint Partners Company News

New Business: KeyPoint Partners has been awarded the management and leasing of University Mall in South Burlington, VT, the state’s largest enclosed mall, by the new owner. The mall management staff has joined KPP, and Vice President of Leasing Don Mace is handling leasing. KPP will also manage and lease Lorden Plaza in Milford, NH. New Leasing Assignment: Silver Sands Plaza, an 85,400 SF Stop & Shop-anchored shopping center on Bridgeport Avenue in Milford, CT. Sr. Associate Michael Branton is handling the assignment...New Employee: Andrea Suba joined the Plymouth, MA office as an Administrative Assistant.






































Meet with us in New York: KSmith@KeyPointPartners.com

National News

Retail sales increased by 0.9% over September and grew 2.2% year-over-year, according to the National Retail Federation’s measure. The calculations excluded automobiles, gasoline stations and restaurants. The NRF said all sectors were strong except furniture, home furnishing and department stores. The Commerce Department said October sales rose 0.8%. Among retailers still reporting monthly same-store sales, L Brands was up 1.0%, Gap was down 1.0%, and Costco was up 2.0%. See our sales reports below.

Accelerating Retail News

Dick’s Sporting Goods won a bankruptcy auction with a $70 million bid this month to take over Golfsmith International’s US business. Dick’s will keep at approximately 30 Golfsmith stores open and shutter the rest with the help of liquidators Hilco Global and Tiger Capital Group. The auction is awaiting the approval of a US bankruptcy court judge...Spence Diamonds will open its first US store in Austin, TX next month, soon to be followed by stores in CA and AZ, with additional markets to be announced soon. Spence features “artisan created diamonds,” which are created in a plasma chamber instead of being dug out of the ground...PGA TOUR Superstore signed leases for three new stores in 2017. PGA TOUR recently acquired a Sports Authority location in Glendale, AZ, and is also planning new stores in Hilton Head, SC and Jacksonville, FL (later next year). This November, PGA TOUR will open a 45,500 s/f store in Woodland TX, its 27th store...Chipotle Mexican Grill opened its first Tasty Made burger restaurant in Lancaster, OH, last month...Modell’s Sporting Goods is opening a flagship store at a 2-level, 20,000 s/f former Sports Authority store in Manhattan this month...Online men’s clothier J.Hilburn is opening a showroom in Dallas’ Inwood Village shopping center. If it goes as planned, the company will open 10 to 15 showrooms over the next 5 years in major US cities...Amazon is planning more physical stores. There will be Amazon book stores, Amazon food stores, Amazon pop-up stores and maybe even Amazon fashion stores. Amazon is preparing a grocery store pilot program - by the end of 2018, 20 grocery units are slated to open in various US cities... Petco will celebrate the grand opening of 9 new stores nationwide in November and December, part of the company’s growth plan, which includes 63 new Petco stores and one new Unleashed by Petco store year-to-date... Saks Fifth Avenue has opened its 3rd store in Miami, a 107,550 s/f full-line store at Brickell City Centre; this is Saks 7th new store opening year-to-date... E-commerce apparel company Bonobos is seeking to expand its brick-and-mortar operations. Bonobos launched in 2007 predicated on the idea that men don’t enjoy shopping and that all menswear would eventually be sold online. Since then, the company has opened close to 30 “guideshops” nationwide. Bonobos has expanded its partnerships with other retailers, and has plans to open 100 stores of its own by 2020... Toys “R” Us has opened a new prototype in Santa Ana, CA. At 25,000 s/f, the store is smaller than the chain’s traditional stores. It also has more interactive features. 3 additional locations are planned... Regency Centers and Equity One have signed an agreement to merge. Regency will continue as the public company. The transaction, which was approved by the boards of both companies, will create a national portfolio of 429 properties totaling more than of 57 million s/f... PetSmart opened its 1,500th store, in Sheridan, CO, one of approximately 80 new stores the retailer is opening in 2016 in new markets as well as current markets.
 

Decelerating Retail News

American Apparel is preparing its second Chapter 11 bankruptcy filing in roughly a year. American Apparel, which emerged from bankruptcy as a private company in February, has brought in strategic advisory firm Berkeley Research Group to oversee its restructuring efforts. American Apparel hasn’t been able to get its feet on solid ground since its controversial split from founder Dov Charney, who was ousted by the board in 2014...Office Depot will close 300 stores over three years, including 65 locations to close in the fourth quarter. Office Depot closed 7 stores during the third quarter, and with the 4th quarter closings will bring the total to 125 stores by the end of this calendar year.. Macy’s Inc. has sold five stores to General Growth Properties for $46 million. 4 of the locations will be closed by spring 2017. Macy’s currently operates about 880 stores... Fossil Group is planning an overhaul of its business that includes closing some of its 284 US stores; the company did not announce how many stores will close... Ignite Restaurant Group closed 14 Joe’s Crab Shack restaurants and 1 Brick House Tavern + Tap unit in the 3rd quarter. Ignite has closed 17 Joes and the one Brick House already this year. Ignite has 138 restaurants, down from 154 at the end of the same quarter last year including 113 Joe’s and 25 Brick House units...Store closing sales have started at 59 US Golfsmith stores. Golfsmith gift cards and merchandise credits will be honored at all closing stores through November 11, 2016...Noodles & Company will consider closing some of its under-performing stores or converting company-owned restaurants to franchised properties. The chain closed 16 restaurants at the end of 2015. Noodles currently has locations in 35 states. The company will slow growth to 10 or 15 new restaurants in 2017 and will concentrate those new stores in more established markets... Hhgregg has exited the Wisconsin market, closing its five “under performing stores in the state... Kenneth Cole is closing its 63 outlet stores within the next six months. After the closings, the retailer will only have two-full priced stores left in the US - in New York and  Arlington, VA.

New England News

Harvard Square icon Cafe Algiers on Brattle St. is closing for good this month after 45 years in business. The two-floor cafe was known for its selection of coffee, tea and Middle Eastern delicacies...Boloco sold five of its 16 restaurants this month. Boloco co-founder and owner John Pepper sold the chain’s locations in Burlington, Concord, Natick, Wellesley, and near Northeastern University in Boston to burger chain b.good. The chain’s Hanover location will not be affected by the sale. b.good has 45 locations and plans to have 60 by March...Flour Bakery opened its 5th location at 114 Mount Auburn St. in Harvard Square. A 2nd Cambridge location is expected to open in December, with another Boston location, behind the Prudential Center, coming in January 2017...Bon-Ton Stores Inc. plans to close a department store in Hamden, CT, marking at least the 6th closing announcement by the retailer over the past two years. Bon-Ton said the CT store will shut down when its lease expires Jan. 31.... Under Armour debuted its 19,000 s/f, two-level Boston store at Prudential Center this month. This is the company’s largest flagship opening of the year... The Sears store in Corbin’s Corner, West Hartford, CT will close in January 2017. After Sears’ closing, the space will be developed for REI, along with additional junior box and small shop retailers and restaurants... The sale of The Shops at Somerset Square, Glastonbury, CT  to Rouse Properties for $42 million has been completed. The 114,106 s/f property is anchored by Ann Taylor, Café Max, MAXFISH, Starbucks, Talbots and Victoria’s Secret...Two retail properties in Beverly and Duxbury MA sold for over $8.9 million in total: Dodge Crossing located along Enon St. in Beverly, and Duxbury Marketplace on Depot St. Occupying 30,100 s/f of frontage along Enon St., Dodge Crossing is anchored by Sleepy’s with additional tenants Learning Express Toys, Mathnasium, Triad Driving Academy, and others. Duxbury Marketplace consists of 5 separate buildings on 3 acres in the middle of the retail area. Tenants include Coldwell Banker, Eastern Bank, Duxbury Dogs, and others.

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

US retail sales rose more than expected in October as households bought motor vehicles and a range of other goods, pointing to sustained economic strength: retail sales increased 0.8% last month, the Commerce Department said.

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 September, declined in October. The Index now stands at 98.6 (1985=100), down from 103.5 in September. The Present Situation Index decreased from 127.9 to 120.6, while the Expectations Index declined from 87.2 last month to 83.9.

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

PURCHASING MANAGERS INDEX

Manufacturing expanded in October as the PMI® registered 51.9 percent, an increase of 0.4 percentage point from the September reading of 51.5 percent, indicating growth in manufacturing for the second consecutive month. 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

Wednesday, October 19, 2016

Preview : Hartford, CT 10-Year Retail Category Special Section

Dramatic Changes in Retail Tenant Store Count and Square Footage Reflect Changes in Lifestyle and Shopping Habits:

In earlier Special Sections we’ve explored long-term changes in the Grocery and Restaurant categories. This year we’ve analyzed 10 years of data on occupancy changes in all retail tenant categories in Greater Hartford, and as we saw in Eastern Massachusetts and Southern New Hampshire, the social values, shopping habits, and lifestyle choices of shoppers in this region have clearly influenced the retail real estate landscape to a high degree.

During this time period, consumers were hit with the Great Recession and emerged on the other side as more value-conscious shoppers. As a result, the past ten years has offered significant opportunity for dollar store development. Among the big three-Dollar Tree, Dollar General, and Family Dollar-store count has gone from 21 to 43 units, making Variety Stores the fastest growing segment of retail space.

As noted earlier in this report, Medical & Dental Services is increasingly becoming a common tenant in shopping centers as demand for traditional retailers has eased somewhat. This trend is certainly reflected in its number two ranking, with this category more than doubling in space since 2006. Ironically, Drinking Places and Health & Fitness Services ended in a virtual tie, each category upping space by about one-half.

While the recession caused shoppers to be more cautious in their shopping in a number of categories, they were less willing to cut back when it came to pets. Consequently, the Pet Shops & Pet Supply Stores category increased its store count by more than 25% in the past decade, good enough to top the list among merchandise categories.
Medical & Dental Services and Drinking Places also finished in second and third place in the growth rate of new units just as they did in square footage.

The charts below track percentage changes in expansion and contraction by major retail tenant categories from 2006 through 2016 by square footage.

Bob Sheehan, Vice President of Research
BSheehan@KeyPoint Partners.com



The 2016 KeyPoint Report for Greater Hartford, CT will be available very soon. The 2016 KeyPoint Reports for Eastern Massachusetts/Greater Boston and Southern New Hampshire are available now at KeyPointPartners.com.


KeyPoint Partners Company News

Retail Leasing: Vice President of Leasing Don Mace has negotiated a lease with Mr. Mac’s Macaroni & Cheese for 3,971 square feet of space at Tyngsboro Crossing, Tyngsboro, Massachusetts. Congratulations to our leasing team for completing new, renewal, and temporary leases at shopping centers in MA, RI, and CT totaling more than 103,000 SF with tenants such as Spirit Halloween, Gentle Dental, Webster Bank, Best Buy, Olympia Sports, Mooyah Burgers, and others... New Employees: Cheryl MacDougall joined the Burlington, MA office as an Accounts Payable Data Entry Clerk.

National Retail News

US retail sales rose 0.6% in September, a rebound after sales slipped 0.2% in August, the Commerce Department said. Department stores suffered a 0.7 % sales decline in September, part of a broader, long-term setback for anchor tenants at many malls that are competing with online outlets for customers. Stabilizing oil prices meant sales rose 2.4% at gas stations. Spending at restaurants improved 0.8%, while auto dealers, building materials stores and furnishers showed gains of 1% or more. During the first nine months of the year, retail sales have increased 2.9% over 2015. Among retailers still reporting monthly same-store sales, L Brands was up 3.0%, Gap was down 3.0%, and Costco was flat. See our sales reports below.

Accelerating Retail News

The parent company of 7-Eleven wants to more than double its US store portfolio. 7-Eleven Japan Co. is looking to open thousands of new stores in the US, increasing its current total of app. 8,500 locations to 20,000...ZIPS Dry Cleaners has signed leases for its next 4 stores, in California, Texas, Maryland and Pennsylvania. ZIPS operates nearly 50 stores in the Mid-Atlantic region...Dairy Queen is looking to the Buffalo Niagara area as a prime expansion market, adding 100 stores. Dairy Queen has more than 6,700 locations worldwide...Old Chicago Pizza & Taproom has signed franchise development agreements with three of its existing franchise partners to open nearly two dozen new restaurants across eight states. Old Chicago operates in 24 states with more than 100 restaurants nationwide... Fun Eats and Drinks LLC, a company formed by private-equity firm Kelly Investment Group, won an auction last week to acquire Last Call Guarantor LLC, the owner of sports bar chains Fox & Hound and Champps, out of bankruptcy with a bid of $26.8 million. Last Call operates 37 Fox & Hound restaurants, 14 Champps units and 4 Bailey’s locations....Club Pilates is projected to have 150 US studios before the end of 2016, and announced the sale of 300 new franchised locations in 27 states...Tractor Supply Company has paid $116 million to acquire Petsense LLC, a specialty retailer of pet supplies and services with 136 stores across 25 states...Cabela’s Inc agreed to be bought by Bass Pro Shops in a deal valued at $5.5 billion. The combined company will own 184 stores in the US and Canada... ThreeSixty Group has acquired FAO Schwarz from Toys “R” Us. The terms of the transaction were not disclosed.  Toys “R” Us purchased FAO Schwarz in 2009.  ThreeSixty has designed a portfolio of owned and licensed brands including Sharper Image, Black Series, Discovery Kids, Smithsonian, and Animal Planet. FAO Schwarz was the oldest toy store in the US when its sole remaining store, on Manhattan’s Fifth Avenue, closed in 2015. A new FAO Schwarz toy collection, designed by ThreeSixty, will be available at select retailers in the fall of 2017... Ross Stores is opening 25 Ross Dress for Less stores and 9 dd’s Discounts stores across 16 different states by the end of October, part of a plan to add approximately 90 locations in 2016. The company currently operates 1,342 Ross locations in 36 states, the District of Columbia and Guam, along with 193 dd’s Discounts stores in 15 states...Macy’s plans to open LensCrafters stores inside 280 locations by the end of 2017. The eyewear retailer is owned by Luxottica, as is Macy’s existing in-store partner Sunglass Hut. Macy’s currently operates about 675 full-line stores, but has announced it will be closing 100 stores by early 2017...Ulta Beauty raised its outlook for US store expansion to a range of 1,400 to 1,700 stores, with new stores targeted to smaller markets and urban markets. As of October 1, 2016 the company operates 928 retail stores across 49 states...Save-A-Lot plans to open 75 new stores in fiscal 2017, and believes the US can eventually support more than 3,500 stores. Save-A-Lot currently has 1,368 stores nationwide.

Decelerating Retail News

Golfsmith International Holdings Inc. filed for bankruptcy, hoping to reorganize or attract a buyer. Golfsmith said it would try to sell part of the chain while shutting some stores. If that fails, the Austin, Texas-based company will liquidate. The company blamed an aggressive plan that began in 2011 to open bigger stores that cost more to operate just as golf began to lose popularity...Kmart is closing 64 locations, in addition to a decision in April by parent Sears Holdings Corp. to close about 68 Kmart stores this year... Garden Fresh Restaurant Corp., owner of Souplantation and Sweet Tomatoes, has filed for bankruptcy. The company plans to close locations and put itself up for sale. Garden Fresh plans to close 20 to 30 underperforming locations. The company has 124 units, primarily on the West Coast and in the Southwest. The brands are known as Souplantation in Southern California and Sweet Tomatoes elsewhere....Red Robin Gourmet Burgers Inc. has closed 9 of its fast-casual Burger Works locations and is rebranding the remaining 3 as Red Robin Express...Walmart  will slow the pace of new store openings to focus on online sales, improve existing stores, and invest in tech. Walmart now plans to open 130 US stores this year, less than the 135 to 155 stores it had forecast previously (and compared to 230 last year), and only 55 stores next year. Walmart operates about 4,500 US stores... Supervalu is selling its Save-A-Lot supermarket chain for $1.37 billion to Canadian private equity firm Onex Corp. The deal is expected to close before the end of January. There are more than 1,300 Save-A-Lot grocery stores.

New England Retail News

Boston’s second Trader Joe’s, the first within city limits to sell alcohol will open in Allston next year at the Continuum, a 335,000 s/f residential/retail project 219 Western Ave.  The first Boston Trader Joe’s opened in 2001 in Back Bay. Trader Joe’s operates 18 MA stores. Nationwide, the company operates 455 stores in 41 states...H&M closed its 35,000 s/f store in Boston’s Downtown Crossing. H&M has stores on Newbury Street and in Cambridge...Krispy Kreme is opening 3 stores in Maine and 4 in New Hampshire under the franchise name NH Glazed LLC. The first will be completed this fall... Fast casual chain Cosi, Inc. filed voluntary Chapter 11 petitions in the US Bankruptcy Court. There are currently 45 company-owned and 31 franchise restaurants...Nordstrom Rack opened last month at Braintree (MA) Marketplace in part of the building that had housed a K-Mart store. Also moving into the building is a Saks Off 5th Outlet store, which should be open in time for the holiday shopping season...L.L. Bean will establish its first urban location outside Maine in November. The retailer will open a 150 s/f  kiosk in the Shops at Prudential Center in Boston, selling Bean Boots as well as a selection of outerwear and accessories. The company has three Boston-area stores, in Burlington, Dedham and Mansfield... Sephora opened its 16th Boston area store this month, a 3,800 s/f store will open at the Van Ness, a mixed-use development on Boylston St. The Van Ness includes a 232,000 s/f office and 174-unit residential tower atop a 165,000 s/f retail base anchored by Target...Rita’s Italian Ice and frozen custard opened its first MA location in Chelsea this month. The company has over 600 US locations around the country. Roxbury native Patricia Shelton plans up to 30 Boston area locations...Wegmans signed a lease for a 120,000 s/f store in Medford’s Meadow Glen Mall, to open in fall 2017. There are Wegmans locations in Burlington, Chestnut Hill, Northborough and Westwood, and plans for stores at the Natick Mall and Boston’s Landmark Center... Ohio-based REIT Phillips Edison grew its Bay State footprint with a purchase of the 732,000 s/f Hanover (MA) Mall from CWCapital. The regional mall opened in 1971 and was modernized in 2004. Tenants include Sears, Macy’s, Walmart’s, Office Max, Petco, Sleepy’s and Trader Joe’s. A 59,000 s/f stand-alone Dick’s Sporting Goods store opened in 2012 and Buffalo Wild Wings opened in an outparcel earlier this year.

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

Sales at retail stores, online retailers, and restaurants rose a seasonally adjusted 0.6% in September from the prior month, the Commerce Department reported. Spending excluding gas and autos rose a more modest 0.3%, though that was still the best gain in three months.

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 August, improved further in September. The Index now stands at 104.1 (1985=100), up from 101.8 in August. The Present Situation Index rose from 125.3 to 128.5, while the Expectations Index improved from 86.1 last month to 87.8.

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

PURCHASING MANAGERS INDEX

Manufacturing expanded in September as the PMI® registered 51.5 percent, an increase of 2.1 percentage points from the August reading of 49.4 percent, indicating growth in manufacturing following one month of contraction. 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

Thursday, September 22, 2016

PREVIEW: The KeyPoint Report for Greater Hartford, CT



With the releases of The KeyPoint Reports on Eastern Massachusetts/Greater Boston and Southern New Hampshire behind us, it’s time to move on to the report for Greater Hartford, Connecticut, based on our proprietary GRIID™ retail database. 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, the 2016 retail market traveled further down the road to stability:

Retail Inventory and Vacancy: Total retail space in Greater Hartford currently totals 37.6 million square feet, a modest increase of 380,800 square feet from last year - in today’s environment, limiting new development should be regarded as a good thing. Most of the incremental gain can be attributed to the new 156,000 square foot Costco in Farmington.

At the same time the region added 421,000 square feet of vacant space, increasing the vacancy rate from 10.1% to 11.1%, which is higher than the 11.0% level experienced in 2014. As a result, absorption in the region turned negative this year by 40,200 square feet. NOTE: The other regions we study, Eastern Massachusetts/Greater Boston and Southern New Hampshire, also experienced a rise in vacancy rates this year.

Size Classifications: During 2016 the only retail size category to show a significant reduction in the vacancy rate was the 5,000-9,999 square foot range, from 12.4% to 11.3%. Macy’s closing in Enfield caused the 100,000-199,999 square foot bracket to jump up to a 5.8% vacancy rate after showing full occupancy last year. After experiencing the highest vacancy rates a year ago, the rates for two categories under 5,000 square feet went even higher this year; small independent retailers are largely to blame. However, the largest increase in vacancy rate occurred in the 50,000-99,999 square foot range, with Macy’s again playing a role with the closing of a second Enfield unit.

Town Rankings: The top ten among Greater Hartford towns, based on square feet of retail space supply, remains unchanged. It should be no surprise that the top three towns are Manchester, West Hartford, and Enfield, all regional retail hubs serving Greater Hartford. Manchester dominates the region with 5.4 million square feet of retail space; West Hartford comes in a distant second with 3.0 million square feet. However, it should be noted that the 1.3 million square foot Westfarms regional mall, which straddles the West Hartford/Farmington line, has a Farmington address but is very much rooted in the West Hartford retail hub. Consequently, West Hartford is effectively a 4.0 million square foot market.

Regarding vacancy, lowest rates were found in Rocky Hill, Newington, and Plainville, all below 6.0%. Rocky Hill was the only town below 5.0%. Farmington and West Hartford complete the top five. Among towns with the highest vacancy rates, only East Windsor was above the 20% level, an improvement from last year when three towns were above that threshold. Vacant Walmart and Showcase Cinema buildings are primarily responsible for the considerably high rate in East Windsor. East Hartford, Berlin, New Britain, and Hartford fill out the top five.

Retailer Activity: The largest retail development in Greater Hartford last year was the opening of a new 156,000 square foot Costco in New Britain. By acquiring Sleepy’s, Mattress Firm entered the Greater Hartford region and now occupies 99,600 square feet, putting them in second place. Ashley Furniture Homestore opened a 42,600 square foot store in Newington in the space formerly occupied by T-Bowl Lanes bowling alley to round out the top three retailers adding square footage in the region. In the ranking of retailers by added stores, Mattress Firm is at the top with 16 recently acquired units. Advance Auto Parts netted four stores via the Carquest acquisition. O’Reilly Auto Parts and Sport Clips followed, each adding three new units.

As previously mentioned, Macy’s closed two stores in Enfield at Enfield Mall totaling 237,700 square feet, the largest contraction of space in the region. The acquisition by Mattress Firm removed 116,100 square feet of Sleepy’s store space from the region. Walmart closed its only Neighborhood Market location in the region, a 59,700 square foot store in West Hartford. Among retailers reducing store count in the region, Sleepy’s led the way with 19 locations. Carquest Auto Parts contracted by five stores as a result of the Advance Auto Parts acquisition. Radio Shack also reduced its store count by three units.

Bob Sheehan, Vice President of Research
BSheehan@KeyPoint Partners.com

The KeyPoint Report examines the retail real estate marketplace for Greater Hartford, Connecticut, with a focus on changes between August 2014 and July 2015. 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. The complete report contains much more detailed information on these categories and more, and will be available soon at KeyPointpartners.com.

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 nearly 262 million square feet of retail space and approximately 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 added the following retail leasing assignments: An additional Shaw’s Disposition property: the 68,337 s/f former Kmart at 1465 Woodbury Avenue in Portsmouth, NH; Buttonwoods Plaza, a 60,000+ s/f center in Warwick, RI anchored by Ocean State Job Lot, with 10,486 s/f available. VP of Leasing Don Mace is handling the assignment; Shoppes at Long Pond, 55-69 Long Pond Road, Plymouth, MA ( managed by KPP) VP of Leasing Rob Grady and Sr. Associate Michael Branton are handling...VP of Research Bob Sheehan appeared on the New Hampshire’s Business segment hosted by Fred Kocher on WMUR TV, New Hampshire’s ABC station to talk about our 2016 KeyPoint Report on Southern New Hampshire: VIDEO

National Retail News

Sales at US retailers declined 0.3% in August, Commerce Department figures showed. Core sales, which exclude such categories as autos, gasoline stations and building materials, declined 0.1%. Purchases at auto dealers dropped 0.9% and those at service stations fell 0.8%. Purchases fell 1.4% on building materials, sporting goods, books and music. Food and beverage spending was up 0.3% and clothing gained 0.7%. Among retailers still reporting monthly same-store sales, L Brands was up 2.0%, Gap was down 3.0%, and Costco was up 2%. See our sales reports below.

Accelerating Retail News

Aldi is building a divisional headquarters and distribution center in VA. Aldi has opened 7 stores in the Richmond region in the past year, and plans at least 2 more this year. Aldi has 32 stores in VA, and plans to open up to 60 more across the state in the next 5 years... Bob’s Discount Furniture will expand into St. Louis with two new showrooms, and add two Chicago stores, during the first quarter. Bob’s operates 73 stores...Cato Corporation opened 1 store and relocated 2 stores in the second quarter.  The Company now expects to open 12 new stores during 2016, down from an estimated 23 stores.  As of July 30, the Company operated 1,373 stores in 33 states....Tops Friendly Markets opened 6 stores last month in NY and MA that it recently acquired from Stop & Shop and Hannaford Supermarkets...West Elm opened its 100th store, at Empire Stores, in Brooklyn, NY, the first tenant to open in the restored 19th-century coffee warehouse. West Elm will open a location in Wayland Square, Providence, RI this month, and another that will anchor the Downtown Palm Springs (CA) Revitalization Project....5 Frank’s Auto Supermarket stores in PA have become part of national chain O’Reilly Auto Parts. As of June 30, O’Reilly Auto Parts had 4,660 locations in 44 state...Cookware chain Southern Season was sold at auction last month to Calvert Retail LP. Calvert owns 6 Kitchen & Company stores and 2 Reading China & Glass stores. Southern Season filed for chapter 11 bankruptcy protection on June 24...Modell’s Sporting Goods opened two stores in metro New York last month, bringing its total store count to 156 locations. The openings include Modell’s 11th location in Brooklyn, and a store in in Mount Kisco...DSW Inc. will open 21 stores nationwide between August and October. The footwear retailer currently operates 482 stores in 42 states...Sears is launching an in-store shop concept, called Showcase at Sears, which will feature 10 European and Latin American men’s, women’s and children’s apparel brands,most available for the first time in the US. The concept will initially launch in 5 New York-area stores this fall. Sears is building 10,000 to 15,000 s/f Showcase boutiques in each location...Ben’s Soft Pretzels plans to bring 15 new eateries to the Milwaukee area by 2021. The growth is part of a national expansion effort with more than 20 stores in development for 2016 and a master license agreement to open inside every newly constructed Meijer location. It has a similar master lease agreement with Wal-Mart to open a pretzel bakery in any open Walmart store tenant space. Ben’s Soft Pretzels has more than 75 locations in 8 states...Amazon Books has confirmed plans for a 7,200 s/f store in Chicago. Amazon Books opened its first store last fall in Seattle, and plans a store in San Diego this summer, 1 in Portland, OR later this year, and one at Legacy Place in Dedham, MA - no opening date has been announced...True Food Kitchen will open its first Northern CA location in Palo Alto next month. True Food Kitchen has 12 locations in Arizona, California, Colorado, Texas, Georgia and Virginia, with 4 more planned throughout the country in 2016...Nordstrom has entered into a deal with J. Crew to sell an assortment of J.Crew apparel in 16 select full-line Nordstrom stores and on its website this month. In 2015, Nordstrom entered into an arrangement with J. Crew’s Madewell brand. The collection was recently expanded to 20 additional stores, and is now available at 76 Nordstrom locations and at Nordstrom.com...Five Below opened a store in Lower Macungie Township, PA  this month, the company’s 500th store and its 59th in PA... Boston’s Restaurant & Sports Bar is on its way to its goal of 100 locations by 2019 with several recent openings and franchise signings, including a deal for 2 units in El Paso, TX and recent openings in Arizona, Michigan, Maryland, and Virginia. Boston’s  has 29 locations in 22 states...Fantastic Sams has been approved for a franchisee lending program through The Bancorp Bank which provides start-up funding for franchisees, as well as expansion and remodel funding for existing franchisees. Fantastic Sams has more than 1,100 locations...Mooyah Burgers, Fries & Shakes opened its 100th restaurant this month, a franchised unit in Tuscaloosa, AL... J. Crew plans to open 36 new stores this year, including 3 flagship J. Crew retail locations, 23 factory stores and 10 Madewell stores...Crown & Ivy, the private label brand launched by Belk in 2014, is opening its first standalone store in Raleigh, NC.  Private equity firm Sycamore Partners bought Belk last year...Roark Capital Group has acquired a majority stake in Jimmy John’s Sandwiches. Terms of the deal were not disclosed. The sandwich chain joins a list of concepts controlled by Roark Capital: CKE Restaurants, Arby’s, and Naf Naf Grill. Once the Jimmy John’s deal is completed, Roark Capital will have acquired 56 franchised or multi-unit brands with 25,000 locations...Petco will open 13 new Petco stores across the country and relocate 1 store in September. The company will also transition 31 existing Unleashed by Petco stores to smaller format Petco stores this month... Aeropostale Inc. won court permission to sell its assets to buyers led by Simon Property Group Inc. and General Growth Properties Inc. The group prevailed at auction with a $243 million bid and a plan to keep open at least 229 stores...American Finance Trust Inc. (AFIN) acquired all outstanding common stock of American Realty Capital/Retail Centers of America Inc. (RCA) for approximately $1.4 billion. The merger creates a retail REIT with an enterprise value of approximately $3.9 billion. The combined company will retain the AFIN name and continue to be led by AFIN’s management team. The combined portfolio includes 494 properties totaling 20.8 million s/f of single-tenant net lease, power center, and lifestyle center assets...Amazon opened 21 pop-up electronics stores in 12 states.

Decelerating Retail News

Perry Ellis will close 15 underperforming stores over the next 18 months as it shifts its focus to e-commerce...The owner of sports bar chains Fox & Hound and Champps closed 25 locations, as the company received a lifeline from Kelly Investment Group that will enable it to operate through an expected auction next month.  Last Call’s bankruptcy is its second since 2013. Going into the bankruptcy, Fox and Hound had 48 locations, Bailey’s had 9 and Champps 23. Last Call now operates 37 Fox & Hound locations, four Bailey’s and 14 Champps.

New England Retail News

The biggest New Hampshire State Liquor Store ever opened in Nashua last month. The 33,000 s/f store offers over 7,000 kinds of wine and hard liquor...Electric car maker Tesla Motors already has a store at Prudential Center in Boston, but plans to move to newer space on the ground floor of the new tower at 888 Boylston St. by the end of the year.. Cosi, the Boston-based restaurant chain, fired its CEO amid declining sales, continuing losses and a declining share price. The company has 76-company-owned and 31 franchisee-owned stores in 16 states...The closing of the Howard Johnson restaurant in Bangor, ME this month leaves only 1 restaurant in a chain that once numbered more than 800. Howard Deering Johnson started the business in 1925, when he inherited a soda fountain outside Boston. That evolved into a chain of restaurants featuring comfort food and 28 flavors of ice cream. The remaining restaurant is in Lake George, NY... Buffalo Wild Wings is opening at the Pheasant Lane Mall in Nashua next month, its 5th NH location. Buffalo Wild Wings runs about 1,200 restaurants globally...New Balance’s real estate arm will start construction soon on its 295-unit apartment building and the Boston Celtics’ new practice facility in Brighton. All three projects are part of Boston Landing, NB Development Group’s 15-acre, mixed-use development that includes the brand’s new global headquarters. Five new eateries will also open at Boston Landing next spring or early summer, including Seaport Grill. Names of the other restaurants were not disclosed.

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

US retail sales declined 0.3% in August, the Commerce Department said. It was the first decline in retail sales since March. Sales increased 0.1% in July, a small upward revision from an initial flat reading. Excluding autos, retail sales last month fell 0.1%.

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 slightly in July, increased in August. The Index now stands at 101.1 (1985=100), compared to 96.7 in July. The Present Situation Index rose from 118.8 to 123.0, while the Expectations Index improved from 82.0 last month to 86.4.

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

PURCHASING MANAGERS INDEX

Manufacturing contracted in August as the PMI® registered 49.4 percent, a decrease of 3.2 percentage points from the July reading of 52.6 percent, indicating contraction in manufacturing for the first time since February 2016 when the PMI registered 49.5. 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

Thursday, August 18, 2016

Preview : So. NH 10-Year Retail Category Special Section

In earlier Special Sections we’ve explored long-term changes in the Grocery and Restaurant categories. This year we’ve analyzed 10 years of data on occupancy changes in all retail tenant categories in Southern New Hampshire, and as we saw in Eastern Massachusetts, the social values, shopping habits, and lifestyle choices of shoppers in this region have clearly influenced the retail real estate landscape.

The 2011 entry of Ulta Beauty into the region lifted Beauty Supplies and Cosmetics to the top of the square footage growth chart during the past decade, with space in that category increasing by a whopping 177%.

Another category showing phenomenal growth was Variety Stores, which grew by 133%; Dollar General and Dollar Tree both entered the region, driving this merchandise segment into second place. And even with the recent demise of Sports Authority, Sporting Goods managed to add 50% to its space inventory. This was attributable to the opening of  three new Dick’s stores, and the fact that Sports Authority opened and closed two of its four units during this time frame.

The liquidation of several chains, including Circuit City, Tweeter, and Cambridge Sound Works, as well as some Radio Shack closings, had a hand in reducing Electronics Stores space by 50%, the most of any category. Furniture Stores also experienced a significant decline, currently occupying 31% less space now than in 2006. Office Supplies was marginally better, with category space reducing by 29%. Although Staples store count remained stable in the region, square footage was reduced by more than 50,000 square feet as the company opted for smaller stores.

Beauty Supplies and Cosmetics not only led the pack in percentage gain by total space, but also in store count with a gain of 78%. Medical and Dental Services came in second with a gain of 30%, as non-retail users become a more viable option when canvassing for shopping center replacement tenants. Drinking Places increased by 29% during the past decade.

At the opposite end of the chart, Electronics Stores experienced the largest setback with a reduced store count of 54%. Gift Shops and Florists were far behind, experiencing store count declines of 34% and 33%, respectively. These categories, which are comprised largely of independent, mom-and-pop operators, have struggled to remain in business during the past decade.

The chart below tracks percentage changes in expansion and contraction by major retail tenant categories from 2006 through 2016 by square footage.


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

The 2016 KeyPoint Report for Southern New Hampshire will be available very soon.

The 2016 KeyPoint Report for Eastern Massachusetts/Greater Boston is available now at KeyPointPartners.com (click on Research Reports).



KEYPOINT PARTNERS COMPANY NEWS

New Business: The leasing team added the following retail leasing assignments: Red Rock Plaza, 1385 South Washington Street, North Attleboro, MA; 308 Walnut Street, Newtonville, MA; and 145-165 Rhode Island Avenue, Fall River, MA. Senior Leasing Associate Michael Branton is handling. With these latest assignments, the current leasing portolio consists of 78 retail properties totaling almost 7.5 million s/f in 4 states. The leasing team  has completed transactions totaling nearly 56,000 s/f in June and July at shopping centers in MA and CT, new leases and renewals, with such tenants as Outback Steakhouse, Spirit Halloween, Santander Bank, GNC, CVS, Lady Grace, Angelo’s Coal Fired Pizza, and others.

NATIONAL NEWS

US retail sales were flat in July, a potential stumbling block for an economy that has relied on healthy consumer spending to propel growth. Sales climbed 0.8% in June, revised up from an earlier estimate of 0.6% growth. From a year earlier, total retail sales were up 2.3%. Sales at auto and parts dealers rose 1.1% in July. Among retailers reporting monthly comp-store sales, L Brands was up 2.0%, Gap was down 4.0%, and Costco was down 2%. See our sales reports below...Newly formed entity Ahold Delhaize  revealed a new logo combining the crown and lion iconography of its respective partners. The new visual identity was revealed as part of a new website for the company, which completed their $29 billion merger. Ahold Delhaize will operate 2,000 US stores under the Stop & Shop, Giant, bfresh, Martin’s, Hannaford and Food Lion banners, as well as the Peapod e-commerce brand.

ACCELERATING NEWS

Target will open a 42,367 s/f 2-level store in Manhattan’s East Village...PizzaRev announced a franchise agreement to develop the chain throughout the northern part of Louisiana. There are more than 200 PizzaRev locations in various stages of development across the country. The brand currently operates 42 corporate and franchise locations in 11 states...Versa Capital Management has formed a new holding company, called Eastern Outfitters, which will continue the restructured operations of Eastern Mountain Sports (EMS) and Bob’s Stores. The news comes several months after Vestis Retail Group LLC, an entity of Versa that operated Bob’s, EMS and Sport Chalet, filed for Chapter 11. The company subsequently shut down Sport Chalet. EMS and Bob’s will now operate as business units of Eastern Outfitters. Other retailers in Versa’s portfolio include Avenue Stores, The Wet Seal and Black Angus Steakhouses...Chipotle’s burger concept, Tasty Made, will make its debut in Lancaster, OH this fall. The new concept will specialize in burgers, fries, and milkshakes...Dollar General bought 41 former Walmart Express stores in 11 states. The company will relocate 40 of its existing Dollar General stores into these new, slightly-larger locations by October. The retailer will also operate gas stations in 37 of the locations.  In January, Wal-Mart Stores Inc. shut down all 102 of its Walmart Express stores, part of an effort to shutter 269 underperforming stores worldwide and 154 in the US...GameStop Corp. acquired 507 AT&T wireless stores in 26 states as part of a plan to diversify... Steinhoff International Holdings will acquire Mattress Firm, the largest mattress retailer in the US, whose assets include Sleepy’s. Steinhoff is an integrated retailer that manufactures, sources and sells furniture, household goods and clothing in Europe, Africa and Australia. It operates more than 40 brands in 30 countries. The acquisition is expected to create the largest multi-brand mattress retail distribution network in the world. Mattress Firm operates more than 3,500 stores in 48 states. The acquisition is expected to close by or around the end of the third calendar quarter, subject to regulatory approvals... Abercrombie & Fitch has been developing a new prototype. The chain will unveil its new look early next year, at Polaris Fashion Place, in Columbus, OH, with a new aesthetic and updated merchandise selections...Dick’s Sporting Goods will open six stores this fall in the Houston area, up from the five it had previously announced...Fazoli’s, fast casual Italian chain, announced the signing of nine multi-unit and single-unit franchise agreements to develop 22 new restaurants nationwide. Fazoli’s has nearly 220 restaurants in 24 states..Domino’s Pizza celebrated the grand opening of its 13,000th store in the world, located outside of Seattle... Flying Tiger Copenhagen is expanding its US footprint. The discounter Danish-designed goods is set to open its fourth NYC location. Flying Tiger opened its first store in 1995, in Copenhagen. In 2015, the retailer opened more than two new stores every week. It currently operates more than 650 stores in 28 countries...Fast casual restaurant Newk’s Eatery is expanding into Virginia with a development agreement to open 10 locations in Fairfax and Arlington counties over the next 6 years.  Newk’s currently operates and franchises more than 100 units in 13 states...Children’s salon Snip-its will open 16 CA locations in the next five years. The chain currently has 63 locations in the US, including 3 in California... Blaze Pizza, the fastest-growing restaurant chain in 2015, according to research group Technomic, has expanded to 150 locations, with 350 more slated to open by 2020...Buffalo Wings & Rings has grown to 70 franchises across the globe. In 2016, the brand opened new franchises in South Dakota and Texas, and has signed franchise agreements for up to 5 more locations before year’s end. Another 8- 10 locations are expected in 2017...Mission BBQ will open a location in King of Prussia, PA. The company has five PA restaurants, and will open at least two more next year...Jinya Ramen Bar has 12 franchised restaurants in California, Texas, Washington, Chicago Las Vegas, and Canada. 10 more will open before the end of the year...TJX increased its store count by 14 stores in the quarter, bringing its total store count to 3,675 locations...Skechers opened a flagship store at the new World Trade Center in Manhattan. With 1,545 stores worldwide, Skechers anticipates more than 1,600 locations by year end....Tuesday Morning opened an updated prototype at two Texas locations. The format feature new fixtures, flooring, improved lighting and a redesigned layout, as well as an expanded assortment of goods. Since January 1, Tuesday Morning has opened 8 new locations and relocated or expanded 34 stores. The company plans to upgrade more than 35 additional locations by year-end...Michaels purchased the rights to Hancock Fabrics’ brand and intellectual property for $1.3 million from US Bankruptcy Court in Delaware. Hancock was in the process of closing 70 stores when it filed for bankruptcy in February. Unable to locate a buyer for the remaining 185 units, it shuttered them in April. Michaels has 1,300 locations.

DECELERATING NEWS

Fired Up Inc., operator of casual dining chain Johnny Carino’s Italian, filed for its second bankruptcy in three years this week and is looking for a buyer. Carino’s has been closing locations in recent years, and currently owns 36 company stores and franchises another 48...Office Depot Inc. will close about 300 more stores in the next three years to help cut annual costs by $250-million by the end of 2018. The company had closed 400 stores by the end of the second quarter...Macy’s Inc. announced that it will close 100 full-line namesake stores. Macy’s said it plans to concentrate resources on its best-performing locations. The majority of the 100 stores will close in early 2017, with the balance closing as leases expire or are amended or waived. Macy’s will announce the locations of the stores to be shuttered at a later date. Over the past six years (2010 through 2016 to date), approximately 90 Macy’s stores have been closed and 13 new Macy’s stores have been opened. In addition, six new Macy’s Backstage off-price locations opened in fall 2015. Macy’s currently operates about 880 stores under the names of Macy’s, Bloomingdale’s, Bloomingdale’s Outlet, Macy’s Backstage and Bluemercury, including 728 Macy’s stores... Ruby Tuesday Inc. will close about 95 underperforming restaurants, 15% of its company-owned restaurants, by September. At the end of the fourth quarter, Ruby Tuesday had 646 company-owned restaurants.

NEW ENGLAND NEWS

NAI Entertainment Holdings LLC, an affiliate of National Amusements, has sold off a Home Depot store in West Roxbury for $34 million...Del Frisco’s Grille will open a 3rd MA location at Westwood’s University Station next year... American Realty Advisors acquired the shops at University Station in Westwood for $206 million. Wegmans anchors the retail portion of University Station. Other tenants include Nordstrom Rack, Marshalls and PetSmart. The property is situated across the street from the  Amtrak/MBTA commuter rail station, which transports 1.3 million travelers annually. New England Development will continue to serve as the management and leasing agent for the retail center.

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

US retail sales were flat in July, the Commerce Department said. Sales had climbed 0.8% in June, revised up from an earlier estimate of 0.6% growth.

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 June, was relatively unchanged in July. The Index now stands at 97.3 (1985=100), compared to 97.4 in June. The Present Situation Index increased from 116.6 to 118.3, while the Expectations Index edged down to 83.3 from 84.6 in June.

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

PURCHASING MANAGERS INDEX

Manufacturing expanded in July as the PMI® registered 52.6 percent, a decrease of 0.6 percentage point from the June reading of 53.2 percent, indicating growth in manufacturing for the fifth consecutive month. 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

Wednesday, July 20, 2016

Preview : KeyPoint Report for Southern New Hampshire

While the 2016 KeyPoint Report for Southern New Hampshire, based on our proprietary  GRIID™ retail database, is in production, we will again share some of the early results:

Inventory and Vacancy Rate: The retail inventory in Southern New Hampshire included 29.8 million square feet in 2016. This represents a net decline of 109,400 square feet, or 0.4%, resulting largely from retail demolitions and conversions to non-retail space.  There were significant new store additions, however, negating most of the reduction in square footage within the region. The single largest new development was Walmart Supercenter in Manchester, replacing a nearby traditional store which will be converted to Carmax. The largest demolition in the region was the former Macy’s building in Bedford. This site will be redeveloped as a mixed-use project dubbed Bedford Place, including retail, office, medical and restaurant space.

Another major change that will occur is the planned 10-screen Chunky’s theater that will occupy a significant portion of the former Lowe’s in Manchester. The former Lowe’s has been available since 2011. A number of closings in Southern New Hampshire during the past year resulted in an increase of 256,700 square feet of unoccupied space in the region, jumping the vacancy rate from 9.6% to 10.5%, about the level experienced in 2014. Two-thirds of the incremental gain can be attributed to the recent closing of four Sports Authority stores.

Size Classifications: Looking at vacancy rates by store size, it was not encouraging to see all categories less than 100,000 square feet showing a rise in vacancy rates between 2015 and 2016. However, the 50,0000-99,999 square foot segment was impacted by a reduction in vacant square footage in the 135,197 square foot Lowe’s vacancy (noted above), resulting from Chunky’s commitment to occupy a portion of this unit. Consequently, the 100,000-199,999 square foot classification now has less vacancy than last year. Not surprisingly, the vacancy rate in the 25,000-49,999 square foot bracket showed the sharpest rise with the four vacant Sports Authority stores included in this size range. Vacancy among smaller independent retailers continues to troublesome as both classifications less than 5,000 square feet have significantly higher vacancy rates this year versus last.

Regional Submarket Rankings: There has been no change in the top ten largest regional markets: Nashua continues to rank first with 6.3 million square feet of inventory; Manchester follows at 5.3 million square feet; and Salem is a distant third at 3.8 million square feet. Seabrook and Bedford follow with 2.0 million square feet and 1.6 million square feet, respectively.

Among towns with at least 500,000 square feet of retail space, Salem tops the rankings for lowest vacancy rate at 4.8%. Bedford, last year’s top-ranked community, dropped out of the top five as a result of the closing of a Hannaford store, which relocated to the former Stop & Shop in Bedford. Hudson is this year’s runner-up at 6.8%. Nashua, Derry, and Exeter complete the top five. Seabrook continues to have the highest vacancy rate in the region at 17.8%, although this figure will decline if the vacant Walmart store at Seacoast Shopping Center is acquired by Ocean State Job Lot, which has been reported. Manchester remains in second place and North Hampton moved up one spot to third.

Retailer Activity: Fitlab Fitness Club led the way in incremental space in Southern New Hampshire by acquiring and rebranding the five Gold’s Gym locations in Southern New Hampshire. A new Dick’s Sporting Goods store in Salem moved this retailer into second place. Walmart was third following a Manchester relocation of its traditional store to a supercenter prototype, netting 65,300 square feet of new retail space. Mattress Firm tied Fitlab Fitness Club for the most new store locations, both adding five units. No other retailer added more than two locations, Aldi and Orangetheory Fitness among these.  The demolition of Macy’s in Bedford caused this retailer to lose the most retail space in the region. The liquidation of Sports Authority placed this retailer in second place. Gold’s Gym was a distant third with all locations converting to Fitlab Fitness Club. Gold’s Gym was also the leader in the number of stores closed with five. Sports Authority was second with four stores and 7-Eleven followed with three units. The complete report contains 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 period from June 2015 to June 2016. The study area includes 39 cities and towns, representing more than 835 square miles and approximately 550,300 permanent residents (42% 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 263 million square feet of retail space and approximately 59,700 retail establishments. The KeyPoint Reports contain a summary and analysis of retail market trends and activity for each studied market area.

KEYPOINT PARTNERS COMPANY NEWS

New Leasing Assignments: Burlington Center Village, Burlington, MA, a new development on the site of the former Building #19 on Route 3A. Sr. Associate Michael Branton and VP of Leasing Rob Grady are handling the assignment. Shaw’s Disposition: The Leasing Team will lease multiple vacant former Shaw’s Supermarkets locations in New England, and sell a parcel of land in southern New Hampshire. Rob Grady, VP of Leasing Don Mace, and Sr. Leasing Associate Michael Branton will handle the assignments. The available spaces range in size from approximately 48,100 to 68,700 square feet. The parcel of land for sale consists of approximately 9.78 acres at the intersection of Route 107 & Route 101 in Raymond, New Hampshire. Complete information about these opportunities, including site plans, photos, and market information, can be found at KeyPointPartners.com (click on Shaw’s Disposition).

NATIONAL NEWS

US retail sales rose sharply in June, a sign consumers are spending at a healthy clip and propping up the economy after a slow start earlier in the year. Retail sales rose a seasonally adjusted 0.6% to mark the third straight strong gain.The surge in spending was led by home-and-garden centers and online stores. Sales at stores that sell building materials and garden supplies soared 3.9% to mark the biggest increase since 2010. These purchases accounted for about 42% of the total increase in retail sales last month. Gas stations and even department stores also recorded strong sales. Gas prices increased in the spring and early summer, though prices have since leveled off. Sales at apparel stores fell 1%, restaurants lost business and sales at purveyors of electronics and appliances were flat. Among retailers reporting monthly comp-store sales, L Brands was up 6.0%, Gap was up 2.0%, and Costco was flat See our sales reports below...Dick’s Sporting Goods was the victor at the bankruptcy auction for Sports Authority. Dick’s bid $15 million for the brand name and other intellectual property, beating Sports Direct International PLC’s $13 million bid. Dick’s also had the winning bid for 31 Sports Authority store leases, for an additional $8 million. The bids are subject to the approval of the US Bankruptcy Court.

ACCELERATING NEWS

Brookshire Grocery Co. will open 26 locations this summer under its new Spring Market banner. The stores will be on the sites of former Walmart Express stores that Brookshire is in the process of acquiring. The locations range from southern Louisiana to west Texas...Tesla has entered a partnership with Nordstrom department stores, and will open a “gallery” in Nordstrom at The Grove, Los Angeles. The 400 s/f display will feature a Model X electric crossover, and Tesla will offer test drives outside the store. The mini Tesla Store will remain open through the end of the year as a pilot...Amazon plans to open a third Amazon Books this fall, at Washington Square Mall just outside of Portland Oregon. Amazon debuted the concept in Seattle in November. It is scheduled to open a second location this summer, at Westfield UTC Mall, an open-air center near the University of California’s San Diego campus. Amazon Books is also slated to open in Hudson Yards, the planned retail, commercial and residential development in NYC. Hudson Yards stores are projected to open in late 2018 or early 2019....ALDI is expanding in New Jersey. The supermarket chain opened a store in Bloomfield, its 37th location in the state, and several more will open later this year. The company has more than 1,500 stores in 34 states, and plans to open about 130 new stores each year in the future...Ross Stores opened 8 new dd’s Discounts stores this month, bringing its total to near 190 units. Ross Stores operates 1,274 off-price apparel and home goods units in 34 states...Bridgestone Retail Operations LLC is looking to expand its retail reach, which currently includes 2,200 company-owned stores in 48 states, which operate under four brands: Firestone Complete Auto Care, Tires Plus, Hibdon Tires Plus, and Wheel Works. The company plans to get to 3,000-3,500 stores via new store openings, as well as acquisitions. Bridgestone is adding 25 new stores in 2016, probably 40 stores in 2017, and as many as 60 or 65 stores each year after that... PetSmart Inc. opened 12 net new stores for the quarter ending May 1, 2016. The company opened 50 net new stores in 2015 and expects to open approximately 80 in fiscal year 2016. PetSmart operates 1,466 stores in the US, Canada, and Puerto Rico...Barnes & Noble Inc. is set to unveil four concept stores in the next year that will feature restaurants serving alcohol. The chain, which owns 640 bookstores nationwide, aims to combat weak store traffic with expanded cafes serving beer and wine, as well as a full breakfast, lunch and dinner menu, with waiter service...Blaze Fast-Fire’d Pizza announced that its 150th restaurant is set to open next month in Houston, its fourth location in this Texas market, with restaurants now open in 31 states and development underway in 48 US markets. The company is planning to open an average of one new restaurant every four days, with its 500th location projected to open in about three years...Fast-casual seafood restaurant chain Slapfish has signed a multi-state franchise deal which will introduce the chain in Utah, Idaho, Arizona, Nevada, Colorado, and Texas... Kellogg’s will open Kellogg’s NYC, its first-ever permanent café, at 1600 Broadway this month. The café will serve dishes featuring Kellogg’s cereals available with an array of unique ingredients. Customers can customize their dishes by choosing from dozens of toppings. The café will have dine in or carry out options and there are plans to launch a delivery service later in the year...Fresh Thyme market opened its 40th store, the first in Omaha, last month. Two other Omaha stores will open shortly after the new year. Fresh Thyme plans to open 20 to 25 stores a year, for a total of 150 across the Midwest in the next four years, and may look to an initial public offering a few years down the road...Westfield Garden State Plaza is rebuilding one of its entrances and remodeling a prime corner of the Paramus mall to create a showcase space for luxury furniture seller Design Within Reach. DWR will move into a new 12,000 s/f store in October. Design Within Reach started as a catalog company and later began opening retail stores. The company has an outlet store in Secaucus and 3 stores in Manhattan... PGA Tour Superstore will open a 45,500 s/f store at Woodlands Shopping Center, Houston, in a former Sports Authority location, this fall. PGA Tour recently took over another Sports Authority location, in Glendale, AZ, which will open in 2017...Convenience store chain Sheetz is opening 4 stores this month in 4 different states: WV, NC, OH, and PA. Sheetz, operates more than 500 stores... uBreakiFix, which specializes in repair of small electronic such as smartphones, game consoles, tablets, and computer,  announced significant growth for the second quarter of 2016: a total of 27 new stores, 3 of which were in new markets for the brand. The company ended the second quarter with 212 locations across North America. Between July 1 and Sept 30, uBreakiFix plans to open 31 new stores in existing markets and new markets including Boston, and plans to have 275 corporate and franchise locations in operation by the end of 2016... Petco will open five new Petco stores across the country this month, and is remodeling 12 stores. Petco operates more than 1,430 Petco locations and more than 115 Unleashed by Petco locations...Delhaize Group and Ahold have reached agreements with buyers to divest 86 US stores. The companies’ merger is set for completion at the end of July, pending final approval by the FTC. The divested stores are in a limited number of locations in which the companies’ subsidiaries both operate, and represent 4.1% of the Ahold and Delhaize Group companies’ total combined US store count. When the merger is complete, Ahold Delhaize will operate some 6,500 stores.