Monday, June 25, 2018

Special Section Preview: Eastern Massachusetts Malls

The 2018 KeyPoint Report on the retail real estate market in Eastern Massachusetts/Greater Boston is in production, and will be released very soon. This year’s report includes a special section on the status of traditional enclosed malls in the region. Have malls fared as badly as the business media would have us believe? It appears that, at least in this region, they’re actually holding their own. Here’s a brief excerpt from our special section:

The volume of noise that’s been heard in the media regarding a retail apocalypse is directed at enclosed regional shopping centers as much as any other segment of retail. For malls in Eastern Massachusetts, however, conditions are not so dire. In fact, malls are relatively stable in this region compared to other parts of the country. There are 52 mall-based department stores among the 17 regional enclosed shopping centers in the region. Only eight of these stores are vacant, including four Sears units and two Macy’s stores. JCPenney has only one vacant unit and the liquidated Rhode Island based Apex chain accounts for the other. Three vacant department stores are located at Silver City Galleria in Taunton. Consequently, Silver City has the highest vacancy rate among Eastern Massachusetts malls when department stores are included. Swansea Mall, with two vacant department stores, has the second highest vacancy rate in the region.


Of the vacant department stores, five closed in the past year: three Sears units and two Macy’s stores. As a result, total mall vacancy increased in the region from 8.8% in 2017 to 13.0% in 2018. The vacancy rate among mall shops ended the year at 13.3%. No single retail chain closed more than three locations in the past year, however, indicating relative stability among mall shops in 2018. In Eastern Massachusetts, at least for now, malls don’t seem to be quite the endangered retail species many would have us believe.

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


KeyPoint Partners News



New Business: The Property Management team has been awarded the contract for 1111 Marcus Ave., Lake Success, NY, a 94-acre, 1,400,000 s/f state-of-the-art complex with office, medical, and commercial space. Tenants include Hain Celestial Group, Inc., LA Fitness, and Northwell Health...New Team Member: Shannon McDonough joined the Burlington, MA office as a Property Manager. Shannon has property management experience at Upland Capital Corporation.

National News

US retail sales rose in May by 0.8% from the prior month, according to the Commerce Department. Excluding food services, auto dealers, building-materials stores, and gasoline stations sales rose 0.5%. 10 of 13 retail categories showed gains in May. Clothing stores had their biggest advance in more than a year at 1.3% and building-materials saw a 2.4% rise, the most since September. Among the sectors to show declines were furniture and home furnishings, with a 2.4% drop -- the most since 2013 -- along with sporting goods, hobby stores, and food and beverage sellers. Among retailers still reporting monthly sales, L Brands was up 5.0% and Costco was up 11.7%. See sales reports below...In a 5-to-4 ruling, the US Supreme Court handed down its decision regarding online sales tax, saying that Internet retailers can be required to collect sales taxes in states where they have no physical presence. The ruling overturned the court’s 1992 decision, which affirmed the “physical presence” test for state sales-and-use tax collections.

Accelerating News

Checkers & Rally’s Restaurants Inc. plans to open two dozen Checkers restaurants in the Pittsburgh area over the next 3 to 7 years. The company currently has 870 restaurants nationwide. It’s adding another 76 this year and plans another 100 in 2019…Wawa Inc. opened its 800th store last month, in Wilmington, DE. Wawa is also growing the size of its locations. In December, it opened its largest store to date, a 9,200 s/f store in Washington, DC, and plans an 11,300 s/f store in Philadelphia by the end of this year...JAB Holding Co., parent company of Krispy Kreme and Panera Bread, plans to purchase British sandwich chain Pret A Manger. Terms of the deal were not disclosed. JAB, also the owner of Caribou Coffee, Keurig Green Mountain, Einstein Noah Restaurant Group, Inc., and Peet’s Coffee & Tea, struck the agreement with private-equity company Bridgepoint Advisers Ltd. There are 530 Pret A Manger stores worldwide, including 92 in the US... Burlington Stores opened 18 stores in the first quarter, up from 4 in the same period a year ago. It expects to open 35 to 40 net new stores this year.  The chain had 629 locations at the end of 2017, and expects to expand to 1,000 stores long-term…Southeastern Grocers has successfully completed its financial restructuring and emerged from Chapter 11. The company operates more than 575 stores under the Bi-Lo, Fresco y Más, Harveys Supermarket and Winn-Dixie banners in 7 southern states...Dog care franchise Dogtopia signed two multi-unit franchise agreements to open 14 locations in Seattle, The new centers are part of Dogtopia’s plans to reach more than 400 units by 2021...Sprouts Farmers Market opened its 300th store this month,  in Simpsonville, SC...Francesca’s opened 27 new stores and closed 4 during the first quarter, bringing its total store count to 744. It plans to remodel 80-90 existing stores this year…Lumber Liquidators opened its 400th store this month. Since it opened its first store in the West Roxbury neighborhood of Boston in 1994, the hardwood floor retailer has grown to operate stores in 46 states…Entrepreneurs Matt Alexander and Mark Masinter, adviser to developers and brands including Apple, J. Crew, and Restoration Hardware, will open a 13,000 s/f department store concept called  Neighborhood Goods  this fall in Plano, TX. The store will host events, have its own podcast, and includes a bar and restaurant.  Neighborhood Goods will gradually expand to other markets in Texas and beyond…ModCloth, the indie and vintage online clothing retailer Walmart acquired in 2017, has opened a store in San Francisco. Additional ModCloth locations will open in New York, Los Angeles, and Washington, D.C... Private investment firm High Bluff Capital Partners has purchased QCE LLC, parent of the Quiznos chain. Quiznos has about 800 locations in 32 countries…Rutter’s, a privately owned group of companies that includes convenience stores, a dairy and beverage company, and a real estate company, opened its 70th location in Inwood, WV, its first outside PA…Five Below continues to expand, adding 33 new stores in Q1 2018 to bring its presence to 658 stores. Five Below envisions more than 2,500 US stores…4 more states will soon have Dickey’s Texas-Style Barbecue thanks to recent franchising deals. The chain now has more than 550 locations in 45 states…RH (formerly known as Restoration Hardware) will open 4 new stores (“Galleries”) this year.  RH has also developed a smaller-sized prototype - the smaller galleries will enable it to add from 5 to 7 new locations per year… Joann opened a new prototype in Columbus, OH that combines technology, community and learning spaces, and new custom services. oann operates 865 US stores…Bob’s Discount Furniture will open 5 more Southern CA stores by Labor Day weekend. The newest stores will bring the company’s count to 104 stores by September.

Decelerating News

Luxury grocer Dean & DeLuca, facing claims from suppliers that they haven’t been paid, is shrinking its US brick-and-mortar presence. The retailer’s owner, Pace Development Corp., has reduced the number of Dean & DeLuca locations from 42 to 18...Claire’s Stores won court approval to vacate 37 of its US standalone stores, mostly in malls. In April the retailer, which filed for Chapter 11 bankruptcy two and a half months ago, won court approval to leave an additional 95 stores…Hudson’s Bay Co. will close up to 10 Lord & Taylor stores, including its flagship on 5th Avenue in Manhattan…Kroger Mid-Atlantic will exit the Raleigh-Durham, NC, market in August, closing its 14 stores. The company is under contract with Food Lion for one store, Crunch Fitness for one store, and Harris Teeter for 8 stores. Kroger Mid-Atlantic operates 108 additional stores... H&R Block will close 400 locations. The company operates nearly US 10,000 locations..Starbucks will close 150 poorly performing company-operated stores next year, about three times as many as it typically closes.

New England News

Franchiser Steve Stabile will open Blink Fitness’ first location north of Boston at the former MG Fitness, in Medford. Stabile plans to open 6 more over the next few years, but did not specify where the gyms would be located. Since its inception in 2011, Blink has opened more than 70 gyms in NY, NJ, PA, and CA. It has over 50 franchise locations across the country, and plans to surpass 300 over the next five years...European men’s fashion brand Suitsupply opened its 100th international store, in Boston…Mainely Burgers will open its second brick- and-mortar restaurant at Boston Landing in Brighton, MA. The business opened its first location in 2016 in Cambridge’s Central Square...Bertucci’s filed for bankruptcy in April and immediately closed 15 restaurants, including 6 in MA. Planet Hollywood founder and CEO Robert Earl bought the chain and is exploring options for more restaurants in the area. Bertucci’s, which once had over 100 restaurants in the Northeast, has 58 after the April closings.

Mall News

Golden Gate Capital has established a new operating company for two companies it acquired out of bankruptcy: PSEB Group is composed of Eddie Bauer and Pacific Sunwear of California, both of which will maintain their distinct brands. It will have a retail footprint of more than 700 stores….Sears Holdings will close an additional 72 US stores. Sears and Kmart operated 894 stores at the end of the first quarter, 381 fewer than it did a year ago...Maurices closed 7 stores in its third quarter ending April 28, dropping from 993 to 986 stores...Cirque du Soleil will open its first “family entertainment centre”, called Creactive, in September 2019 in a retail property in Toronto, in partnership with real estate firm Ivanhoé Cambridge. Cirque du Soleil is in discussions for additional locations in Canada, and with other partners to open outside of Canada. Creactive will offer bungee jumping, wire and trampolines, mask design, juggling, circus track activities, dance and more. The spaces will average 24,000 s/f.

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 US retailers rose 0.8% from a month earlier, the Commerce Department said. That marked the biggest one-month jump since November. Excluding automobiles, gasoline, building materials, and food services, retail sales increased 0.5% last month.

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® increased in May, following a modest decline in April (after a downward revision). The Index now stands at 128.0 (1985=100), up from 125.6 in April. The Present Situation Index increased from 157.5 to 161.7, while the Expectations Index improved from 104.3 last month to 105.6 this month.

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

PURCHASING MANAGERS INDEX

Manufacturing expanded in May as the PMI® registered 58.7 percent, an increase of 1.4 percentage points from the April reading of 57.3 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

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