Thursday, August 30, 2018

PREVIEW: The KeyPoint Report for Greater Hartford, CT

With the releases of the KeyPoint Report on Eastern Massachusetts/Greater Boston behind us, and the report for Southern New Hampshire in the works, 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 2018 retail market was a relatively stable one.

Retail Inventory and Vacancy: Total retail space in Greater Hartford currently totals 37.6 million square feet, a nominal decrease of 47,200 square feet from last year. The change is primarily attributed to a low level of new development and a number of conversions to non-retail space. The region was able to weather the Toys R Us/Babies R Us liquidation, which added more than 172,000 square feet of vacancy to the region, and at the same time benefit from the absorption of other existing vacancy, ending the year with a decline in the vacancy rate to 10.6%. This reflects a significant improvement from the past two years when the vacancy rate was stuck at 11.1%. Furthermore, the resulting absorption rate of 164,600 square feet was the strongest since 2015.

Size Classifications: During 2018 changes in vacancy rates among size classification generally show improvement in vacancy. However, the most glaring change occurred in the 25,000-49,999 square foot segment. This particular classification was impacted substantially by the store closings resulting from the Toys R Us liquidation, resulting in a jump in the vacancy rate from 2.5% in 2017 to a current level of 6.2%. The only other size classification to show an increase was the 100,000-199,999 square foot bracket, singularly impacted by the Sam’s Club closing in Manchester. Another particularly notable change this year occurred in the smallest segment, the Under 2,500 square foot classification, which experienced a decline from 17.9% to 14.9%, the strongest improvement in the region. As the largest segment of retail in Greater Hartford, this dramatic improvement had the most positive effect on the region as a whole. Also showing solid improvement was the 50,000-99,999 square foot size range, which experienced a vacancy rate decline of 240 basis points to 8.3%. This was a case of addition by subtraction following the demolitions of a vacant Showcase Cinema in East Windsor, which is earmarked for a new casino, and a former Walmart store in New Britain, now the site of a new self-storage facility.

Town Rankings: The ten largest retail markets among Greater Hartford communities, based on square feet of retail space supply, remain 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, the lowest rate was found in Glastonbury, coming in at 4.2%. This was a significant improvement from an 8th place finish last year when its rate was 8.9%. Newington and Rocky Hill tied for second, both inching up from sub-4.0% rates last year to 5.4% in 2018. Bloomfield followed, moving into the top ten this year with a 6.0% vacancy rate. Among towns with the highest vacancy rates, Enfield finished the year at 20.6%, impacted largely by vacant Macy’s and Sears stores at Enfield Mall. Runner-up was East Windsor at 19.4%, followed by East Hartford at 17.2%. Only seven of the top ten towns have vacancy rates above 10.0%.

Retailer Activity: At Home led all retailers in square footage gain this year, recently opening its first Connecticut store in Manchester. Walgreens followed, converting seven Rite Aid units to its namesake pharmacies. Burlington rounded out the top three, adding its fifth store in the region, replacing a vacant Sports Authority unit in Farmington.  T-Mobile added five locations to the region and was the only retailer to add more than two locations in 2018. Roz & Ali, Dollar General, and O’Reilly Auto Parts were among numerous names to add two stores. Sam’s Club led all retailers in space contraction, closing its only store in the region in Manchester. Toys R Us followed with three store closings. Babies R Us was third, shutting down two stores. The two liquidated chains vacated a combined 172,200 square feet. Rite Aid reduced its store count by 10 locations, seven converting to Walgreens and three closing. It has two pharmacies remaining in the region which may eventually convert to Walgreens or close. Pizza Hut and Subway each closed four units.

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

The KeyPoint Report examines the retail real estate marketplace for Greater Hartford, Connecticut, with a focus on changes between August 2017 and August 2018. 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 nearly 60,000 retail establishments. The KeyPoint Reports contain a summary and analysis of market trends and activity for each studied area.


Read the complete 2018 KeyPoint Report on Eastern Massachusetts/Greater Boston,
including the special section on malls, available now!
AND watch for The KeyPoint Report on Southern New Hampshire, available soon!
See current and past reports at KeyPointPartners.com/Reports

KeyPoint Partners Company News

Employee News: Nick Schaejbe was promoted to Property Manager and Cheryl MacDougall was promoted to Assistant Property Manager in the Burlington, MA office; Rich Couillard has relocated to the Brookline, MA office as an Assistant Property Manager. Vijay Pathak joined the Burlington, MA office as an Assistant Property Manager, and Andri Shehu has joined the Burlington, MA office as a Property Accountant.  Jon Maimon joined the Brookline, MA Office as a Property Manager...New Business: The Leasing Team has added Wareham Marketplace, a newly-constructed retail center on Cranberry Highway in Wareham, MA. Tenants now open include Aldi and AutoZone, with Wendy’s and Mattress Firm opening soon.

National Retail News

US retail sales rose by 0.5% in July, Commerce Department figures showed. Excluding autos and gas, sales climbed 0.6%. 9 of 13 major retail categories showed increases, highlighted by 1.3% gains at clothing stores and food services and drinking establishments. Food and beverage stores reported a 0.6% advance, the biggest since December. Among retailers still reporting monthly sales, L Brands was flat and Costco was up 8.3%. See sales reports below. The planned merger between Albertsons Cos. and Rite Aid has been called off due to concerns that investors wouldn’t approve of the $24 billion price tag hours before they were set to vote on it. Albertsons and Rite Aid announced the proposed merger in February, in a deal that was approved by the boards of both drug chains. Under the terms of the agreement, neither Rite Aid nor Albertsons will be responsible for any payments to the other party as a result of the termination.

Accelerating Retail News

Starbucks opened its first-ever standalone Princi bakery and café, in downtown Seattle. Princi is the exclusive food supplier in all Starbucks Reserve Roastery locations…Focus Brands Inc. will acquire Jamba (whose wholly-owned subsidiary is Jamba Juice Company) in a transaction valued at approximately $200 million. The deal is expected to close during the third quarter of 2018.  Jamba Juice has more than 800 locations worldwide…Brookfield Asset Management Inc. will acquire all the outstanding shares of common stock of Forest City in a transaction valued at $11.4 billion. Forest City operates  a large portfolio of retail space, including regional malls and specialty retail centers, primarily in NYC.  The company’s portfolio also includes 6.3 million s/f of office, 18,500 multi-family units, and 5 large-scale development projects in the NY Metro area, San Francisco, and Washington, DC...Online furniture retailer Wayfair will open its first retail outlet in Florence, KY. The 20,000 s/f store will open early next year, and will sell returns and closeouts...Casper will open 200 stores across North America over the next 3 years. Casper opened its first permanent retail shop in NYC earlier this year after gaining popularity with a series of pop-up shops.  The 200 stores include 18 of these temporary locations that Casper will transition to permanent shops. Many of Casper’s temporary stores are in malls, and the company expects to keep opening shops in malls... Tiffany & Co. will begin a massive renovation of its Manhattan flagship on 5th Avenue at 57th Street, starting this spring…Bealls Inc. will open a chain called Home Centric, the first of which opened this May in Cary, NC. At an average 15,000 s/f, Home Centric’s product mix includes brand and private label products for furniture, wall décor, rugs, lamps, housewares, bed and bath. A 2nd Home Centric will open this fall in Tennessee; a third will open in next spring in Florida. 5 in total are projected for the end of 2019. Bealls operates over 530 stores across 16 states...A marijuana-themed restaurant chain wants to expand its Wisconsin footprint with a new shop in the Milwaukee region. Colorado-based Cheba Hut operates in 7 states and entered the Wisconsin market in 2013 with a franchise in Madison... CAVA, a restaurant chain focusing on casual Mediterranean cuisine, has agreed to acquire Zoe’s Kitchen Inc for around $300 million including debt, with backing from a group of investors. The deal will expand CAVA’s footprint from 66 locations to 327 in 24 US states.  Zoe’s was founded in 1995 and has 261 locations in 20 US states... Google is reportedly planning a two-level flagship retail store in the Fulton Market district of Chicago. Google’s has previously opened in-store shops and pop-ups in various US locations, including in NYC and LA. The Chicago location is about two blocks south of the company’s Midwest headquarters, and will occupy the first and second floors of several connected, two-story brick buildings...FAT Brands Inc., parent company of Fatburger and Buffalo’s Express, are developing 13 new Fatburger and Buffalo’s Express restaurants in CA and Washington state.

Decelerating Retail News

Furniture retailer and wholesaler Heritage Home Group, which owns the Thomasville & Co. brand, filed for Chapter 11 bankruptcy this week, hoping to sell off assets. The company, formed out of the Furniture Brands’ 2013 sale in bankruptcy to private equity company KPS Capital Partners, faced years of declining sales...National Stores Inc, which operates the Fallas, Factory 2-U, and other discount apparel and housewares stores, filed for Chapter 11 bankruptcy. The family-owned company plans to close 74 of its 344 US stores... Noon Mediterranean, the fast-casual chain formerly known as Verts Mediterranean Grill, has also filed for bankruptcy protection. The chain recently shuttered 7 units and laid off 89 employees. Before the filing, the chain had 19 units, largely on the East Coast and in Texas...Guideboat, the upscale clothing chain started by Stephen Gordon, founder of Restoration Hardware, is liquidating its stores after a five-year run. Guideboat had 4 stores, 3 in Northern CA and 1 in Austin, TX. 3 have now closed, with the original store in Mill Valley, CA to be shuttered soon...Lowe’s plans to close all 99 of its Orchard Supply Hardware stores by the end of the year in order to focus on its core warehouse model. Orchard Supply Hardware stores are located mainly in California, but also in Oregon and Florida... Sears Holdings is closing 46 more stores in November across the US. Liquidation sales at the 33 Sears stores and 13 Kmarts have begun. Sears said in January it was planning to shut more than 100 stores, then announced another 100 closures in May. Sears was operating 894 stores as of May 5, the latest available total provided by the company.

New England News

Outdoor apparel retailer Filson is opening its first New England store in Boston’s Seaport this month. The 3,177 s/f store will be Filson’s second-largest. The company has launched 14 of its 17 global stores within the last 5 years...Fool’s Errand, a third restaurant from chef Tiffani Faison, opened this month in Boston’s Fenway area. The 400 s/f “snack bar for adults” has no seats. Servers on the floor take snack and drink orders for different vermouths, sherries, crudo, finger sandwiches, and more.

Mall News

Brookstone filed for Chapter 11 bankruptcy protection and will close all of its 101 stores in US malls. The company will continue to operate its 35 airport stores and e-commerce and wholesale businesses...Sally Beauty plans to close as many as 100 stores, or 1 - 2% of its footprint of 5,177 stores...Samuels Jewelers filed for Chapter 11. The 120-store chain, which has roots dating back to 1891, is now for sale and is talking to several interested parties. Samuels Jewelers operates in 23 states under the names Samuels Diamonds, Samuels Jewelers, Schubach Jewelers, Rogers Jewelers, and Andrews Jewelers. The company says most of its stores are profitable, and they are all still operating. Samuels is pursuing a going concern sale, but has enlisted Gordon Brothers and Hilco to sell off excess inventory… American Dream Meadowlands, the mammoth retail and entertainment destination now taking shape in East Rutherford, NJ, will reportedly open this spring. The long-delayed center will include an indoor Nickelodeon Universe theme and water parks, Lego Discovery Center, Sea Life aquarium, 16-story indoor ski slope, miniature golf course and some 450 retail stores and a 150,000 s/f food hall. American Dream, formerly known as Xanadu, broke ground more than a decade ago, but its construction stalled, delayed by various problems, including financing difficulties. In 2011, Canada’s Triple Five Group officially took over control of the project and rebranded it as American Dream. Triple Five’s portfolio includes the largest shopping center in North America, West Edmonton Mall in Alberta, Canada, and the largest US center, Mall of America, Bloomington, MN.

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 July as households boosted purchases of motor vehicles and clothing, the Commerce Department said. Sales increased 0.5% last month. Excluding purchases of autos and gasoline, sales climbed 0.6%.

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 marginally in July, following a modest decline in June. The Index now stands at 127.4 (1985=100), up from 127.1 in June. The Present Situation Index improved from 161.7 to 165.9, while the Expectations Index declined from 104.0 last month to 101.7 this month.

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

PURCHASING MANAGERS INDEX

Manufacturing expanded in July as the PMI® registered 58.1 percent, a decrease of 2.1 percentage points from the June reading of 60.2 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