Thursday, December 20, 2018

The Year in KeyPoints: An Annual Review

The end of another KeyPoints publishing year approaches. We’ve explored events and trends in retail real estate, and shared our unique research. Below is a recap of topics on which we’ve commented in 2018. Stay with us in 2019 to see where these stories go from here:

January: Reason to Smile
VP of Research Bob Sheehan wrote about a positive trend in brick-and-mortar retail holiday sales: “By most accounts, the industry just experienced its best Christmas since the end of the Great Recession in 2010. The National Retail Federation (NRF) reported that November/December sales were 5.5% higher than holiday 2016…If any of you thinks this could be a “one and done” holiday shopping season, it’s likely you’re mistaken. North American retailers expect a 6.2% increase in sales in 2018”.
Update: Most recent forecasts peg Christmas 2018 coming in at 4.3% to 4.8% (NRF) and 4.8% (CBRE), slightly below 2017. However, online sales are running 18.6% (Adobe Analytics) higher, an all-time record.

February: Mall owners Fill Up on Entertainment
Bob commented on the rise of entertainment tenants in malls: “The tenant category that is arguably playing the largest role in the re-thinking of mall tenancy is the category we broadly refer to as Entertainment… a variety of non-traditional entertainment concepts of many different types are absorbing large chunks of unoccupied mall square footage.”
Update: Entertainment growth doesn’t stop at the mall. Outside the mall, movie theaters, upscale bowling facilities, and trampoline parks continue to add space to the region.

March: Another Category Killer Gets Killed
Bob wrote about the demise of Toys R Us: “The two questions that always come up when bankruptcies are announced are, “Who will absorb the sales?”  and “Who will fill the vacancies?”  We can expect to see a significant impact on vacancy rates in all regions which may take some time to fully mitigate - and that’s only until the next category killer bites the dust.”
Update: Not a category killer per se, but a Sears and Kmart liquidation would add over 2.5 million square feet of vacancy to the three New England regions tracked by KeyPoint Partners.

April: Internet Sales tax: A Game Changer?
Bob commented on possible changes to the laws covering sales tax on online retail: “A change in the sales tax rule should be deliberated very carefully. If small retailers with both a physical presence as well as an online platform are required to collect sales tax for online purchases, will they have the wherewithal to get it done? It could be that burden, and the expense, are too big to bear. Consequently, a change in the online sales tax rule may be just the thing that drives some of these smaller retail firms out of business.”
Update: So far it appears that the sales tax change hasn’t had much effect on internet sales, which is setting all-time highs this holiday season.

Our May through August issues focused on our KeyPoint Reports on retail real estate in key New England markets, based on our GRIID™. All reports are available at KeyPointPartners.com.

September: Is It the 900 lb. Gorilla?
Bob Sheehan shared some thoughts on whether market share from closing Sears stores was being taken up by Amazon: “Although Sears hasn’t filed yet, its ongoing initiative to eliminate stores has freed up substantial sales dollars. Sears…saw its US revenue drop from $21.0 billion to $11.1 billion during that time frame, a decline of nearly $10 billion…When $10 billion gets tossed back into the expenditure pot, someone must be benefitting. Where have those revenue dollars gone?”
Update: Not much new to report here…yet!

October: Then and Now: Decade of Change?
Bob Sheehan explored whether the list of Top 25 Retailers in Eastern MA had changed in 10 years: “If were to ask you how much a list of the Top 25 Retailers by Store Count in a given region of the country had changed in the last ten years, what would you say - a great deal, somewhat, or not very much, really? We decided to use our GRIIDTM database to see how much change this region experienced during the past 10 years. To do so, we listed the top 25 retailers by store count in 2008 and in 2018.”

November: Just How Apocalyptic Is It?
Last month Bob questioned the concept of “retail apocalypse” by analyzing vacancy at 270 shopping centers: “While the fallout is far from over, there are signs the worst may be behind us…The point that needs to be stressed here is that 199 of the 270 shopping centers analyzed here - 74% - are only 4% vacant. In most circles that’s considered fully occupied.  Put another way: most centers are doing fine.”

All of which brings us to the close of another action-packed retail year! Thanks for your readership and support. Happy Holidays and a peaceful, prosperous New Year!
                                                                                                                                                                   









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

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