Thursday, January 24, 2019

Which Supermarket Anchor Do You Want in Your Center?

If you ask any shopper which shopping center he or she visits most often, chances are the answer will be a grocery-anchored shopping center.

This retail property type typically offers a variety of convenience-oriented co-tenants including pharmacies, dry cleaners, health clubs, medical offices, banks, restaurants, and others that serve the daily needs of nearby residents.

While online grocery services are gaining popularity among consumers and supermarket chains, they are not viewed as a severe threat to grocery-anchored centers, according to Retail Capital Markets. In fact, among commercial real estate investors surveyed by RCM, 48% cited anchored shopping centers, particularly supermarket-anchored properties, as the most preferred retail investment. Grocery-anchored shopping centers are frequented two to three times a week and bring a constant flow of traffic that benefits in-line tenants. It’s the primary reason many retailers choose to locate in this property type.

In a recent review of grocery-anchored shopping centers within Eastern Massachusetts/Greater Boston, Southern New Hampshire, and Greater Hartford, CT - the regional coverage within our proprietary GRIIDTM database - we took a look at vacancy rates in these centers by grocery chain. For this purpose we defined a shopping center as a retail property with three or more tenants. We also included only grocery anchors that averaged 40,000 square feet or more.

Combining all three regions, there are 277 grocery-anchored shopping centers that fit the criteria noted above. The average center size is 164,200 square feet, while the average vacancy rate within these properties is 7.2%, significantly below the 9.8% vacancy rate of all properties throughout the entire KeyPoint Partners’ GRIIDTM coverage area. The average supermarket size within the selected group of 277 shopping centers is 58,000 square feet.

But are all grocery-anchored shopping centers created equal? When it comes to vacancy by grocery anchor, there really aren’t too many surprises.

The lowest vacancy rate among grocery-anchored shopping centers goes to centers anchored by Wegmans. The selective store location strategy throughout Eastern Massachusetts and the high demand for available space results in a meager 3.2% vacancy rate at Wegmans-anchored shopping centers. Six other chains anchor shopping centers whose vacancy rates are below the overall 7.2% average. These include Shop Rite, Big Y, Price Chopper, Stop & Shop/Hannaford, Star Market, and Whole Foods.

The highest vacancy rate among grocery-anchored shopping centers falls to Roche Bros. shopping centers, which have a vacancy rate of 12.7%. Skewing the rate, however, was the impact Northborough Crossing and other new development along Route 9 appears to have had on Roche Bros.’ Bay State Commons location in Westborough, where vacancy is prevalent, including a former Stein Mart store. Discounting this shopping center, Roche Bros.- anchored centers would have a meager 4.2% vacancy rate. Other chains coming in higher than average are Market Basket, Shaw’s, and Price Rite.

The following table shows the breakdown of shopping center vacancy by supermarket anchors (CLICK on image to enlarge):


By no means should property vacancy rate be a sole determinant in measuring the strength or attractiveness of a shopping center, but it’s certainly a factor that should be given serious consideration before deciding to locate or invest in a retail property. Nevertheless, relative to other shopping center types, grocery-anchored centers have a strong position in the retail market for retail prospects and investors alike.
Bob Sheehan 
VP of Research  

KeyPoint Partners Company News

New Team Member: Stephen Davie joined the Burlington, MA office as an Assistant Property Manager.



National Retail News

NOTE: The US Commerce Department has not reported retail sales for December due to the shutdown of the federal government. Reports from other sources indicate that holiday retail sales were strong: Total US retail sales, excluding automobiles, rose 5.1% between Nov. 1 and Dec. 24 from a year earlier, according to Mastercard SpendingPulse, which tracks both online and in-store spending with all forms of payment. This is the strongest holiday sales increase in six years. Overall, U.S. consumers spent over $850 billion this holiday season, according to Mastercard. Among retailers still reporting monthly sales, L Brands was flat and Costco was up 6.1%. See sales reports below4...Sears Holdings Corp. selected chairman Eddie Lampert’s ESL Investments as the winning bidder in the company’s bankruptcy auction. Under the terms, ESL will acquire substantially all of the company’s assets, including 424 stores, for approximately $5.2 billion. Lampert’s offer is the only one that would keep Sears up and running. The offer is subject to court approval, with a hearing currently scheduled for February. Provided conditions are satisfied, the transaction will close on or about February 8.

Accelerating Retail News

Benderson Development has acquired a 600,000 s/f portfolio of 15 former Toys ‘R’ Us and Babies ‘R’ Us stores throughout the country. The sales price was not disclosed. Locations include five stores in Florida, two in Oregon and California, and one each in North Carolina, Massachusetts, Pennsylvania, Colorado, Connecticut and New York…Floyd’s 99 Barbershop plans to increase its current franchise presence from 32 to 350 franchises over the next five years…Fast casual seafood chain Captain D’s opened its newest franchised location in Wytheville, VA, marking the brand’s 23rd restaurant in the state…Jersey Mike’s franchiser Dan Markel signed an agreement with The Hummus & Pita Co. to develop up to 100 units across California. The Hummus & Pita Co., based in New York City, operates 5 stores in NYC, CT, and NJ...Ahold Delhaize largest US brand Stop & Shop will acquire King Kullen Grocery Co. The agreement includes King Kullen’s 32 supermarkets and 5 Wild by Nature stores. The acquisition is expected to close during the first quarter of 2019, Terms were not disclosed... Wegmans will make its New York City debut this fall, with a 74,000 s/f store at the Brooklyn Navy Yard. Wegmans is also expanding into North Carolina this fall, with a 104,000 s/f store in Raleigh, plans to open 4 additional NC stores in the future, and will enter Virginia this year with a location in Virginia Beach. Wegmans currently operates 98 stores in 6 states... Ocean State Job Lot is moving in to several shuttered Toys “R” Us locations. The discount retailer has bought or leased 7 former toy stores in Massachusetts, New Hampshire, New York and Pennsylvania. Ocean State Job Lot currently has 133 stores in New England, New York and New Jersey…Sprouts Farmers Market plans to open 9 new stores in the second quarter of 2019. Overall, the chain expects to open about 30 new stores in 2019, the same as in 2018. The retailer currently operates 320 stores in 19 states...Giant Food Stores debuted its new store format, Giant Heirloom Market, this month with a 9,500 s/f store in Philadelphia, the first of several locations planned for the city...Ollie’s bought 12 former Toys “R” Us sites and is leasing another six. In November, Ollie’s opened its 300th store at an old Toys “R” Us location in Maryland.  It plans to open up to 650 new stores around the country.

Decelerating Retail News

Beauty Brands has declared bankruptcy, weeks after the beauty products retailer announced it would close 25 stores, leaving it with 33 locations...Kohl’s Corp. plans to close four “lower performing” stores this year, shutter its customer-service center in Dallas, and offer a retirement program to long-time employees 55 and older. Kohl’s will close two locations in New York, one in KS and one in LA. Kohl’s plans on opening four smaller stores, keeping its store count at 1,158...P.F. Chang’s entered into an agreement to be sold to TriArtisan Capital Partners LLC and Paulson & Co. Inc. The deal is expected to close in the first quarter of 2019. P.F. Chang’s currently operates 214 US locations and franchises another 93 in 24 countries worldwide…The parent company of Sleep Outfitters, Innovative Mattress Solutions, has filed for Chapter 11 bankruptcy protection for reorganization. Innovative Mattress Solutions also owns Mattress Warehouse and Mattress King. The company has 143 stores...Whole Foods Market plans to discontinue the Whole Foods 365 store format. Plans call for the company to continue operating the current 12 Whole Foods 365 locations but not to build any more. Whole Foods operates 475 US stores.

New England News

Community Phone opened its first pop-up store in Harvard Square. Community Phone currently partners with T-Mobile and Sprint and plans to add AT&T to its network soon…Elm Street Taproom, owned by Hawkeye Hospitality’s Dylan Welsh, will open in the old Joshua Tree space in Davis Square, Cambridge this month…Online luggage seller Away has opened a storefront at 50 Seaport Blvd., Boston, the seventh physical location for the brand...Historic Durgin-Park resataurant will close this month. The restaurant has been open in Boston’s Fanueil Hall since 1827, but according to owner Ark Restaurants is no longer profitable...Tatte Bakery & Cafe opened the first of 2 planned locations in downtown Boston, at 125 Summer St. Tatte has not announced the address of the other downtown location, which will be its 12th overall...Taco Bell will open in a former Subway location in Boston’s Downtown Crossing, the chain’s first in downtown Boston... Shaw’s supermarkets in Portsmouth, NH and Leominster, Lynn and Plymouth, MA will be closing, though no date has been announced.

Mall News

PGA Tour Superstore plans to open an “experiential” golf superstore in February in the former location of Toys R Us at Northshore Mall, the company’s 36th US store and first in New England. When the Peabody store opens, PGA Tour Superstore will be open in 16 states. PGA has been acquiring locations of former Toys R Us, including in Indianapolis, Chicago and Boston. Toys R Us filed for bankruptcy in September 2017 and closed its US stores in late June... J.C. Penney said it will initiate 3 preliminary store closings this spring as part of an ongoing evaluation of its store portfolio during the next few months. Locations were not disclosed...Gap Inc. will close its store at the CambridgeSide Galleria in East Cambridge, MA this month, where New England Development plans to convert 140,000 s/f of retail into office space. CambridgeSide’s 120,000 s/f Sears closed last year, opening up a significant chunk of space in the mall. Macy’s Inc. will close its Home and Kids store on the third floor in mid-2019 and move some of its merchandise into the main store, which will stay open on the second and third floors throughout the renovation….Chico’s FAS will close 250 stores over the next three years. As of November, the company operated about 1,400 US stores...Gymboree Group Inc. will shut down after going bankrupt a second time. The retailer, which operates 945 stores under three brands in the US and Canada, plans to close its Gymboree and Crazy 8 chains after failing to find anyone to buy them. A unit of Goldman Sachs Group Inc. is leading bids for Gymboree’s higher-end Janie and Jack business.

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

NOTE: The US Commerce Department has not reported retail sales for December due to the shutdown of the federal government.

TREASURY YIELDS

















Treasury Yield Sources:  federalreserve.gov; ustreas.gov

CONSUMER CONFIDENCE INDEX

The Conference Board Consumer Confidence Index® decreased in December, following a modest decline in November. The Index now stands at 128.1 (1985=100), down from 136.4 in November.

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

PURCHASING MANAGERS INDEX

Manufacturing expanded in December, as the PMI® registered 54.1 percent, a decrease of 5.2 percentage points from the November reading of 59.3 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