Monday, February 25, 2019

Where to Locate Your Next Store

So you want to know where to locate your next store?

When it comes to evaluating retail markets and determining which site has the highest potential, there are a number of factors to consider. There’s no question that physical site characteristics such as venue, tenant mix, accessibility, and visibility are important variables in the decision making process. However the utmost consideration should be given to demographics and competition.

All retailers aren’t necessarily looking for the same demographic profile, since merchandise mix and price points tend to dictate which shopper segment will represent the core customer profile for a particular store. The population level surely plays a role in site selection – after all, when it comes to retail customers, the more the merrier!  And retail price points dictate which income segment of the market a particular retailer will target - luxury goods will attract the more affluent shoppers while value oriented goods will draw a more price-sensitive clientele. But demographics won’t matter if the market is saturated with direct competition, leaving little room to capture available expenditures. At the same time, if the competition level is fragmented and thin, retailers may find that they can lower the bar a bit on demographic criteria, trusting that they’ll be able to attain a strong share of market.

As an example, and using these points as a backdrop, we took a look at the ten submarkets in our proprietary GRIIDTM database that make up the Eastern Massachusetts region in order to determine which submarkets might offer the greatest potential based on total household income and total retail inventory. Within the region as a whole, the total household income is estimated at $253.5 billion while the total retail inventory is currently 197.0 million square feet. That’s to say, for every square foot of retail space in the region there is an estimated $1,287 in household income to support it. Assigning a relative index of 1.00 to this regional level, we compared the individual submarkets to gauge which appear to offer the greatest chance for successful new store opportunities (as shown in the table below - CLICK to enlarge).


If you haven’t been considering the Inner Suburbs of the Boston metro for new store locations, maybe you should.  Encompassing such communities as Cambridge, Belmont, Somerville, Medford, and Watertown, the Inner Suburbs submarket is the most populated, has the second highest aggregate income, the lowest vacancy rate, and is tied for the lowest square feet per capita, despite the fact that the median household income is slightly below the regional average. As a result, this submarket has a relative index of 1.30, or $1,671 of income per square foot of retail space, the highest in the region. If we equate income to retail expenditures, then the sales potential for all retail categories is 30% higher, on average, than the regional level.

Closely behind the Inner Suburbs is another strong submarket worth considering: the North, which is comprised of towns such as Andover, Winchester, North Reading, and Wilmington. The relative index here is 1.27. Median household income is 9% above that for the entire region while retail SF/capita is tied for lowest in the region with Inner Suburbs and City of Boston. Also high on the list is the West submarket with a 1.20 index. This submarket includes the affluent towns of Weston, Sherborn, Newton, Needham, and Sudbury. Also including Natick and Framingham, it is not surprising that this submarket has the most retail space within the region. With households earning 20% more per square foot of retail space, the West is also the highest income submarket, with median household income running 34% above the regional estimate.

There are also some sectors of the region that you may want to think twice about before making a commitment to retail expansion in the area. The Buzzards Bay submarket, for instance, has a relative index of 0.60, equating to an income per square foot level of only $777. Including the cities of New Bedford and Fall River, this submarket has a median household income of $57,700, 36% below the median level in the region. The vacancy rate is also the highest in the region at 12.6%. The South is another submarket where you may want to exercise caution when developing a location strategy. This submarket only has a 0.65 relative index. The vacancy rate is 11.4%, just behind that in Buzzards Bay. The South also has the second highest retail density in Eastern Massachusetts, currently sitting at 45.9 square feet per capita.

We don’t want to leave you with the impression that this analysis is an end-all when it comes to site location research. Within submarkets there will be higher income pockets as well as more modest income neighborhoods. There will be high population concentrations as well as areas lacking density. Within the best submarkets there will be bad locations and, conversely, for the right retailer there may be excellent opportunities even when market characteristics suggest otherwise. What we are hoping for is that it may offer a little bit of insight when you start your search for that next expansion opportunity in Eastern Massachusetts.

And when you do, please let us know how we can help with the process.

Bob Sheehan ,VP of Research,
BSheehan@KeyPointPartners.com

KeyPoint Partners Company News

New retail leasing assignments: Milford Crossing, a 37,500+ s/f power center in Milford, CT, and 1 Iyannough Road, Hyannis, MA. Both will be handled by VP of Leasing Don Mace; and  Morrisville Plaza, Morrisville, VT, to be handled by VP of Leasing Michael Branton.


National Retail News

US retail sales fell in December, posting the worst drop in 9 years. Sales fell 1.2% from the prior month. Excluding automobiles and gasoline, retail sales fell 1.4%, the biggest drop since March 2009, after a 0.5 percent advance the previous month. The report was delayed by the federal government shutdown, and some analysts question whether the shutdown created issues of data collection and quality. The Commerce Department said that while data collection was delayed, processing and data quality were at or above normal levels for this release....Among retailers still reporting monthly sales, L Brands was down 1.0% and Costco was up 5.2%. See sales reports on Page 4...ESL Investments, the hedge fund run by Sears Holdings Corp. chairman Eddie Lampert, has completed its acquisition of the company for approximately $5.2 billion. Following its previously announced round of store closures, the new Sears will be made up of 223 Sears and 202 Kmart stores, along with Kenmore, DieHard, Craftsman, Sears Home Services, Sears Auto Centers, and Innovel brands and businesses. A new entity, Transform Holdco, will be the holding company for the chain.

Accelerating Retail News

INDOCHINO will will open 3 stores in the Tri-State area; a second Boston location; and a fourth in Toronto. 5 locations are confirmed for the West Coast, with 3 in California plus Portland, Oregon, and Bellevue, Washington. INDOCHINO ended 2018 with 38 showrooms…Specialty retailer Dry Goods will open 19 stores in 2019, giving it a total of 58 US locations. In 2018, Dry Goods opened 12 stores. Dry Goods opened its first location in 2010…Domino’s could build another 2,000 US stores over the next 7-8 years, part of a growth strategy that would add 10,000 locations by 2025... RYU Apparel Inc. opened a store in Newport Beach, CA, its 9th to date. The retailer is expected to open a total of 4 US locations in 2019…Foot Locker’s power store format made its US debut this month in Eastpointe, MN. It plans to open more than a dozen locations in the format in 2019. Upcoming stores are planned for LA, NYC, and Philadelphia…Stoner’s Pizza Joint, which has locations in Texas, Florida, South Carolina and Georgia, plans to open 100 new locations by 2023 mainly in the Southeast US...PJ’s Coffee awarded 22 franchises representing 37 licenses, and opened 17 new stores, surpassing 100 locations by the end of 2018. It plans to open an additional 30 stores by the end of 2019...Melt Shop recently opened its first franchised restaurant in Delaware as well as its first location in New Jersey. The brand has 4 restaurants currently in development and 21 planned. Since launching into franchising in 2017, Melt Shop has added 20 restaurants and remains ahead of its goal to open 100 locations by 2022...Indian fast casual restaurant Curry Up Now plans to add 100 new units by the end of this year, and 200 new locations in 2020. The company has close to 50 franchised and corporate locations in development and franchise deals in more than a dozen states….Murphy USA opened 11 new stores and reopened 15 rebuilt locations in 2018, growing to 1,472 stores as it entered 2019...Five Below plans to open 94 stores across the country this year. Since November 2017 the chain opened 120 stores for a total of 745 stores in 33 states...Giant Food Stores plans to open 3 more Philadelphia locations for its Giant Heirloom Market store concept this year. This will give the chain 5 stores in the Philadelphia city limits…Tire Pros has added 9 new franchise locations in California, Idaho, Indiana, Louisiana, Oregon, Tennessee, Texas, Utah and Virginia...Chipotle Mexican Grill opened its 2,500th restaurant this month in Concord, CA... Swiss watch company Tissot opened a new 2,800 s/f concept store in Manhattan that celebrates its status as official watch and timekeeeper of the NBA.

Decelerating Retail News

Shopko has filed for Chapter 11 and is pursuing restructuring. Shopko, owned by Sun Capital, will close 289 stores, relocate over 20 Optical centers to freestanding locations, and conduct an auction for its pharmacy operations. Shopko also revealed a plan to grow its optical business and open additional locations in 2019... Performance Bicycle is closing all of its more than 100 locations, including stores in Cincinnati, Cleveland and Dayton. In November, Advanced Sports Enterprises, the parent company of Performance Bicycle, filed for Chapter 11 bankruptcy protection, listing debts of more than $100 million...The Michaels Companies will close all of its Pat Catan’s stores in the fourth quarter of 2018. The retailer plans to rebrand up to 12 of the 36 closed stores under the Michaels banner. Michaels owns and operates more than 1,200 stores in 49 states and Canada under the brands Michaels, Aaron Brothers and Pat Catan’s...H&M will close 160 stores this year. The company still plans 175 net new stores in 2019.

New England News

Stop & Shop plans to test driverless vehicles this spring in greater Boston that bring consumers a selection of groceries when summoned via an app. When the vehicle arrives, customers unlock the vehicle’s doors and pick the fruit, vegetables, and other products they want to buy off the shelves inside. The vehicles’ technology automatically records the products customers selected and charges them. Receipts are e-mailed in seconds... PGHC Holdings, Inc., parent company of Papa Gino’s and D’Angelo, announced that the New England restaurants will be sold to private equity investment firm Wynnchurch Capital. The deal does not include franchisee locations. There are still 141 company-owned Papa Gino’s and D’Angelo locations in New England... Retail developer Gazit Globe Ltd. is expanding its Boston portfolio with the purchase of 341 Newbury St., a 6-story, 49,000 s/f building leased to Uniqlo and fitness studio SLT, for $51 million. The property also includes a 98-space parking garage. Gazit’s portfolio includes 3 retail properties in Boston’s Downtown Crossing...Milk Bar and &pizza opened their first-ever joint storefront in Harvard Square, Cambridge last month. Milk Bar now has 17 locations from New York City to Las Vegas. &pizza has grown to more than 30 locations along the East Coast...Oak Furniture Land, the UK’s largest furniture retailer, has opened its first US store, at Wayside shopping center, in Burlington, MA. The company has 100 showrooms across the UK... Artichoke Basille’s Pizza opened its first of 5 CT locations in Newington this month.

Mall News

D. Legends Holdings Pte Ltd., a creator of indoor virtual reality parks, has retained R.J. Brunelli & Co. Inc. to broker its entry into the US Market. The Legend Heroes Park concept combines virtual and augmented reality technologies with physical movement for an “immersive ” experience, including hologram concerts, a raceroom, and robot VR theme park rides. The company is seeking 30,000 to 40,000 s/f locations in major US markets including New York, Atlanta, Orlando, Las Vegas, San Francisco, Boston, Chicago, Philadelphia, and D.C. Regional malls are the preferred venue, where the company can absorb vacant sub-anchors or single floors of subdivided department stores. Legends Holdings will also consider big-box spaces in high-profile power centers, strip centers, and freestanding highway locations as well as warehouse/flex buildings... Macy’s will close its Swansea (MA) Mall store next month, the only MA location of 9 Macy’s that will close nationwide in early 2019. Macy’s operates 690 Macy’s and Bloomingdale’s stores...Charlotte Russe Holdings Corp. announced it has filed for Chapter 11 bankruptcy protection. The young women’s fashions retailer said it plans to close about 95 stores while continuing to pursue a sale of the business and assets. Charlotte Russe operates more than 500 stores, including 10 under its Peek Kids banners.

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 sank 1.2% in December, the Commerce Department said, the largest drop since September 2009. Excluding automobiles and gasoline, retail sales slumped 1.4%, the biggest drop since March 2009.

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® decreased in January, following a decline in December. The Index now stands at 120.2 (1985=100), down from 126.6 in December.

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

PURCHASING MANAGERS INDEX

Manufacturing expanded in January, as the PMI® registered 56.6 percent, an increase of 2.3 percentage points from the December reading of 54.3 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