Wednesday, May 29, 2019

Preview: KeyPoint Report for Eastern MA 2019

The 2019 KeyPoint Report for Eastern Massachusetts/Greater Boston, based on our proprietary GRIID™ retail database, is in production and should be available by the end of June. While you’re waiting, here’s a preview - but please consider these results preliminary and subject to change:

Inventory and Vacancy: Total inventory in Eastern Massachusetts experienced a modest decline this year to 196.0 million square feet, a drop of 0.2%, caused largely by demolitions and repurposing of space to non-retail use. Following a substantial rise in the vacancy rate last year to 9.5%, it was encouraging to see the region show a nominal decline to 9.4% this year.

But even with less vacant space in the region, the contraction of total space resulted in a modest negative absorption of 170,200 square feet. While there are a number of retailers continuing to expand, store closings and liquidations counterweigh on the region and hinder consistent absorption gains. Without the repurposing of space, conditions in Eastern Massachusetts would be of even more concern.

Size Classifications: Unlike last year, when all size classifications experienced an increase in vacancy rates, this year was mixed. Smaller categories up through 25,000 square feet, with the exception of the under 2,500 square foot segment, ended the year with higher vacancy rates. Store closings at Rite Aid, Papa Gino’s, and 7-Eleven as well as liquidations of Payless ShoeSource, Charlotte Russe, and Gymboree were largely the cause. Among the larger format tenants over 25,000 square feet, three categories lowered vacancy rates, while the 200,000 SF plus category remained fully occupied. A number of tenants absorbed larger vacancies left behind by Toys R Us, Benny’s, Kmart and others. Retailers expanding into these spaces included Ocean State Job Lot, Hobby Lobby, Target, and PGA Superstore, among others.

Town Rankings: The five communities encompassing the most retail space remain the same for the third year in a row, with Boston and Cambridge maintaining their dominance in first and second position. Natick, Brockton, and Burlington follow. Westwood remained in the top spot in the region for lowest vacancy rate, although nominally higher than last year at 1.7%.  Abington moved up to second place with a rate of 2.8%. Stoneham repeated its third place finish from a year ago at 3.0%.

Taunton had the highest vacancy rate in Eastern Massachusetts for the third straight year, now at 31.9%, the highest a single town in the region has ever experienced. Wrentham is a distant second with a rate of 19.4%; the town is still saddled with the never-occupied Shops at Wrentham, which was speculatively built in 2014 and which may end up as repurposed space in the future. The property is reportedly up for sale.


Retailer Activity: The retailer gaining the most retail space in the region was Hobby Lobby, adding stores in Braintree and Attleboro. In second place was Target, opening three small format stores in Burlington, Medford, and Cambridge. Rounding out the top three is At Home, adding a second store to the region in Dedham. By number of new units, Xfinity opened nine stores, more than doubling it count in the region to 16 units. Verizon and Richfield Convenience both opened seven units, good for a second place tie in the region.

In a year which finally saw Sears file for bankruptcy, it is not surprising to see that once-venerable department store at the top of the list in Eastern Massachusetts for largest space reduction, closing stores in Peabody, Natick, and Cambridge. This follows three closings last year. Rite Aid also had a difficult year following the acquisition by Walgreens of more than 1,900 stores. As a result, approximately 350,000 square feet of the Rite Aid stores closed.

Parent company National Stores decided it was time to shut down its six Fallas stores in the region, placing the retailer third in contracted space. Papa Gino’s and D’Angelo’s, operating under the same parent company, closed a combined 69 locations, placing the restaurant chains in first and third place among retailers closing the most stores. In second place was Payless ShoeSource, closing its remaining 37 stores in the region as part of a national liquidation.

NOTE: Readers can expect to see much more detail on retail changes in Eastern Massachusetts when we publish our 2019 KeyPoint Report for Eastern Massachusetts/Greater Boston. Stay tuned!

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

See our current KeyPoint Reports for Eastern Massachusetts/Greater Boston,
Southern New Hampshire, and Greater Hartford, CT at

KeyPoint Partners Company News

New Business: Vice President of Leasing Don Mace represented the seller to procure a buyer in the $8.2 million sale of Summit Square, a retail center located in Warwick, RI. Don also has new leasing assignments: Meadow Glen, Medford, MA; Greenwood Shops, Warwick, RI; 1020 Western Ave. Brattleboro, VT; Shaw’s Plaza, Sharon, MA (with VP of Leasing Michael Branton). Michael Branton also has new listings: 660 Merrill Road, Pittsfield, MA; 474-484 Moody Street, Waltham, MA; and 2196 Cranberry Highway, Wareham, MA...Team News: Cristina Cora, RPA has been promoted to Senior Property Manager in the Boston office.

National Retail News

US retail sales unexpectedly declined in April for the second time in three months, weighed down by soft sales of autos and building materials and suggesting consumer spending will remain subdued this quarter. Overall sales declined 0.2% after a 1.7% increase the prior month that was the strongest gain since 2017, according to the Commerce Department...See sales reports below.

Accelerating Retail News

Foot Locker will open a 25,000 s/f “power store” in Washington Heights, Manhattan this fall. The format serves as a hub for local sneaker culture, art, music and sports…Amazon Go has opened its 3rd store in San Francisco, for a total of 11 locations to date... Papa John’s opened its 2,000th restaurant outside of North America…Vegan fast-casual restaurant By CHLOE plans to expand from 13 to more than 50 US locations by 2023…Great Harvest Bread Co. has signed franchise agreements with new and existing franchisees that will bring the bakery-cafe concept to 5 additional markets in the west and northeast. Great Harvest operates nearly 200 US locations...After a pilot in 13 CVS stores, SmileDirectClub will open “SmileShops” in hundreds of CVS locations in 2019, with the potential to expand to more than a 1,000 stores during the next several years. This will more than double the current physical footprint of SmileDirectClub…Blaze Fast-Fire’d Pizza is seeking strategic expansion throughout Washington, DC as part of a plan to reach 500 locations by 2021. Blaze currently has 300 restaurants in 41 states and 5 countries…Indochino will open 3 stores in New York, New Jersey, and Connecticut this year and into 2020. Indochino opened its 44th location last month in Greenwich, CT...Tru Kids Brands, a licensing firm formed last year by Toys ‘R’ Us creditors, plans to open a handful of US stores in time for the holidays that will span about 10,000 s/f each. The 600 stores that were shuttered last spring typically spanned 20,000 - 50,000 s/f. Tru Kids owns both the Toys ‘R’ Us and Babies ‘R’ Us brands...Luxury bridal brand Floravere has opened its first permanent physical location, in the Tribeca neighborhood of Manhattan…Nordstrom will open Nordstrom Local stores in Manhattan this fall, in the West Village and on the Upper East Side. Nordstrom Local debuted in October 2017, in Los Angeles. Two additional LA locations have since opened…Lidl will open 4 stores throughout the state of NY by early 2020. Lidl US has an East Coast expansion strategy calling for 25 new stores within the year, and expects to top the 100-store mark in the US by the end of 2020, with locations in 9 states...Planet Fitness will open 225 gyms this year, some located in sites that Toys “R” Us or Sears once occupied, though the company declined to give a specific number. The chain has more than 1,800 US gyms…Dollar General  opened its 1,500th location, in Texas...Dunkin’ has signed development agreements to open 50 new locations over the next few years in Texas, Michigan, Kentucky, Minnesota, Wisconsin, North Carolina, Nevada, and Missouri. Dunkin plans to add 200-250 net new US restaurants each year over the next 3 years...Restaurant Brands International (RBI), parent company of Burger King, Popeyes Louisiana Kitchen and Tim Hortons, plans to grow from its current total of approximately 26,000 restaurants to more than 40,000 locations globally during the next 8-10 years. Of its three brands, Burger King is the largest, with some 18,000 locations in more than 100 countries. Tim Hortons has more than 4,800 system wide restaurants in Canada, the US and around the globe. Popeyes has more than 3,100 restaurants…Direct-to-consumer luggage brand Away plans to grow its physical footprint, opening 50 new stores during the next 3 years. The brand currently has locations in New York, Los Angeles, San Francisco, Austin, Chicago, Boston, and London... Sears has unveiled its first Sears Home & Life stores with openings in Louisiana, Illinois and Alaska. The apparel-free, smaller-sized format (10,000 to 15,000 s/f) is focused on home products and services…Ross Stores is on track to open approximately 100 locations in 2019, comprised of 75 Ross and 25 dd’s Discounts. The company operates 1,502 Ross stores in 38 states and 243 dd’s Discounts stores in 18 states…TBC Corp. expects to add 27 company-owned stores to its network in 2019 under the NTB Tire and Service Center and Tire Kingdom Service Center banners. The company has opened 9 new stores this year — 5 NTB stores and 4 Tire Kingdom locations. By the end of the year the company will have more than 735 company-owned stores.

Decelerating Retail News

Pier 1 Imports Inc. plans to close at least 45 of its 970 stores, and potentially up to 100 more, as it seeks to cut costs after a disappointing holiday season...Office Depot is closing 50 stores this year under both its namesake and OfficeMax banners, part of a three-year plan announced in 2016 to shutter roughly 300 stores...CVS Health is closing 46 “underperforming” stores. The cuts represent fewer than 1% of the 9,600 CVS Pharmacy stores nationwide...Party City plans to shutter about 45 of its approximately 870 locations in 201…Potbelly Sandwich Shop plans to close 15 to 22 restaurants, including 9 to 12 company stores. The company closed the quarter with 481 restaurants... Discount chain Fred’s is closing 104 more stores by the end of June. The closures are in addition to the 159 stores closings announced in April. Once the closures are completed, Fred’s will have roughly 300 stores across the southeastern US…As part of a multiyear plan to close 300 stores by 2020, The Children’s Place will close another 40 to 45 stores in 2019. The Children’s Place has 971 stores. Since 2013, the company has closed 213 stores... Dressbarn, owned by Ascena Retail Group, is winding down operations, including the eventual closing of its approximately 650 stores... Arcadia Group has confirmed plans to close or sell off all of its 11 Topman and Topshop stores in the US.

New England News

Frank Pepe Pizzeria Napoletana, which operates 10 restaurants in the northeast, will add 2 more in Massachusetts in Watertown’s Arsenal Yards development, and in Burlington, which opens next month. Frank Pepe opened its first MA restaurant in Chestnut Hill in 2015…Ruth’s Chris Steak House will open its 3rd Massachusetts location at Somerville’s Assembly Row…The Boston Planning & Development Agency gave final approval to lease nearly 8 acres of city-owned land at Parcel P-3, known as Tremont Crossing for a $700M, 1.7M SF transit-based mixed-use project across from Ruggles Station in Roxbury. The plan calls for 700 apartments, 405K SF of retail, 108K SF of office and a museum. The retail component will include a BJ’s Wholesale Club, Regal Cinemas, Starbucks, Brooklyn Boulders and CVS...The Bagel Table will open a 1,650 s/f location on the ground floor of 80 Guest Street at Boston Landing, home to the Warrior Ice Arena.The Bagel Table opened their 1st shop at The Street in Chestnut Hill, followed by a 2nd location in Ashland, MA... Brighton Irish bar The Green Briar closed this month after 29 years... Gazit Horizons Inc. has acquired Marketplace Center, a 62,000 s/f retail property near Faneuil Hall, featuring Ann Taylor Loft, Banana Republic and Gap, among others, for $81.8 million.

Mall News

Melt Shop will open 6 restaurants in Orlando and surrounding counties, starting with its first Florida location, at Sawgrass Mall in Sunrise, later this year. Since launching into franchising in 2017, Melt Shop has added more than 35 restaurants. The company remains ahead of its goal to open 100 locations by 2023. Melt Shop currently operates 15 locations... Pandora  plans to close 50 of its concept stores across the world...Francesca’s Holdings Corp. will close at least 20 stores this year and put a hold on remodels until its financial situation stabilizes. In fiscal 2018, the company opened 32 stores and closed 26, giving it a total of 727 locations...Bath & Body Works is opening 46 new stores, renovating 175 and closing 24 stores this year. As of May 4, Bath & Body Works has closed three stores and opened 14 stores this year.

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

The Commerce Department said US retail sales declined 0.2% after a 1.7% increase the prior month that was the strongest gain since 2017.

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® improved in April, after decreasing in March. The Index now stands at 129.2 (1985=100), up from 124.2 in March.

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

PURCHASING MANAGERS INDEX

Manufacturing expanded in April, as the PMI® registered 52.8 percent, a decrease of 2.5 percentage points from the March reading of 55.3 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