And then we have Sears, JCPenney, and Macy’s: the major department store companies that were blind-sided by the impact of ecommerce and the attitude reversal of shoppers that had grown up on regional malls. More closings resulted. Exacerbating the problem was that these were all large format vacancies that needed to be filled. A certain degree of panic set in among landlords who had to find viable replacements in a retail world that was in a state of disarray. Who would they find?
In many cases they called on low rent payers, retail “bottom feeders” if you will, that once would never have been considered viable candidates for the better power and community centers which traditionally catered to the type of tenants noted above. But then things changed again: the more attractive target tenants now included familiar names such as Burlington, Ocean State Job Lot, Tractor Supply, and Big Lots. When things improved a bit, other more desirable candidates came to the forefront, such as Target, Hobby Lobby, Whole Foods, Dick’s Sporting Goods, and the TJX divisions. Also, there were newcomers to the market that helped eat up vacant space, including At Home, Floor & Décor, and PGA Superstore. However, even the recent proliferation of viable retail replacements hasn’t been enough to fill all the vacancy built up over the past 10 years.
So landlords reached beyond general merchandise and grocery prospects and actively pursued entertainment venues - not only more traditional movie theaters, but also trampoline parks, bowling venues, adventure parks, and escape rooms – as well as medical uses and fitness centers. These tenant types have one common advantage over traditional retail tenants: what they provide to fulfill customer needs and desires cannot be purchased online; they’re “gorilla proof” (as in the 900 lb. variety whose name begins with an A).
Growth in these retail tenant categories is clearly evident when we review the annual results within our proprietary GRIIDTM retail database. The Health & Fitness category has been the most consistent winner for more than a decade with respect to square footage gains in Eastern Massachusetts/Greater Boston. Going back as far as 2007, this category has been consistently ranked in the top five. In fact, in the past ten years it’s made it into the top three in all but one year.
In reviewing the vacant spaces over 10,000 square feet that exist across all three KeyPoint Partners GRIIDTM regions, which includes just under 400 units, we identified 29 spaces that have commitments from tenants. While these new tenants come from a variety of categories, seven come from the Entertainment category, including four trampoline parks of various brands. Also included are a movie theater and a Dave & Busters. There also will be five Health & Fitness tenants added later this year and early next year, including three Fit Factory locations. While there are no spaces larger than 10,000 square feet with medical use commitments thus far, there are 10 commitments for smaller units, including urgent care, physical therapy, dental clinics, and other doctors’ offices. The remaining larger format boxes are earmarked mainly for grocery, pharmacy, and restaurant uses, although there are commitments for a number of these spaces from Target, Marshalls, and Ulta Beauty, all dominant retailers within their respective merchandise lines.
The telling point in all of this is that there are opportunities out there for landlords to fill vacant retail space, but it’s best to find the kind of tenant that is Amazon-proof…in other words, avoid the big gorilla!
Bob Sheehan, Vice President of Research