Thursday, December 19, 2019

KeyPoints 2019: Our Year In Review

It’s the end of another KeyPoints publishing year. Here’s a recap of topics on which we’ve commented in 2019 - with some additional thoughts from Bob Sheehan, VP of Research. Stay with us in 2020 to see where these stories go:

January: 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...that serve the daily needs of nearby residents. NOTE: And remember, landlords...Amazon-proof tenants!

February: Where to Locate Your Next Store So you want to know where to locate your next store? When it comes to determining which site has the highest potential, there are a number of factors to consider. There’s no question that physical site characteristics...are important variables in the decision making process. However the utmost consideration should be given to demographics and competition. NOTE: I forgot one! A good store manager.

March: How Bad is the Mall Business These Days? It will be two years in May since Credit Suisse came out with its bold prediction that up to 25% of regional enclosed malls would close by 2022…Many skeptics rejected the idea, saying...that dire calculation was way overblown.  We’re not even halfway to that 2022 end date, yet it’s starting to feel as if that forecast by Credit Suisse may not be so unreasonable. After all, the ongoing brick-and-mortar fallout experienced at regional malls is showing no sign of abatement. NOTE: Nothing has happened to change the dire trend so far.

April: Any Takers for Toys R Us Space Yet? It seems that, on an annual basis, we see another national big box chain fall to online competition, high debt, and, in some cases, mismanagement…This means that every year the real estate industry is searching for replacements, sometimes successfully – and other times not. NOTE: It shouldn’t be surprising if we see another one or two Toys R Us pop-ups.

May: Preview: KeyPoint Report for Eastern MA 2019 Total inventory in Eastern Massachusetts experienced a modest decline this year to 196.0 million square feet, a drop of 0.2%...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…Store closings and liquidations counterweigh on the region and hinder consistent absorption gains. Without the repurposing of space, conditions would be of even more concern. NOTE: Currently the vacancy rate has ticked higher, to 9.7%.

June: Preview: KeyPoint Report for Southern NH 2019 The retail inventory in Southern New Hampshire included 29.9 million square feet in 2019, indicating a modest increase of 107,800 square feet from a year ago. However, vacancy rose by 130,600 square feet, increasing the vacancy rate to 9.7% from 9.3% last year.  NOTE: It appears the vacancy rate is trending back up.

July: Vacancy: The New Norm Only a year ago it seemed that the worst was behind us, with retail store closings down dramatically: according to tracking by Coresight Research, there were 5,524 store closings in 2018, down 30% from an all-time high of 8,139 in 2017. Well, records are made to be broken…Coresight reports that 7,062 stores have been closed by U.S. retailers so far this year, and if this pace continues, the research firm projects more than 12,000 store closings by year end, blowing away the 2017 high. NOTE: Still on schedule for a new record.

August: Greater Hartford, CT Report Preview Total retail space in Greater Hartford currently stands at 37.6 million square feet, an increase of 166,300 square feet from last year. The modest change is primarily attributed to a low level of new development offset by a number of conversions to non-retail space…However, the region still could not escape a slight uptick in the vacancy rate from 10.6% to 10.8%. NOTE: Since the Report’s release, the vacancy rate has trended up to 11%.

September: JC Penney: What Now? JC Penney has been on a downward trend, experiencing a continuous erosion of market share…It has gone through four chief executives, most notably Ron Johnson, who came over from Apple after transforming Apple retail…Unfortunately Johnson couldn’t successfully reboot Penney’s, and he proceeded to run the ship into the ground…well not quite. NOTE: Q3 report shows a loss narrower than expected, but sales were still down 10.1% v. last year.

October: The Halloween Issue A bit of a bright spot in the midst of continuing upheaval in the retail world: even though they’re searching for ideas online, Halloween shoppers still plan to visit actual stores for their costumes, candy, and party purchases, at least according to the National Retail Federation’s Halloween Data Center. NOTE: Party City reported a 4.9% drop in October comp sales, and sales at its Halloween City stores fell 20.8%.

November: The Replacements: Avoid the Big Gorilla We all recall the days of large format retailers such as Linens ‘N Things, Circuit City, Borders, Filene’s Basement, Office Max and, more recently, Sports Authority and Toys R Us. There are many more we could add to this list…All large format vacancies 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? NOTE: Entertainment, Fitness, and non-retail continue to be the best alternatives.

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/Research  Marketing Mgr.

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