It's been quite a turbulent ride; however, recovery is underway. Although retail inventory in Eastern Massachusetts/Greater Boston showed only slight gains, the decline in vacancy more than made up for it.
At year-end 2012, total retail inventory totaled 189.5 million square feet. The amount of retail space in the region has increased 13.1 percent during the past 10 years. However, the recession took a toll on new development, and we’ve seen only a slight gain of 0.1 percent in the past 24 months. This slowdown has benefited the retail environment by increasing the demand for existing space. Approximately 2 million square feet of unoccupied space was filled during the year, which brought the vacancy rate to 7.8 percent from 8.9 percent a year ago — the largest drop in more than a decade. As a result, the year ended with net absorption totaling 2.05 million square feet.
There wasn’t much movement among the ten largest communities in terms of retail space, although Braintree replaced Leominster at number 10. Boston has the largest amount of retail space, of course, followed by Cambridge. Natick, Brockton, and Danvers complete the list of the top five communities in terms of total retail square footage.
Among towns with at least 500,000 square feet of retail space, Abington has the lowest vacancy rate, followed by Wrentham and Bridgewater. The ranking that no town wants is highest vacancy rate, and moving up to the top spot this year is North Reading, which is followed by Belmont. We need to be cautious in judging the relative retail health of these towns, however, because each contains less than 700,000 square feet of retail space. Of greater concern is Malden, which tied for third with Westborough, although it wasn’t even ranked among the top 10 towns with highest vacancy rates last year.
Vacancy dropped significantly in all categories of retail properties by size. Despite improvement, the vacancy rates of the three smallest size classifications (ranging from 0 to 9,999 square feet) remain in double digits and well above the regional average, and all three have lost market share during the past decade. Conversely, retail units of 100,000 square feet or more have seen market share increase during the decade. Therefore, while the total square footage of retail inventory has increased between 2003 and 2013, the number of retail properties and retail establishments has declined.
Grocery operator Market Basket led retailers in expansion in the region, adding 230,000 square feet, including a 60,000-square-foot unit in Westford, where it already operates an existing unit. In terms of expansion by store count, Subway — now the number one restaurant chain in the world in terms of store count — added 34 units to the Boston metro area.
Number one on the contraction list is Johnnie’s Foodmaster, which closed all 10 of its stores. Fashion Bug closed 10 stores in the region, part of a chain-wide shutdown. Bally Total Fitness also closed its four regional locations. Retailers closing the most stores last year included Bank of America and Fashion Bug. The Upper Crust closed seven of its 16 locations. Other retailers ending operations included Blockbuster, Ritz Camera, Mattress Giant, and Bally Total Fitness.
When it comes to growth by retail category, it was food, food, and then some exercise. Eating places topped the rankings in both incremental square footage and store count. Food stores/grocery stores ranked second in square footage increases. Health and fitness services came in third, and also ranked third in store count growth. Electronics stores experienced the greatest decline in square footage, followed by women’s apparel.
In summary, this was a “rebuilding” year for the region. We can say with caution that while we’re not fully recovered, recovery is underway, and barring another recession, things should feel more normal by this time next year.
— Bob Sheehan, vice president of research, KeyPoint Partners