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E-commerce Impacts Retail Market in Eastern Massachusetts

Retail vacancy levels declined in 2012 and 2013 in Eastern Massachusetts following several years of rising vacancy rates during the Great Recession. But since 2013, vacancy rates have been on the rise as shopping habits continue to tilt toward online options. In 2016, retail inventory gained modestly, reaching 194.2 million square feet, an increase of 0.5 percent, although no major center opened during the year. The region added 488,800 square feet of vacant retail space, and the vacancy rate increased to 9 percent. Big box closings — notably Sam’s Club, JCPenney, and Kmart — and the departures of Citibank and City Sports, were the primary cause of increasing vacancy. Nonetheless, the region experienced positive absorption, netting 573,600 square feet.

Robert Sheehan,

Robert Sheehan, KeyPoint Partners

As reported in The KeyPoint Report: Eastern Massachusetts/Greater Boston, Boston and Cambridge ranked one and two in the list of top 10 towns by retail square footage. Abington tops the rankings for lowest vacancy rate. Eight of the top 10 towns with the highest vacancy rates are repeats from the previous year; new additions include Wrentham, site of the 135,000-square-foot Wrentham Crossing, which is vacant and currently for sale.

The under-2,500-square-foot size classification remains the largest segment of the market, and the vacancy rate in the category increased from 13.5 percent to 14.7 percent. Independents represent the majority of closings, although RadioShack, Curves for Women, Citibank, and 7-Eleven contributed.

The only size classifications that showed improvements in vacancy rate were 25,000-49,999 square feet and 50,000-99,999 square feet. New openings contributing to the improvement included LA Fitness in Natick, Big Lots in Plymouth, TJMaxx in Boston, Ocean State Job Lot in Taunton, Primark in Boston (their first U.S. store), and Round 1 in Taunton.

In terms of expansion, the 160,000-square-foot Target at Landmark Center in Boston was the most space added by any retailer. Life Time Athletics and Wegmans in Westwood ranked second and third. Dollar Tree added 100,000 square feet, the only small store format high on this list. Webster Bank led by store count growth, adding 16 units. Dollar Tree followed, netting 11 locations.

Grocery stores led all categories in square footage gain, resulting from the openings of Wegmans in Westwood, Price Rite in Stoughton, and Shop n’ Save in Ayer. The medical and dental services category ranked second. In terms of unit growth, medical and dental services led with 25 units, while telephone equipment and family apparel categories each added 19 stores.

The retailer closing the most space was Sam’s Club, phasing out its last two stores in the region, a combined 255,200 square feet. JCPenney closed its Natick Mall store, its largest in the region; Wegmans will be the Penney replacement. Kmart and Cardi’s Furniture closed stores of 118,800 and 111,700 square feet, respectively.  Citi­bank closed 15 locations. Declining categories are headed by sporting goods — which lost City Sports, East Coast Alpine, and Sports Authority — and restaurants, which declined by 131,000 square feet.

New development is occurring at a snail’s pace, as retailers allocate more capital expenditures toward omni­channel retailing, at the same time asking landlords for reductions in size and rent. Although vacancy rates are inching up, entertainment users are absorbing significant space. Patriot Place in Foxboro added Splitsville and 5 Wits, among others, and Kingston Collection (formerly Independence Mall) has added K1 Speed, Sky Zone, Billy Beez, and Pinz Entertainment. Dave & Buster’s, Round 1, and Wamesit Lanes are also expanding. Fitness clubs are expanding. Fit Factory opened two units and Life Time Athletics added the largest center in the region. Super­markets are also filling significant space:  Whole Foods replaced Market Basket in Westford, Price Rite filled a Shaw’s vacancy in Stoughton, and Weg­mans will replace JCPenney in Natick. In addition, Wegmans has announced a Medford store as part of the Meadow Glen Mall redevelopment.

It’s anyone’s guess when the impact of omnichannel retailing on brick-and-mortar stores will be fully realized. In the meantime, developers should minimize risk by scaling centers appropriately and assembling a tenant mix that will adapt to the changing environment.

— By Robert Sheehan, vice president of research at KeyPoint Partners. This article first appeared in the February 2017 issue of Northeast Real Estate Business.

Content Partners
‣ Arbor Realty Trust
‣ Bohler
‣ Lee & Associates
‣ Lument
‣ NAI Global
‣ Northmarq
‣ Pavlov Media
‣ Walker & Dunlop

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