Retail inventory in Southern New Hampshire totaled 29.8 million square feet in 2018, a nominal gain of 42,900 square feet from 2017. Vacancy increased 41,200 square feet, equating to a vacancy rate of 9.3 percent compared to 9.1 percent last year.
The higher rate can be mainly attributed to closings by Toys ‘R’ Us (four namesake stores and two Babies ‘R’ Us stores) and Walmart (two Sam’s Clubs).
Offsetting these closings were openings that filled several large vacancies. Three vacant Sports Authority stores were occupied by HomeGoods, Sierra Trading Post, Cost Plus World Market, Guitar Center, Party City and DSW. BJ’s Wholesale Club opened in the vacant Sam’s Club in Manchester.
Robert Sheehan, KeyPoint Partners
A vacant center in Merrimack, now known as Merrimack 360, is under redevelopment. Planet Fitness opened there and an Altitude Trampoline Park is planned. Other announced tenants include Dollar General, Great Clips and The Thirsty Moose Taphouse. As a result of these changes, absorption was flat for the year.
The retailer adding the most space in the region was BJ’s Wholesale Club, which opened 108,900 square feet in Manchester. Cardi’s Furniture and NH1 Motorplex Indoor Karting were next, filling space at Seacoast Shopping Center in Seabrook.
Sam’s Club, Toys ‘R’ Us, and Babies ‘R’ Us vacated the most square footage, a cumulative 452,500 square feet. Sam’s Club closed two stores. Metro PCS added three units, the most of any retailer.
Sbarro, Cabinet Depot, and Orangetheory Fitness tied for second with two new locations. Subway reduced its store count by six. Burger King, Teavana and Best Buy Mobile all closed three.
Entertainment Expansion
The category that expanded the most was entertainment, adding 101,700 square feet, more than double the gain of restaurants, which finished in second place. Several entertainment venues added space, including a 22,000-square-foot Cowabunga’s in Manchester, joining Chunky’s as part of the Lowe’s redevelopment. Other tenants in that category include NH1 Motorplex Indoor Karting in Seabrook, Kids World in Salem and Altitude Trampoline Park in Pelham, all absorbing existing vacancy.
Hobby, toy and game shops experienced the largest decline in space due to closing of Toys ‘R’ Us locations. The category lost a net 140,400 square feet.
Gift, novelty and souvenir shops came second in vacancy growth. Equipment rental ranked third while grocery came in fourth, largely attributed to The Fresh Market closing in Bedford.
Beauty salons and services led all categories in store count growth, netting 16 new locations. Hair and nail salons, massage spas, tattoo parlors, and eyebrow threading represent the bulk of new additions. Medical and dental services added 11 units. Smoke shops came in third with eight stores.
Gift, novelty and souvenir shops contracted by 11 stores, more than any other category. Grocery stores followed with a loss of eight locations.
Rising Vacancy
While there may be obvious reasons for the rise in vacancy this year, it doesn’t explain the fact that brick-and-mortar retailers and landlords remain under pressure to defend their turf from the onslaught of
e-commerce. Walmart, for instance, is making strides with a huge capex investment in internet sales enhancement and the acquisition of online retailers.
Walmart and Target have joined Google to drive the e-commerce component. Target and retailers such as Costco, Kohl’s and Walgreens are utilizing Google Express.
While shopping center development was at a near standstill, big-box vacancies were readily absorbed by growth-minded retailers. With its Amazon-proof characteristics, entertainment is becoming a go-to category for development or
vacancy replacement.
In addition to NH1, Altitude Trampoline Park, Cowabunga’s Bouncy House, Kids World and Cheers Poker Room & Casino opened in the region.
With the region continuing to experience significant absorption of vacant space, it’s clear that tales of a retail apocalypse are exaggerated. Southern New Hampshire will also continue to see the shift toward online shopping. Many sophisticated retailers are forgoing physical growth to focus on enhancing the online experience.
Shopping center developers need to adjust to the digital world, and redevelopment projects in 2018 show that the call to exercise caution has not gone unheeded.