Robert Sheehan, KeyPoint Partners
While it was unfortunate to see retail vacancy in Eastern Massachusetts on the upswing during 2014, it was more than offset by new retail construction as major development resurfaced. At year-end, total retail inventory was 191.6 million square feet, an increase from the prior year of approximately 2.1 million square feet. Vacant retail space in the region was up more than 1.3 million square feet, due to major contractions and liquidations such as Building 19, Dots, and Shaw’s Supermarkets. Net absorption ended the year ahead by 712,500 square feet.
The 10 towns with the greatest retail supply remain in place from a year ago with one exception: thanks to new Walmart Supercenter and Sam’s Club locations, Fall River replaced Peabody. The top retail hub is Boston, followed by Cambridge, Natick, Brockton and Framingham. Among communities with at least 500,000 square feet of retail space, five towns broke into the top 10 with lowest vacancy rates: Foxboro, Hingham, Hudson, Danvers, and Everett. Abington remained at the top with a 1.2 percent vacancy rate. Foxborough made the biggest leap — up from 58th last year — as the result of Patriot Place filling significant vacancy, and Ocean State Job Lot opening in the one vacancy left by Bradlees. Eleven towns finished the year with less than 4 percent vacancy. Six towns remain among the top 10 with the highest vacancy rates, including Malden, which had the highest rate at 22.7 percent. Newcomers to the list include Haverhill, New Bedford, Shrewsbury, and Fairhaven.
Vacancy changes by store size show disappointing results. The only category showing improvement was the 25,000- to 49,999-square-foot range, in which the vacancy rate declined from 8.2 percent to 7.5 percent. The remaining size classifications remained stable or showed modest increases — with the exception of the 50,000- to 99,999-square-foot category, where the vacancy rate jumped from 3.0 percent to 6.3 percent, primarily as a result of vacated Building 19 and Shaw’s units. These uninspiring leasing opportunities could continue to weigh on the vacancy rate.
Walmart added 344,000 square feet, the most of any retailer. Party City ranked second due to its acquisition of 24 iParty stores totaling 234,500 square feet of space. Whole Foods ranked third by acquiring five Foodmaster units and opening a store in Lynnfield. Building 19 was the biggest loser, closing 597,400 square feet. Party City added the most units via iParty. Subway was next with the addition of 11 units, followed by Orange Leaf and Metro PCS, both adding nine stores. The Dots liquidation led to the closing of the 16 stores. Building 19 followed with nine closings.
Eating Places heads the list for growth by both space and store count. Amusement/Recreation ranked second in square footage gain. Second place for store count growth went to Food Stores/Dairy Products, thanks to continued growth in “froyo” establishments. Medical/Dental Services added 30 locations for third place. Department Stores topped the list for square foot contraction, which could have been avoided without the Building 19 liquidation. Furniture Stores ranked second in square foot contraction and third in unit contraction. Apparel/Women ranked third in store contraction, largely attributable the Dots liquidation.
Vacancy rates seem to have found equilibrium, as closings of struggling chains offset any strides the region makes in absorbing space. Where vacancy runs high and properties are substandard, vacant units in the region could sit idle for extended periods, particularly in lower-income markets where independent stores are prevalent. However, a number of projects have recently opened, including MarketStreet Lynnfield, Assembly Row in Somerville, The Street in Chestnut Hill, and 3rd Ave. in Burlington, and University Station in Westwood will open soon. Although the long-term impact of e-commerce should never be underestimated, projects like these give us confidence that brick-and-mortar retail is here to stay.