Population growth leads retail expansion out of the recession.
New Hampshire has a big story to tell: a lower than average unemployment rate, low poverty and crime rate, high median household income and a well-educated population. We are among the healthiest and safest states in which to live. All of these factors contribute to continued population growth which will drive the goods and services sectors. New Hampshire also benefits from its proximity to Massachusetts and Maine as well as Canada whose shoppers are eager to take advantage of the absence of a sales tax.
Prior to 2009, the Northern New England retail market was vibrant and active. However, retail expansion in the market came to a halt in 2009 and 2010 while the economy tried to dig itself out of stagnation. This year has seen a moderate uptick in activity both from a local and national perspective.
Demand for retail space in northern New England is slowly returning. For the past several months, national retailers have been focusing on major metropolitan markets rather than peripheral markets. If retailers have a limited open to buy, chances are smaller cities such as Portsmouth may not be on their initial target list for expansion.
However, quality retail space is continually being absorbed. An “A” location — often near the mall or in the big box corridor — usually does not sit vacant for much more than a year.
There have been several cases of reabsorption in the past couple of years in the southeastern New Hampshire market. Home Goods took over the AC Moore space at Durgin Square in Portsmouth. Dollar Tree occupies a portion of the former Staples store in the D’Angelo’s Plaza on Woodbury Ave. in Portsmouth. Furniture Forever has also joined Dollar Tree in that plaza. Ocean State Job Lots moved into the Circuit City building across the street on Woodbury Avenue. Sprint and Batteries Plus are now tenants in the newly renovated former Tweeter building in Newington. McKinnon’s Market from Massachusetts is opening in the former Shaw’s Supermarket space at Southgate Plaza on Route 1 in Portsmouth, joining new tenants Shio (a Japanese restaurant) and Namco. Philbricks Fresh Market opened its second specialty grocery store in a former Rite Aid location in North Hampton. Market Basket opened a 75,000-square-foot store in Brickyard Square in Epping. O’Neil Cinemas is opening a 40,000-square-foot, 1,800-seat theater also in Brickyard Square. Sleepy’s and Famous Footwear joined the Kohl’s Plaza in Seabrook. Pet Life and Bootleggers joined the Staples Plaza in Stratham. Five Below is at The Crossings at Fox Run in Newington. Speaking of Fox Run, Simon Property Group took over the leasing, management and marketing of the mall, anchored by Macy’s, JC Penney and Sears, from Jones Lang LaSalle. Vacant spaces have opened up opportunities for smaller local tenants around the region, filling vacancies in strip plazas and various downtowns.
Most large retailers that have left the market have only helped their competition further secure their dominance in the marketplace. When AC Moore and Circuit City departed the Portsmouth trade area, Michaels Stores and Best Buy captured their customer base and now own their respective categories.
Southern New Hampshire has been fortunate that the economy was not impacted as severely as other areas around the country and that the population growth has continued to increase. Many communities have experienced double-digit percentage growth primarily due to the availability of affordable housing and land, reasonable cost of living and accessibility to both urban markets and recreational areas. The quality of life factor is one of the major driving forces for people moving into the state, many of whom have high discretionary income.
Property values generally have declined an average of 10 percent depending on the location and type of real estate. With banks loosening up slightly with their financing resulting in more buyers/investors in the market, this figure should begin to decrease to close to pre-recession prices and/or rates.
Even within a small market such as Portsmouth, rental rates can vary greatly.
Downtown rates are typically in the low $20s to low $30s per square foot NNN, depending on the size, quality of location, and whether it is second-generation space or new construction, among other factors. Near the mall, rates can vary from mid-teens to high $20s. Along Route 1, rates are typically in the low to mid-teen range. We expect those to remain steady for the foreseeable future.
On the development side, Target has overcome its legal hurdles and is planning to open a store on Route 1 at a DDR development in border town Seabrook, New Hampshire. This project will continue to drive the retail in that market which has continued to perform at a high level.
We are in the early stages of a slow-growing rebound, however, it could be another 5 to 10 years before we see a full recovery. The manufacturing sector has not added as many jobs as people had hoped and the residual ramifications trickle down from there. Having said that, New Hampshire did create 10,000 new jobs last year. The tourism sector alone employs 67,000 people. Other growing industries include healthcare, biotechnology, telecommunications and robotics.
Consumers need to feel confidence that the economy is continuing to grow, albeit incrementally. As the national economy begins to right itself, this will have a positive effect on the regional economy, barring unforeseen circumstances.
We are fortunate here in New Hampshire to have an abundance of natural resources such as the seashore, lakes, mountains, and national parks which will continue to attract tourists and visitors from all over the country and around the world who spend an estimated $12 billion annually. This should lend some assurance to retailers statewide that New Hampshire remains a terrific place to do business.
— Jody Skaff is a retail services broker with Portsmouth, New Hampshire-based The Kane Company.