Retail Rebounds With New Development Driven by Grocers
With all the construction vehicles on retail sites as you circle metro Boston, we can now quantify the retail slowdown attributable to the recession as a three-year window. Never has the local retail market been healthier than it is today. WS Development is under construction with its Whole Foods-anchored Meadowbrook Walk in Lynnfield. The Nordblom Company has begun 3rd Avenue, a Wegmans-anchored lifestyle project in Burlington. Market Basket is well under way at the former Polaroid site in Waltham. New England Development is building its Wegmans project in Chestnut Hill while WS redevelops the former Macy’s further east on Route 9. Also moving forward, though at a slightly earlier stage, is NED’s long-awaited Westwood project. A total of almost 3 million square feet of new high-profile — even iconic — retail space along Boston’s inner ring beltway is now upon us, exactly three years later than originally anticipated.
Notably, grocery is driving all of these larger projects. While traditional market leader Stop & Shop makes only narrowly strategic moves and Shaw’s languishes, grocery chains of a wide range of sizes targeting distinct demographics have inspired development at both the local and regional level. Wegmans, Market Basket, Whole Foods, Price Rite and ALDI are among those driving this growth, eating into the traditional grocers’ market share.
The suburbs don’t have a stranglehold on new retail development and redevelopment. Interior Boston has exciting activity further shifting the urban landscape with WS Development’s retail and entertainment complex proposed in the Seaport, Millennium’s mixed-use project at Downtown Crossing and Federal Realty’s proposed entertainment and outlet transit-oriented development at Assembly Square in nearby Somerville. Existing space in downtown Boston is renting at a premium with occupancy and demand at all-time highs while at Faneuil Hall the Ashkenazy team is breathing fresh air into a sleeping giant.
Naturally, the traditional formula of strong tenant demand and high occupancy is driving the new development and the threshold-setting rents. Greater Boston continues to be among the tightest retail markets in the country with per capita GLA less than half that of many major markets outside of the coasts. After the recession era shutdown of Circuit City, Linens ‘N Things and, more recently, Borders, those spaces were quickly inhaled. Surprising to many, there was limited retailer disposition to follow. The recent Boston Globe report that Whole Foods was buying a half dozen leases from Johnny’s Foodmaster, including some with limited term, is indicative of the seemingly desperate frenzy for space that is under way among growth-oriented retailers across the healthy Northeast. For every Barnes & Noble, Best Buy and Staples that has cut expansion, there is a Nordstrom Rack, HomeGoods or Michaels aggressively pursuing unit growth.
A torrent of activity among small-sized retailers driven by a seemingly endless stream of fast casual concepts along with banks, wireless providers, discount salons and self-serve yogurt franchisees is inspiring the smaller strips proposed around the region. While Panera Bread, Chipotle, Starbucks and Five Guys continue to be leaders, PotBelly, Noodles & Co., Smashburger, B. Good, Boloco, Sweet Greens and Qdoba are among those who have heated up the chase for high quality small space with requisite parking. These tenants have inspired smaller scale high octane developments such as those in Newton and Burlington from Bierbrier Development and Princeton Properties, respectively.
For retail developers that have weathered the three-year downturn, the wait has been worth it with better quality retailers showing more flexibility to obtain the highest-grade space.
— Ben Starr, partner at Atlantic Retail