Southern New Hampshire Posts Lowest Retail Vacancy Since 2008
Retail inventory in Southern New Hampshire totaled 29.8 million square feet in 2017, a modest decline of 59,400 square feet, or 0.2 percent, largely due to retail demolitions and conversions to non-retail space, including auto dealerships, office, and residential. Some former retailer spaces that have been demolished include the 17,800-square-foot Grenon Trading Co. in Bedford, the 10,700-square-foot New Hampshire Liquor & Wine Outlet in Salem, and the 8,400-square-foot Weathervane Restaurant in Salem.
The big story in the market is the notable decline in vacancy. Several retailers absorbed large vacancies, reducing unoccupied space by more than 400,000 square feet, and cutting the vacancy rate from 10.5 percent in 2016 to the current level of 9.1 percent. Larger retailers who filled vacant space include Chunky’s Cinema in Manchester, which opened in a portion of the former Lowe’s store; Hobby Lobby in Nashua, filling a vacant Market Basket at Somerset Plaza; and Ocean State Job Lot in Seabrook, which opened in the former Walmart at Southgate Shopping Center. As a result of relatively stable inventory and considerable decline in vacancy, the region finished the year with positive net absorption of 352,400 square feet. There’s been no change in the top 10 largest regional markets: Nashua continues to rank first with 6.3 million square feet of inventory; Manchester follows at 5.3 million square feet; and Salem is a distant third at 3.9 million square feet.
The retailer adding the most space was Mattress Firm, which converted its acquired Sleepy’s locations to add 59,700 square feet to the region. Conversely, that sale resulted in Sleepy’s closing the most space. Mattress Firm also led the region in new stores, adding 10 units to its five existing locations. Cricket Wireless, with three new locations, and Sprint, opening two stores, were the only other retailers gaining multiple stores.
Among retail categories adding the most space, we saw a virtual tie between “amusement/recreation” retailers and “hobby/toy/game shops,” with both categories gaining 57,300 square feet. Another category adding more than 50,000 square feet was “health & fitness services,” which continued its upward trend. “Family apparel” retailers contracted the most space, largely from the closing of Bob’s Stores in Salem. “Sporting goods” was also high on the list of closings. Regarding store count, “health & fitness” retailers led the way, netting 15 new units. The “grocery” category ended the year in second place, adding seven stores.
Despite current rumblings of a retail apocalypse, things have been pretty good in Southern New Hampshire in 2017. Vacant big box found users after sitting idle for years: new tenants partially absorbed a Walmart box, as well as former Shaw’s, Market Basket, Lowe’s, Hannaford, and Sports Authority spaces. New players that entered the region (or will enter by the end of the year) include Chunky’s, Ocean State Job Lot, Cardi’s Furniture, Hobby Lobby, and others. Together these tenants have reduced vacant space in the region by 346,600 square feet. The vacancy rate came down to 9.1 percent. The region hasn’t produced a vacancy rate this low since 2008, when the figure stood at 7.4 percent.
While this was a step in the right direction, brick-and-mortar retailers shouldn’t be too comfortable. Online retail has created a sea change in the way people shop. One can only imagine what Amazon has planned for Whole Foods Market, but it’s a concern for the grocery industry. We’re also coping with a new generation of shoppers for whom shopping online is the norm. If retailers are unable to offer a satisfying omnichannel experience, they won’t retain these customers. While no brick-and-mortar retailer is immune to online shopping, beauty and cosmetics retailers, auto parts chains, and off-price retailers have managed to stay out of harm’s way. On the bright side, job growth and low unemployment have provided us with a relatively healthy economy, which should result in increased spending potential to help weather the storm.
— By Robert Sheehan, vice president of research, KeyPoint Partners. This issue first appeared in the December 2017 issue of Northeast Real Estate Business magazine.