Winners and Losers in Connecticut Retail
The retail market in Connecticut is alive and well. Sure it’s changing but what industry doesn’t experience change? There are numerous retail categories that continue to post healthy sales while also keeping their new store counts in a growth trajectory. Other categories will adapt to consumer trends and stay relevant in the world of brick and mortar.
As we close 2017, we see that traditional shopping centers, especially grocery-anchored centers, are the solid performers in the sector. The “services” or “daily needs” category of retail continue to flock to these centers mainly because of consumer routine. The “services/daily needs” category includes health/fitness, traditional sit-down restaurants, quick-service restaurants, pharmacies, pet supply retailers, wireless communications, medical (walk-ins) and banking.
Traditional neighborhood centers are becoming more conscious about merchandising with this specific category while trying to avoid deals with the more risky retail categories, such as off-priced apparel.
The big-box power centers and the centers with large chunks of vacancy are another story, and there will be winners and losers. Geography plays a big role here and it’s not the dead-end road that some suggest.
Over the past 18 months, my team’s exclusive leasing portfolio has had two Kmart closures in two separate and distinct markets. Both were well-placed centers. The first was a 100,000-square-foot box that will soon be home to a new Shop Rite with the balance of the space all but spoken for with notable retailers. The second vacancy came to us recently in the form of a 60,000-square-foot over 60,000-square-foot box. I am pleased with all the activity thus far and can say with certainty that this box will be filled.
The winners are typically owners with well-placed centers with some flexibility with deal terms. The losers will be the boxes sitting in markets that are simply too rural.
What about Specialty Retail?
There are many questions still to be answered in the market: What is happening to “high streets” in Connecticut? How is the SoNo Collection (GGP’s new South Norwalk mega-mall) going to impact the market?
Connecticut is a small state and, from my perspective, I only count three destinations that have a large enough mix of premium and luxury-branded retail to be considered “high street.”
Retailers are happy in the Westfarms Mall in Farmington. One could argue that this mall has a trade radius of 20 to 30 miles. If there is a need for premium or luxury goods, a consumer residing in and north of New Haven County would consider a trip to this mall. There’s no competition to speak of and it is doubtful we’ll see a competing project developed any time soon.
However, the other two “high street” nodes in the state do have competition. Greenwich Avenue in Greenwich and Main Street in Westport have battled over the years for specialty retailers that only need one store to service lower Fairfield County. Greenwich Avenue almost always wins that battle but Westport’s Main Street has remained relevant with a healthy mix of premium brands with some luxury stores sprinkled in.
While both streets share the same New England street-front charm, Greenwich Avenue features more products and has far more immediate population density. Although there’s still activity and new deals in both markets, rents have certainly peaked and finding candidates for a vacancy in these markets has become more difficult over the last few years. These brands might be forced to adapt to consumer trends and they are absolutely susceptible to harm from e-commerce. It will be interesting to see what happens in the years ahead with both of these important Connecticut submarkets.
Certain sectors might be more stable than others, but traditional brick-and-mortar stores are alive and well in Connecticut. Brands will adapt to keep consumers coming to their stores for a new type of shopping experience. The best is yet to come.
— By Jason Wuchiski, executive vice president and partner, RHYS. This article first appeared in the December 2017 issue of Northeast Real Estate Business.