News & Trends

Boston strong: What’s fueling Boston’s retail resurgence

Posted by: David Salvage David Salvage
on June 6, 2013

On Memorial Day, I visited the Boston Marathon memorial in Copley Square. Sorrow was the overwhelming feeling after seeing the makeshift memorial with the many banners, toys, and seemingly thousands of pairs of sneakers. It was hard not to relive the nightmare-like story that occurred on that afternoon and how all of the innocent families were impacted. It was so very sad.

Boston Marathon memorial

IN MEMORY: The Boston Marathon memorial in Copley Square

But once leaving the memorial, the environment was much different. The only other sign that anything had happened near the marathon’s gold-striped finish line was the Forum restaurant and bar that has yet to reopen. Boylston Street was packed with consumers, some with shopping bags while others were having their way at the local eateries. The atmosphere was vibrant. Boston is resilient, was my new thought. Boston is dynamic. Boston is strong.

Boston’s stronghold

There are many other areas where you can see Boston’s strength, beyond the city’s comeback after the marathon bombing. Boston’s retail sector especially is continuing to resurge. Redevelopment and development of high-quality real estate are creating value for landlords through new leasing.

Helping fuel Boston’s comeback are availability, rental, and unemployment rates, which far outpace U.S. averages. Availability in Greater Boston is 9.8 percent, compared to the national average of 12.5 percent, according to CBRE Global Research. Likewise, rental rates are $15.81 per square foot in Boston versus $14.48 per square foot nationally, according to Costar; and unemployment is 5.7 percent versus 7.5 percent, according to the U.S. Bureau of Labor Statistics.

To be more specific, Webster Square, Kimco’s 176,148-square-foot shopping center in Nashua, N.H., offers a great redevelopment example in the Greater Boston market. And as for development, one just needs to look under the hood to see the breadth of activity that is occurring in the marketplace.

Redevelopment: The Webster Square story

Webster Square is a microcosm of the growing redevelopment of quality assets that is occurring in the Greater Boston area. We’ve restructured the buildings and tenant mix to comprise the asset with all strong national retailers that are attracting significant foot traffic and making the center a predominant shopping destination in the area.

The redevelopment phase started in 2010 when Office Depot closed its doors at Webster Square. Shortly thereafter in early 2011, DSW relocated into the Office Depot location, bringing along its new prototypical store design. This set the stage for Trader Joe’s opening in half of the former DSW premise in July 2012, which is the retailer’s first New Hampshire location.

Webster Square Ulta Trader Joes

NEW RETAILERS ON THE BLOCK: Trader Joe’s and Ulta are two of Webster Square’s newest tenants

The Trader Joe’s deal attracted the likes of Ulta (occupying the other half of DSW) and T.J. Maxx, which both opened in March 2013. A month later, Five Guys Burgers and Fries opened in a portion of a 4,300-square-foot vacancy, and Moe’s Southwest Grill is planning its opening in the remaining portion in a month’s time. Meanwhile, Verizon renewed its lease and finished a complete interior and exterior store remodel. In addition, more than a handful of other tenants have renewed their leases during the redevelopment phase, all at substantial rent increases.

Webster Square Michaels TJ Maxx DSW

MORE TO THE MIX: T.J. Maxx joined the Webster Square tenant mix this past March

There are other opportunities in Webster Square’s pipeline that we are working through to add even more value. Currently the asset is yielding double-digit returns (NOI versus book value). Couple this with the current low cap rate environment of high-quality assets in the Boston marketplace and the project tells a nice value-add and return story.

Boston development trends

As a result of the Great Recession, nearly all retail development projects across Boston, and for that matter the country, came to a screeching halt. Projects were either scratched (many given back to the lender) or placed on hold.

Property Snapshot: Webster Square

Site Information
Location: Nashua, N.H.
MSA: Manchester-Nashua
GLA: 176,394 SF
Anchor Tenants: David’s Bridal, Guitar Center, Kids R Us, Michaels, Modell’s, T.J. Maxx, Toys “R” Us, Trader Joe’s, Ulta
Leasing Agent: David Salvage
Area Demographics* (3 miles)
Population: 35,538
Avg. HH Income: $89,796
Households: 13,937
Aerial View

Webster Square aerial view

But five years later, the Boston retail market now has enough sizzle — mainly from tenants’ willingness to pay enough rent to justify land and site costs — to start building again. It’s not just one or two small projects scattered across the market. It’s a pipeline full of exciting retail developments, ranging from traditional grocery-anchored strip centers to a massive downtown revitalization play.

Five major projects are slated to open within a year. Below is a list of these projects. (The square footages cover only the retail component of these projects. Some projects are mixed use and have greater GLA.)

  • Burlington Park. Burlington, Mass.; anchored by Wegmans; 300,000 square feet
  • Highland Commons. Hudson, Mass.; anchored by Market Basket, Lowe’s, and BJs; 700,000 square feet
  • Chestnut Hill. Newton, Mass.; anchored by Wegmans; 300,000 square feet
  • MarketStreet Lynnfield. Lynnfield, Mass.; anchored by Whole Foods; 680,000 square feet
  • 1265 Main. Waltham, Mass.; anchored by Market Basket; 180,000 square feet

Four other development projects will take more time, mainly because they are larger in scope (by GLA and infrastructure) and are in more urban settings, making these developments more complex. These include:

  • Seaport Square. Boston; over 1 million square feet
  • Quincy Center. Downtown Quincy, Mass.; large-scale downtown redevelopment; 695,000 square feet
  • Assembly Row. Somerville, Mass.; outlet users; 500,000 square feet
  • Westwood Station. Westwood, Mass.; anchored by Wegmans and Target; 550,000 square feet

Overall, Boston’s vital signs are strong and momentum is positive. It has demonstrated its resiliency in the face of economic setback, and most recently, a national tragedy. Continued growth in Boston will be driven through the redevelopment and development of high-quality real estate assets, coupled with increased interest from strong retailers who want to build their business in this great city.

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