Q2 2012 Boston, Massachusetts Retail Submarket Trends

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Q2 2012 Boston, Massachusetts Retail Submarket Trends

Central Boston

  • Reis reports the second quarter 2012 vacancy rate in the Central Boston submarket, which includes both the City of Boston and nearby communities, is 1.1% for 3.4 million square feet of anchor space, lowest among the seven submarkets, and 6.4% for 3.3 million square feet of non-anchor space, the second lowest. The average asking rent is $15.65 psf for anchor space, and $27.80 psf for non-anchor space. The latter is the highest metrowide.
  • The overall vacancy rate slipped 10 basis points during the second quarter to 3.7%, and is up 10 basis points from a year earlier. Rents moved up 0.2% by both measures during the quarter, with the effective average at $25.31 psf. Rents have fallen 0.3% by both measures from a year earlier.
  • Although talk of more mixed-use development is heating up, the 21,000-square-foot 50 Post Office Square mixed-use project remains the only project under construction. It has an expected December 2012 completion date. The 90,000-square-foot Fenway Center mixed-use project is expected to break ground in October. The Downtown Crossing Tower, with 230,000 square feet of retail, is expected to finally break ground in January 2013 after years of delays.
  • Community-neighborhood center development has already picked up. The 115,000-square-foot first phase of the redevelopment of the Chestnut Hill Shopping Center community center in Chestnut Hill broke ground in May 2012 for completion in late 2013. In April 2012, the 45,000-square-foot Main Street Marketplace neighborhood center broke ground in Waltham.
  • “Walgreens will unveil a new ‘concept’ store at the Porter Square Galleria in Cambridge next year,” Marcus & Millichap reported. “The two-story layout will transform the traditional drugstore into a health and daily living space that will offer fresh food. Further, the company will also open a 24,000-square foot flagship store at Downtown Crossing this fall.”
  • “There is talk that Target will be opening an urban store at Fenway Triangle and that Faneuil Hall’s new owner will be adding hotel space to the area,” according to Cushman & Wakefield.
  • “Australian skin care company Aesop will open a Newbury Street boutique in August, its third US location. Aesop has stores in New York, Australia, Paris, London, Zurich, and Asia,” according to Keypoint Partners. “Furniture and accessories retailer Room & Board has signed a lease for an entire 39,000-square-foot building at 407 Newbury St. in Boston, the chain’s first New England shop… Lululemon Athletica has purchased the building at 337 Newbury Street where it opened its second Hub store in March.”
  • “Marimekko, the Finnish textile and clothing design company, will open its third US store and first Boston store in July, a 3,200-square-foot store at 140 Newbury St.,” according to another report from Keypoint.
  • “Prime shopping corridors in the Back Bay, such as Newbury and Boylston streets, remain popular,” according to Northeast Real Estate Business. “In this area, retailers see demand 7 days a week because the Back Bay has a large office and residential population. It also has a tourist component,” according to one market watcher. Another put asking retail rents on Newbury Street at $80 per-square-foot and higher. “There are plenty of [Newbury Street] deals being done that are well north of $100 per-square-foot, but that’s one of the strongest markets.”
  • “Microsoft will open a superstore this summer at the Shops at Prudential Center, across Boylston St. from the Apple Store, in the 7,000-square-foot space that once housed Ann Taylor,” according to Keypoint.

North

  • In the North Shore/Route 128 North submarket, the second quarter vacancy rate for 3.5 million square feet of anchor space is 6.1%, and the average asking rent is $15.76 psf, according to Reis. For 2.5 million square feet of non-anchor space the vacancy rate is 9.8%, and the average asking rent is $21.91 psf.
  • The overall vacancy rate increased 10 basis points to 7.6% during the second quarter, and is up 80 from a year earlier. Both the average asking rent and the average effective rent increased 0.6% during the quarter, the latter to $19.60 psf. The year-over-year gains are 1.3% and 1.1%, respectively.
  • The 300,000-square-foot first phase of the Third Avenue community center in Burlington is expected to break ground in November.
  • “Davio’s Northern Italian Steakhouse and Yard House restaurant will be tenants of MarketStreet Lynnfield, a 680,000-square-foot mixed-use project under development north of Boston,” according to Keypoint Partners. “Whole Foods, the Legal C Bar restaurant, and Kings are the only other announced MarketStreet tenants.”
  • “Celebrity chef Bobby Flay will open a 72-seat Bobby’s Burger Palace at the Burlington Mall in Burlington, Flay’s first Massachusetts restaurant,” according to Keypoint.
  • For the North/Merrimac River Valley submarket, Reis reports a second quarter vacancy rate of 6.2%, second highest among the submarkets, and an average asking rent of $13.33 psf, for 2.8 million square feet of anchor space. For 1.5 million square feet of non-anchor space, the vacancy rate is 13.2%, also the second highest, and the average asking rent is $18.39 psf, second lowest among the submarkets.
  • The overall vacancy rate increased 40 basis points to 8.6% during the quarter, and is up 170 from a year earlier. Rents rose 0.2% by both measures, with the effective average at $16.67 psf. The year-over-year gains are 2.1% and 1.7%, respectively.
  • Reis predicts the 240,000-square-foot Cornerstone Square community center in Westford will break ground in August. “The property will be anchored by Market Basket, which will occupy 60,000 square feet, and the owner also has commitments from Five Guys Burger and Fries and Panera Bread,” according to Marcus & Millichap. This source reports an earlier groundbreaking and completion.
  • More shops. “Tenants announced for Cornerstone Square, the 238,000-square-foot office-and-retail development under construction at the intersection of Route 110 and Boston Road in Westford, MA, include: Market Basket, National Pet Care and Supplies, Family Eye Care, Dalla Nails, Great Clips, Westford Florist, Ladybird Lingerie, Elements Massage, Premiere Cleaners. Panera Bread, Five Guys Burgers and Fries, and Tutti Frutti,” according to Keypoint Partners.
  • “As the Boston Public Library considers the novel approach of adding retail to its main branch, Mayor Thomas M. Menino is calling for offerings that complement the Back Bay,” according to the Boston Business Journal. “Our goal is to redesign the front of the Johnson Building because it’s a dead spot,” the Mayor said of the 1972 building. “We’d like to bring some liveliness, foot traffic and activity to that section of Boylston Street.”

South Shore/Southwest Bristol

  • The second quarter vacancy rate in the South Shore/North Plymouth County submarket is 7.5% for the 3.8 million square feet of anchor space, highest among the submarkets, and 16.7% for 2.6 million square feet of non-anchor space, also the highest metrowide. The average asking rent is $10.35 psf for anchor space, lowest among the submarkets, and $19.64 psf for non-anchor space.
  • The overall vacancy rate of 11.2% was up 30 basis points from a quarter earlier and 100 from a year earlier. Both the average asking rent and the average effective rent rose 0.1%, the latter to $17.09 psf. The year-over-year rent gains are 2.2% asking and 2.4% effective.
  • Much new space has completed in the Southwest/Bristol submarket in recent years, and the $16.40 psf average asking rent for anchor space there is the second highest metrowide. The vacancy rate for 3.4 million square feet of anchor space is 2.6%, second lowest among the submarkets. The vacancy rate and asking rent for 2.8 million square feet of non-anchor space are 11.8% and $20.96 psf.
  • The overall vacancy rate of 6.8% is up 20 basis points from both a quarter and a year earlier. Rents are down 0.4% by both measures for the quarter and 0.7% by both measures year-over-year, with the effective average at $19.05 psf.
  • “Approximately 1 million square feet of space came online during the last year in Boston, including the long-delayed second phase of the Shoppes at Page Pointe,” according to Marcus & Millichap. “The community center is anchored by L.A. Fitness, and added 196,000 square feet to stock in the Southwest/Bristol submarket in April.”
  • “Construction is under way on the 330,000-square foot Crossroads at 24 community center located at the former Quaker Fabric manufacturing center in South Bristol County,” according to this source. “Nearly half of the $55 million complex will be anchored by a Walmart Supercenter, which is expected to open by the end of the year.” Reis predicts completion in July 2013.
  • In the Southwest/Bristol submarket, according to Cushman & Wakefield, “the stalled Westwood Station project has resurfaced with a new team of five investors leading the development. One hundred thirty acres were purchased for $45 million. There are plans for 500,000 square feet of mixed-used retail, housing, office, and hotel space.” Target and Wegmans are possible tenants of the development which “is being renamed ‘University Station’ due to its proximity to the Amtrak and MBTA Route 128 station.”

West

  • The second quarter vacancy rate in the West submarket is 4.0% for 2.0 million square feet of anchor space, and 4.5% for 2.1 million square feet of non-anchor space, the lowest among the submarkets and by far the lowest in the suburbs. The average asking rent is $16.90 psf for anchor space, highest among the submarkets, and $23.80 psf for non-anchor space, second highest.
  • The overall vacancy rate of 4.2% was down 20 basis points during the second quarter and 120 from a year earlier. Rent gains remained strong, as the average asking rent rose 1.2% and the average effective rent increased 1.3% to $22.24 psf. The year-over-year gains are 2.5% and 2.7%, respectively, with the first half of 2012 accounting for nearly all the increase.
  • The 155,000-square-foot retail portion of the Wayland Town Center community center in Wayland broke ground in May 2012.