Retail construction booms, but economy raises doubts
Sparkling new shopping complexes have opened in recent months in Foxborough, Mansfield, Plymouth, and Wareham. Legacy Place, a 675,000-square-foot "lifestyle center," is slated to open next summer in Dedham. The South Shore Plaza in Braintree is expanding, and large retail projects are planned in Hingham, Sharon, Westwood, and Weymouth.
But this wave of suburban retail development is arriving on an uncertain landscape. The real estate market, which was sizzling when the projects were first drawn up, has cooled considerably, and consumers are pinching pennies. Across the country, businesses are struggling, and empty storefronts are becoming a more common sight.
"It's a very difficult retail market right now," said Robert F. Sheehan, vice president of research for KeyPoint Partners LLC, a Burlington-based commercial real estate firm. "This is just my opinion, but I think you're going to see significant vacancies if all of these projects get off the ground.
"It's not the greatest time."
Indeed, vacancy rates at US shopping centers are the highest they've been since the mid-1990s, and mall vacancy rates haven't been this bad since 2002, according to the New York-based real estate research firm Reis Inc.
A recent KeyPoint study found that the overall retail vacancy rate in Eastern Massachusetts (based on square footage) rose slightly to 7 percent in March 2008 from 6.9 percent in October 2006, but that big retailers seem to be weathering the downturn better than smaller businesses. The study showed that over 99 percent of big-box stores were occupied, but that the vacancy rates among smaller stores - under 2,500 square feet - climbed to 9.9 percent in 2008 from 8.4 percent in 2006.
"Within that segment, you have mom-and-pops, and you have national and regional chain stores closing," said Sheehan.
It seems that no sector is immune. The national chain Linens 'n Things Inc. announced in July that it would close three Massachusetts stores, including one in Taunton. Starbucks announced that it was closing coffee shops in Dartmouth, Sharon, and Stoughton.
Smaller independent businesses, meanwhile, can be hurt by the proliferation of giant shopping centers. Book Ends, a locally owned bookstore on North Main Street in Mansfield, is closing because it couldn't compete with online retailers and the Borders bookstore that opened at Mansfield Crossing, a new 383,000-square-foot shopping plaza on Route 140.
In Massachusetts, the amount of unoccupied retail space varies widely from community to community.
The KeyPoint report found the highest retail vacancy rates in Swansea (22.1 percent), Stoneham (17.5 percent), and Lawrence (15.8 percent). Retail vacancy rates for the Globe South region ranged from as low as 1.3 percent in Wareham to as high as 12.5 percent in Foxborough.
In Wareham, Chuck Gricus, the town's former director of planning, said the retail scene has been thriving, especially since the arrival of Wareham Crossing, a 675,000-square foot open-air shopping center that opened last fall.
The plaza, which Gricus described as "booming," is home to big-name tenants such as Best Buy, Target, Borders, and Old Navy. JC Penney will celebrate the grand opening of its store there next weekend.
"Wareham is a regional retail center; people come from all over, and off the Cape to shop here," said Gricus. "Wareham has its share of problems, but retail is not one of them."
On the other end of the spectrum, Stephen M. Costello, Norwood's planning and economic development director, chalks up the town's 12 percent vacancy rate to two large empty properties: the long-dormant Home Quarters Warehouse and the former Decathlon Sports Megastore.
"Those two are substantial vacancies on our Route 1 landscape," said Costello. "We're trying to actively fill them with tenants."
The Home Quarters Warehouse, known as HQ, was part of a national chain of home improvement stores that went under in 1999. The 115,000-square-foot warehouse has been empty ever since, according to Costello. The former 40,000-square-foot Decathlon store has been vacant since 2006.
"With HQ, it's a substantial space for a specific type of use. . . . We're working with the owner to make it permit-friendly and tax-friendly," Costello said.
"It's the larger spaces that seem to be nagging and chronic," he said. "We're in pretty good shape, except for those" two properties.
Costello said the situation in Norwood is still much better than during the 1990s, when several manufacturers left town, Raytheon closed, and hundreds of local jobs disappeared.
When Klein's department store on Washington Street closed in the early 1990s, several other merchants followed. "That really caused a big ripple in downtown," said Costello. By 1998, the town center was left with 18 vacant storefronts and a vacancy rate of 22 percent.
Norwood's downtown has since been revived, said Costello, thanks partly to such initiatives as a sign and facade improvement program, which helped make the downtown area more attractive to restaurants and niche tenants. Costello said the former Klein's site is now occupied by Woodstuff, which sells unfinished wood furniture, and Byblos Restaurant, which is Zagat-rated and serves Middle Eastern cuisine.
The regional boom is evident in Braintree, where big changes are underway at South Shore Plaza. The mall, which opened in 1961, is undergoing renovations and creating a large addition that will include a 150,000-square-foot Nordstrom department store.
A recent visit to South Shore Plaza found more than a dozen empty storefronts. Most of them appeared to be in transition and were covered with "Coming Soon" signs. A mall spokeswoman said that several spaces are undergoing renovations, and that other tenants recently moved to bigger spaces within the mall.
Five new stores - Chipotle restaurant, Teavana tea shop, children's clothing retailer Janie & Jack, Zumiez skateboard and snowboard shop, and Zounds - opened in mall this summer, and two other restaurants - Shrimp Market and Quiznos - will be opening in the food court, according Judy Tullius, the mall manager.
All told, there are "essentially 22 different properties coming into the shopping mix," Tullius said in an e-mail. "And this is all before a new wing opens, featuring Nordstrom."
"Not only is the mall doing major upgrades and improvements," she said, "but the existing tenants are also taking the initiative to remodel and rebrand their stores, while new tenants are seeing what's coming with the mall's expansion and additions and want to be on board."
Nordstrom officials last month hosted a project preview for several minority- and women-owned building contracting firms, according to Nordstrom spokesman Michael Boyd. "Our store is still on track there at the South Shore Plaza, scheduled to open in spring 2010," said Boyd. "We don't have a specific opening date to share with you yet, but we are on track."
Retail development is also humming along in Hanover. On Route 53, the site of the former Decathlon sporting goods store at 1207 Washington St. is fenced off and surrounded by construction vehicles. Bulldozers have removed acres of trees behind the store to make way for a shopping center that will be anchored by Target. The Decathlon space could become a restaurant.
The La-Z-Boy furniture showroom at 1271 Washington St. is empty. But most retailers along Route 53 are open. The Hanover Mall is also fully occupied.
Tom Burke, president of the Hanover Chamber of Commerce, is optimistic.
"To me, it really feels like we're at the traditional occupancy level, given the current conditions," he said. "The impression I get is that we probably have the normal amount of vacancies. With all the development, when you look at what's going on . . . it's pretty promising."
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