Building 19’s quirky bargain emporiums became a thing of the past. Outsidecompetition battered regional supermarket chains. Amazon continued to tap into brick-and-mortar retailers’ revenue streams.
And the retail real estate market in eastern Massachusetts barely missed a beat.
In the past year, the market expanded by 2 million square feet, according to a recent report by Burlington-based KeyPoint Partners. While vacancies edged up from 7.8 to 8.5 percent, absorption increased by 712,500 square feet, aided by a strong development pipeline that continues to accelerate both in Boston and along Route 128.
Rents in top Boston, Cambridge and suburban markets now exceed those of their pre-recession peak in 2007, said Jonathan Martin, a vice president at Colliers International in Boston. Prime storefronts in Back Bay and Harvard Square are leasing for well over $200 a square foot and rising, he said.
“There’s very little space available at a time when new construction is on the rise,” he said. “There’s this little lull. We don’t have a lot of supply right now, but there’s plenty of demand and lots of new concepts coming to Boston.”
In the past year, major retail developments opened in Lynnfield, broke ground in Boston and Westwood and opened in Burlington and Somerville. More are on the drawing board in Burlington, Waltham and Watertown. And developers are hoping to fill 1.5 million square feet of storefronts in South Boston’s Seaport Square over the next few years.
The retail building boom reflects the vitality of the Greater Boston economy, which has outpaced the nation coming out of the recession and continues to create well-paying jobs, particularly in tech and life sciences.
That has helped developers obtain financing to take the wrecking ball to obsolescent shopping centers, aging office parks and rundown industrial properties, converting them into upscale life centers and mixed-use developments.
In Westwood, after stalling during the recession, a redevelopment of an industrial park is back on track. Newton-based New England Development broke ground in December on the first phase of University Station, which will include 550,000 square feet of stores and restaurants anchored by a 130,000-square-foot Wegmans supermarket and Target store opening next spring. Other announced tenants include Nordstrom Rack and Life Time Fitness. More than 95 percent of the retail space is committed, said Deborah Black, New England Development spokeswoman.
Following the “live-work-play” model, University Station places retail shops close to workplaces and housing, with plans for 350,000 square feet of office space and 350 apartments under construction with a projected occupancy of mid-2015.
In inner-ring suburbs of Boston, developers are experimenting with new retail models designed to appeal to younger shoppers and car-less households.
Disregarding historical development patterns in which outlet centers were built in outer suburbs, Federal Realty Investment Trust attracted more than 30 outlet stores for its 300,000 square-foot Assembly Row shops in Somerville, New England’s most densely populated city. Tenants such as Saks Off 5th, Le Crueset and Papagayo operate on ground floors beneath 450 Avalon Communities apartments. The site will be served by a new MBTA Orange Line station opening this fall.
In Watertown, a development group acquired the 225,000-square-foot Arsenal Mall last year with plans to reposition the property with better retailers and restaurants and more open-air shopping space.
Superstores, Restaurants Drive Growth
In the suburbs, traditional shopping centers anchored by grocers and discounters accounted for much of the major development activity in the past year, according to the KeyPoint Partners Retail Real Estate Trends & Analysis 2014 report. The study analyzed properties in 189 communities in eastern Massachusetts.
The fastest-growing submarket was Buzzards Bay, where two Walmart supercenters opened in Fall River and Swansea, while a Sam’s Club opened in Fall River, adding a combined 448,000 square feet of retail space.
Across the entire region, restaurant and fast-food category supplied the most new space with nearly 300,000 square feet of expansion, with chains such as Subway, Orange Leaf and Starbucks among the top 10 retailers in new store openings.
Robert Sheehan, vice president of research for KeyPoint Partners, said the recent market trends reflect Greater Boston’s high barriers to entry with few vacant developable sites.
“The retail demand here is typically better than it is in many major metro areas,” Sheehan said. “When someone sees a vacant unit, they know it’s going to be difficult to enter the market through new construction, so they typically have to take advantage of what existing space is there.”
Email: sadams@thewarrengroup.com
