One local retail developer summed up the number of projects that will likely open in the coming year in a simple phrase: “It’s not going to be a return to the good old days.”
If that’s what Ted Tye from National Development, a well-known Boston retail developer, defines as “cautious optimism,” be glad the economy isn’t worse.
National Development is working with Chestnut Hill-based WS Development on a significant mixed-use retail project in Lynnfield. Boston’s Sam Park & Co. is busily toiling on a massive development at the former Polaroid site in Waltham. And Burlington-based Nordblom Co. is redeveloping its Northwest Park in Burlington into a shopping-anchored, master-planned campus.
But Tye is right: Only a handful of major retail projects are expected to open their doors or start construction in 2013. As he told Banker & Tradesman, there are still only pockets of opportunity for retail development projects in the state.
“The economy is certainly not booming,” Tye solemnly offered in a recent interview.
It’s no secret that retailers large and small have taken a beating from the low prices and ease of consumption available to any Internet shopper. But companies are starting to come back from those inflicted losses. National retailers are finally starting to consider expansion and new stores, said Kenneth Goldberg, attorney with Bernkopf Goodman in Boston, who works with retailers and retail developers.
And there’s great interest in lending money for new retail projects, especially those mixed with residential and office, Tye added.
High-End Rules
While that’s good news for developers and the lawyers who represent them, those shiny new projects could spell disaster for the owners of older, less ideally located malls. According to American Commercial Real Estate President Dusty Burke, who leads leasing efforts for the Cornerstone Square retail development in Westford, “retail at its highest level” will be the next rising star asset class across commercial properties.
“We’re seeing continuous movement from older locations to more state-of-the-art, more accessible, more inviting and safer shopping environments,” Burke said. “We have a tenant, Riverbend & Co., that’s moving from a Shaw’s plaza in Groton to Cornerstone Square so they can dramatically expand their business and improve the quality of the center they’re located in. That kind of move is happening more and more often.”
How that will eventually affect the retail vacancy rate in the area is unclear. But National Development’s Tye suggested there may be a trend toward repositioning some of the more dated, less ideally located malls.
The Bulfinch Cos., for example, which recently purchased the 300,000-square-foot Atrium Mall in Chestnut Hill from Simon Property Group, is attempting to reposition the property into a suburban medical office hub, marketing its proximity to the Longwood Medical Area (LMA) in Boston. While the Atrium Mall’s tenants dropped like flies, Partners Healthcare leases parking spaces in the mall’s garage, and a shuttle bus runs to a Brigham and Women’s ambulatory center at 850 Boylston St. in Boston and into the LMA. So, there is a potential LMA tie-in.
Sunny Signs
The retail vacancy rate in Eastern Massachusetts is currently 8.2 percent, down from its 2010 peak of 9.7 percent, according to Robert Sheehan, head of research for Keypoint Partners in Burlington, which only tracks Eastern Massachusetts.
That number bumped up when Borders and Filene’s closed stores across the commonwealth, but has dropped back down again. Many other big box stores that closed have also largely been leased, Sheehan said.
Goldberg said he is currently piecing together several large lease transactions for retailers that want to open new stores in Massachusetts, in some cases up to 100,000 square feet apiece.
“What we see now is the genesis of deals that will evolve in the first and second quarter of next year,” Goldberg said. “We have significant retailers being sufficiently satisfied with the economy that, really for the first time in a while, are beginning to consider meaningful expansion. That’s brand new. Six months ago, I could not have said that.”
Email: jcronin@thewarrengroup.com
