Kohl's, Home Depot, Linens ‘N Things and Target — the tenant roster at Rhode Island's recently opened Crossings at Smithfield says a lot about the future of retail in New England. The 600,000-sq.-ft. hybrid community/lifestyle center, a development of Chestnut Hill, Mass.-based S.R. Weiner, is the product of the aggressive expansion plans many big boxers are implementing in the region. They are anchoring most of the new centers under development in New England.
“There are now some powerful national chains that had very little or no presence in New England a decade ago,” says William Beckeman, an investment sales partner at Finard & Co. in Burlington, Mass. It has been 10 years since Wal-Mart entered New England, and now the discounter is the largest retailer operating in the region, Beckeman notes. Wal-Mart has been joined recently by other big names such as Best Buy, Old Navy and Marshall's.
But these expansion-minded retailers couldn't have picked a more resistant region to infiltrate. “New England is infamous for its barriers to entry,” says Jim Koury Jr., a senior vice president at Boston-based Spaulding & Slye Colliers International. Residents often fight to maintain the character of New England, and shopping centers and the associated traffic are not viewed favorably.
“New England is notoriously difficult to do development in,” Beckeman agrees. The permitting process is often difficult and lengthy. Vermont is the most challenging state in New England for retail developers. Act 250, the state's land use planning law, presents a variety of hurdles and thresholds that developers are required to meet regarding aspects ranging from design and landscaping to access and signage.
And not all the big expanders are interested. The barriers to entry and a modest population growth are two reasons why some national chains have taken longer to penetrate the New England market. “From a population standpoint, New England is generally seen as a slower-growing part of the country compared to others,” Beckeman says. Nevertheless, big-box retailers are pushing their way in slowly by scooping up surplus space and encouraging developers to bring more new centers online.
With a population of 3.2 million and a median household income of $53,505, Connecticut is home to the demographics retailers adore. According to Beckeman, the big-box brigade invaded the state several years ago and began major rollouts, which continue. Konover & Associates, Inc., and S. R. Weiner, two of the most active developers in New England, have capitalized on these Connecticut rollouts, building several centers to accommodate big-boxers.
The amount of retail development activity suggests a relatively mild recession in the state. “The recession in Connecticut was moderate,” says Peter Gioia, an economist with the Connecticut Business and Industry Association in Hartford. “From 2000 through 2002 and most likely going forward, the state has been at least two full percentage points below the U.S. unemployment rate. Indications are that this year will be a moderately good retail year as well.”
The recession had a light impact the Rhode Island economy as well, says Gary Ciminero, director of the Rhode Island House Policy Office in Providence. “Employment levels declined only one-half percent (last year) and began to rise early this year,” he says. In addition, consumer spending has held up, with retail sales tax revenues rising by 7% throughout the downturn.
The 2000 U.S. Census detected a slight up-tick in population in Rhode Island. Between 1995 and 2000, the state's population grew from 990,000 to 998,000. Through 2015, the population will surge by 5.7%. According to the census, Median household income will move up from $42,873 in 2000 to $50,661 in 2005.
Overall, the state appears to be a small but solid retail market. According to Ed Highers, vice president of retail services with Boston's Grubb & Ellis, malls and centers in the state's major markets of Providence, East Providence, Cranston, North Kingston, and Smithfield emerged from the recession with few if any vacancies, and new centers are moving steadily forward.
Isolated from the recession in their northern corner of the map, Maine retailers have also felt little pain. “Maine doesn't overheat when the national economy overheats, and it isn't as adversely affected when the economy slows,” says Tom DeSimone, executive vice president of S.R. Weiner.
DeSimone's analysis has held true. According to Charles Colgan, a professor of public policy and management in the Muskie School at the University of Southern Maine, the recession cost the state only 3,000 jobs out of a total of 612,000. Colgan also reports that retail sales grew in Maine throughout the downturn. “Retail sales grew 3.6% in 2001 over 2000, and I project sales will grow by 3.8% this year.”
A geographically large state, Maine supports a relatively small population of 1.25 million. The U.S. Census Bureau sets the median household income at $41,597, a touch above the U.S. median of $42,148.
With four projects under development in Maine, Konover & Associates currently ranks as one of the state's most active developers. Konover's projects include a 150,000-sq.-ft. power center adjacent to an existing Wal-Mart Supercenter in Auburn, a 131,000-sq.-ft. community center in Belfast, a 132,000-sq.-ft. Home Depot and a 220,000-sq.-ft. Wal-Mart Supercenter in Topsham, and a 300,000-sq.-ft. power center in Waterville.
The majority of retail activity in Massachusetts, Vermont and New Hampshire is occurring in redevelopment and renovation projects within existing retail areas. But the three states are attracting their share of attention from expanding retailers.
Massachusetts population in 2000 reached 6.3 million, while Vermont is home to only 609,000 residents. New Hampshire recorded the highest percentage change in population in New England in the past decade with an 11.4% increase, to 1.2 million people.
The population density of the Boston metro area makes it an obvious first choice for expanding retailers. But Southern New Hampshire is popular with consumers from a wide trade area due to its zero sales tax status. Border cities such as Nashua and Portsmouth are emerging as strong retail hubs. “If you're a big retailer, locating in New Hampshire is like having a 5% sale going on every day,” Baxter says.
Kohl's Corp. recently opened nine stores in the Boston area, and four stores are planned in Southern New Hampshire. Home Depot, Wal-Mart and Staples also have opened stores in Southern New Hampshire in the past year. Home Depot is in the midst of opening its second Vermont Home Depot in Rutland at the end of July, while Orvis opened a new 23,000-sq.-ft. flagship store in Manchester in June. The Vermont-based fishing equipment manufacturer operates 29 retail stores in the United States and England.
The bankruptcies of retailers such as Bradlees and Caldor have opened the door to new retailers trying to expand in the market. Kohl's, for example, purchased four of the vacated Bradlees sites in New Hampshire. “In New Hampshire when we have had large vacancies, they have been pretty much filled up right away,” says David Baxter, an adviser at Grubb & Ellis/Coldstream in Portsmouth, N.H.
NEW ENGLAND STATS
population (2001): 3.425 million
population (1991): 3.289 million
unemployment rate (April 2002): 3.8%
unemployment rate (April 2001): 2.9%
per capita income (2001): $41,930
per capita income (1991): $26,747
median HH income ('98-'00): $50,647
median HH income ('96-'98): $ 44,978
population (2000): 1.287 million
population (1990): 1.235 million
unemployment rate (April 2002): 4.0%
unemployment rate (April 2001): 3.9%
per capita income (2001): $26,385
per capita income (1991): $17,638
median HH income ('98-'00): $39,815
median HH income ('96-'98): $34,989
population (2000): 6.349 million
population (1990): 6.016 million
unemployment rate (March 2002): 4.4%
unemployment rate (March 2001): 3.1%
per capita income (1999): $35,551
per capita income (1990): $23,223
median HH income ('97-'99): $43,697
median HH income ('95-'97): $44,978
population (2000): 1.236 million
population (1990): 1.109 million
unemployment rate (March 2002): 4.1%
unemployment rate (March 2001): 3.1%
per capita income (1999): $31,114
per capita income (1990): $20,713
median HH income ('97-'99): $44,891
median HH income ('95-'97): $40,854
population (2001): 1.059 million
population (1991): 1.004 million
unemployment rate (April 2002): 4.5%
unemployment rate (April 2001): 4.7%
per capita income (2001): $29,984
per capita income (1991): $20,228
median HH income ('98-'00): $43,428
median HH income ('96-'98): $38,150
population (2000): 609,000
population (1990): 563,000
unemployment rate (March 2002): 3.9%
unemployment rate (March 2001): 3.3%
per capita income (1999): $25,889
per capita income (1990): $18,055
median HH income ('97-'99): $39,419
median HH income ('95-'97): $34,592
Source: Northeast Midwest Institute
RETAILER EXPANSION IN EASTERN MASSACHUSETTS
|Expansion by sq. ft.||Expansion by number of stores|
|Retailer||New stores||Total stores||New sq. ft.||Total sq. ft.||Retailer||New stores||Total stores||New sq. ft.||Total sq. ft.|
|Target||6||9||793,500||1.174 million||Dunkin' Donuts||34||458||30,000||789,600|
|Home Depot||3||25||367,000||2.873 million||CVS||9||238||71,200||2.019 million|
|Wal-Mart||4||26||346,300||2.871 million||Family Dollar||8||40||84,000||315,600|
|Stop & Shop||5||74||319,300||4.135 million||Old Navy||7||17||121,000||284,700|
|Loew's Theatres||2||7||131,000||268,900||Stop & Shop||5||74||319,300||4.135 million|
|Old Navy||7||17||121,000||284,700||Marshall's||4||36||105,300||1.16 million|
|Marshall's||4||36||105,300||1.16 million||Wal-Mart||4||26||346,300||2.871 million|
|Big Lots||3||7||99,200||274,900||Big Lots||3||7||99,200||274,900|
|Source: Finard & Co.|