Remember 2011 and 2012? Back then, the forecasters were saying that the economy would probably be sluggish through 2013. After that, starting in 2014, growth would return.
Well, it’s 2014, and the prognosticators are cheering. More to the point, retail sales forecasts are glowing. Kiplinger, for instance, is calling for retail sales gains of 5.2% to 5.7%, a significant bump up from last year’s 4.5% increase. Fueling the increase will be an expected 3% rise in personal income. More personal income, more retail sales. What retail markets will benefit from this growth? Where are retailers putting their new stores?
“I recently spoke with a major national discount retailer that is planning 500 new units this year,” said Bill Rose, VP and national director of the national retail group at Marcus & Millichap, based in Calabasas, Calif. “They are looking at Denver, Salt Lake City, Albuquerque, Boise — the Mountain States markets.”
Retail development is also moving away from the outer suburbs to infill areas closer to and inside cities, noted James McCandless, director of retail with Washington, D.C.-based Streetsense, a multidisciplinary design and strategy firm specializing in retail, restaurant and hospitality real estate solutions. “Today’s young professionals want to live downtown or near downtown and close to where they work,” he said. “They don’t want hour-long commutes to work. New city apartments are accommodating them. Developers are also building modern downtown markets like the cutting-edge Union Market on New York Avenue in Washington, D.C., which was developed by EDENS.”
Examples of active markets include the Bay Area in California, the Boston metropolitan region and Center City Philadelphia.
Bay Area, California
The Bay Area has become vibrant with retail development. “Watch the Bay Area, and you’ll see many new market entrants,” said John Cumbelich, a principal at Walnut Creek, Calif.-based John Cumbelich & Associates, an X Team International partner. “A significant group of proven national retailers with zero activity in the Bay Area before the recession is entering the market — Dick’s Sporting Goods, Dunkin’ Donuts, Hobby Lobby, LA Fitness and Ulta.”
Hot areas for retail expansion in the Bay Area include Walnut Creek, San Jose and, of course, San Francisco.
A number of projects are in the works throughout the city of Boston, including nearly a dozen in the Seaport District, as the South Boston waterfront is called. One of the more notable projects in the Seaport District is Fan Pier, a 1 million-sq.-ft. mixed-use project with office, residential and retail components. The Boston-based Fallon Co. is developing it.
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Seaport Square is the city’s biggest new development. It is a 6.3 million-sq.-ft. mixed-use development with office, residential and retail. The retail portion of the project, the 260,000-sq.-ft. One Seaport Square, is being developed by Chestnut Hill, Mass.-based WS Development.
In the middle of the financial district, an area called Downtown Crossing, New York City-based Millennium Partners is redeveloping a former Filenes building into a mixed-use project called Millennium Tower.
The Philadelphia Story
Philadelphia is second only to Boston in university student population. It also has the third highest residential center city population in the United States and it’s growing. Thousands of market rate apartments are being redeveloped and constructed new throughout the city.
“Philadelphia’s restaurant and retail markets are on fire,” said Douglas Green, a principal with Philadelphia-based Michael Salove Co., a retail real estate advisory and brokerage firm. “The restaurant scene is incredible. More seats are added weekly, and demand just keeps growing.
“The retail market is as active as it’s been in six or seven years. We’re back to pre-recession levels of demand and rents.”