Amid brick-and-mortar shakeup, Greater Hartford's retail vacancy rate shrinks
HBJ Photo | Sharon Bordonaro
Greater Hartford retail has had a mixed year. Newcomers like Saks Off Fifth, buybuy Baby and Cost Plus World Market filled new retail space in West Hartford, while Sears and Toys R Us closed several locations around the state. Meantime, healthcare facilities, like GoHealth Urgent Care (shown right) have filled traditional empty retail locations.
Photos | Contributed
The times, they are a-shiftin' — in central Connecticut's retail real estate scene, at least.
A new study shows Greater Hartford's retail vacancy rate fell 4.5 percent over the past year to 10.6 percent.
It's a surprising number given recent news of major retail chains like Toys R Us, Babies R Us, Sears and Lowe's closing stores, and other brick-and-mortar retailers reportedly struggling to keep pace with online competitors.
But traditional brick-and-mortar retail isn't dead yet. In fact, department and sporting-goods stores added the most space over the past year and several major retailers — Burlington, Saks Off Fifth, Cost Plus World Market and At Home — have opened new storefronts.
However, shifting dynamics are impacting the market, including an increasing number of developers converting retail properties into mixed-use and residential space, and medical and health-focused businesses moving into storefronts traditionally occupied by retailers. And, of course, internet sales' increasing role will continue to put pressure on the industry.
“It was a relatively good year compared to recent history for Greater Hartford,” said Robert F. Sheehan, research vice president of Massachusetts-based KeyPoint Partners Inc., which authored the study. “Developers held the line on new construction while a significant number of vacancies were replaced by growth-oriented retailers or by non-retail conversions. This was enough to lower the vacancy rate in the region, despite contending with the Toys R Us liquidation and a Sam's Club closing.”
The amount of unoccupied retail space in Greater Hartford shrunk by 211,000 square feet over the past year, the report found.
Total retail space in the 26 towns and cities surveyed contracted by almost 50,000 square feet. That's a nominal decrease, but it's mostly attributable to retail spaces being converted to non-retail uses. One example is the former Showcase Cinema in East Windsor — more than 59,000 square feet of space — being razed in anticipation of a proposed casino there.
Meantime, the 10.6 percent vacancy rate is considered a significant drop from 2017's 11.1 percent vacancy rate, Sheehan said.
Happy holidays
Michael Gallon, managing broker at Newington-based Reno Properties Group LLC, is a firm believer that traditional brick-and-mortar retail still has a future, even if it's not as robust as it once was.
In fact, he's bullish about the upcoming holiday shopping season — retail's make or break period — and thinks many stores will enjoy healthy revenues as 2018 comes to a close.
Consumer confidence heading into Black Friday remains high, and shoppers are expected to spend 4.1 percent more on average this year compared to last, according to the National Retail Federation and Prosper Insights & Analytics.
“At the end of the day, my gut feeling is that brick-and-mortar retail is going to have a spectacular holiday season,” Gallon said. “I still believe people want to go out and have the brick-and-mortar experience. I think there will always be a place for it.”
However, Gallon has also witnessed some retail areas that have struggled with inactivity.
Demand and development, for example, has been slow along the Berlin Turnpike, a 12-mile corridor connecting Berlin, Meriden, Newington and Wethersfield, Gallon said. Big name national brands have mostly eschewed the area, save ongoing construction of a 7-Eleven in Wethersfield — Gallon thinks that's likely a competitive measure against a nearby Cumberland Farms.
“(As far as) traditional retail, I don't see any national brands or even regional or local retail as it relates to beautiful available spaces that sit empty on the Berlin Turnpike,” Gallon said.
Increasingly, Gallon is also seeing health-related businesses (think walk-in clinics, medical labs and fitness centers) set up shop in places formerly occupied by conventional retailers.
As a category, health and fitness businesses added 22,000 square feet over the last year, third most behind department and sporting-good stores, the KeyPoint report found.
Club Fitness led the way, adding 34,000 square feet of space.
Meantime, GoHealth Urgent Care opened its ninth and 10th locations in West Hartford and Windsor, respectively, this year.
“Medical uses — minute clinics, dental offices, dental chains — are growing across the country, and looking toward retail shopping centers as a very viable place to locate,” Sheehan said.
It makes sense for landlords to rent to medical businesses, Gallon said. They're usually credit-worthy, willing to sign long-term leases and bring patients to strip malls.
Hobby and toy stores, unsurprisingly, shed the most space over the past year (112,000 square feet), largely a result of the Toys R Us/Babies R Us liquidation.
Drug stores also shed space — Rite Aid closed 10 locations leaving vacant 101,700 square feet; Walgreens, however, absorbed some of that loss by adding seven stores and 74,900 square feet.
Tenant's market
When it comes to renting retail space, it's a tenant's market, said Mark D'Addabbo, a retail space broker and co-founder of New England Retail Properties Inc. in Wethersfield. Rents can be upwards of $30 per square foot in upscale developments like West Hartford's Blue Back Square, but can dip lower than $10 per square foot for an old square box building.
“I would say as a landlord you have to be competitive,” D'Addabbo said. “For the most part, the tenants still have the upper hand.”
But when it comes to development of retail space, D'Addabbo doesn't see much of an increase in central Connecticut's future. Most of the prime spots for retail are developed, and many of the national retail brands that might build in the area already have a footprint here.
“The retail areas are fairly well developed in this market area, so there's a lack of opportunity for a new development,” D'Addabbo said.
Meantime, compared to other spots in the region, downtown Hartford's a different animal, Gallon said. It's one of the few places developers are looking to bring retail — especially in spaces occupied by parking lots near Dunkin' Donuts Park, where the planned $220 million Downtown North mixed-use development is expected to occur.
Aaron Goldenthal, vice president of Camera Bar, which has operated out of the same Asylum Street storefront for 62 years, said the influx of people who have come downtown as a result of new residential development could help reestablish the area as a good place for businesses to move into.
Goldenthal admits, about 30 years ago — before he started officially working for the family business — retail was much stronger in the downtown area. Currently, 13 percent of the city's 2.9 million square feet of retail space is vacant, down from 15.2 percent a year earlier, according to KeyPoint Partners. But he's hopeful about the future.
“I think there are a lot of (businesses) that understand the value of moving to downtown Hartford,” said Goldenthal, who is also a member of business advocacy group Business for Downtown Hartford. “I think retail would be nice to bring back.”
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