News
City to Retailers: We Love You
July 5, 2011
| The nearly 350 guests for Bisnow?s Retail Summit Thursday morning at the Hyatt Regency delighted to be wooed by the city's new economic development chief Peter Meade. They also learned from top retail landlords that some rents are back to peak. |
 |
| It's early for Valentines, but Peter sent one to retailers: ?Please do business here. We want you. We love you.? Boston is growing, he says, young and cutting edge. Eg, work just started on the nation's largest private construction project, the $900M, 1.1M SF new HQ for Vertex Pharmaceuticals at the Seaport. In recent years, the population has increased, packed with nearly 300,000 16- to 34-year-olds that retailers want. But Boston does have a problem, and its address is One Franklin Street, the one-block hole on Washington Street where Vornado and Gale International halted construction for a big mixed-use project. Peter tells us that the developers are waiting for the economy to pick up before they make a move. We're not there yet, and, Peter reassures, the BRA is there to help retailers succeed. (Plan B: Make a giant pool and try to host the swimming World Championships.) |
 |
| Among the six panelists were Target?s John Griffin, Centro Properties Group's Barry Rodenstein, and Federal Realty Investment Trust?s Don Briggs. John warned that ?extraordinarily cheap money? is making us think we can make cap rates of 4%, 5%, or 6% work for acquisitions and development. Prepare for rates to rise, he says. Barry, meanwhile, sees lots of activity in his Northeast territory as retailers fill boxes left by Circuit City and Linens N Things. New England is a rare region that isn't over-stored. It has 20% fewer stores than demographics warrant because land is costly and permitting lengthy. The tightening supply of space, he says, is a good sign for improving shopping center fundamentals. Centro is building in the Northeast. It expects to break ground next spring for the 272k SF Shops at Riverhead in New York to open spring 2013. Leasing includes New England?s first Golf Galaxy in 15k SF at Burlington Square. |
 |
| Don Briggs, here with UrbanMeritage?s Michael Jammen, agrees that US retail will struggle except for some urban, and first- and second-tier suburban markets. In Somerville, Don is managing the development of what could be the $2B, 5M SF Assembly Row at Assembly Square. In New England, the recession is shrinking demand, but since the region didn't overbuild power centers in the '80s and '90s, it enjoys growing demand for space now. Don says only the DC market surpasses Boston. But still, there are some Boston markets like Rte 495 where over the long-term demand may not bounce back. Some of this retail space may have better uses, like conversion into medical offices or may be torn down for the construction of new multifamily buildings. (Perhaps a place to store all our sports championship trophies?) |
 |
| UrbanMeritage?s Mike Jammen focuses on Newbury Street acquisitions where his firm is now among the largest landlords. He says demand is strong. Retailers from around the world are competing for scarce space. If retailers elsewhere are drunk on cheap money, he tells us, in his 100-year-old boutique-filled submarket barely grazed by the recession, ?we're hammered.? Chipotle Mexican Grill's Brad Toothman says his company is growing fast in New England and may soon open more than a dozen new stores, including spots in Vermont and Springfield, Mass. and increasing its presence in Boston. Spooked before by high rents, now Chipotle likes that the city has a diverse urban fabric with people living close to a downtown well served by mass transit. He says Boston has done an extraordinary job guiding growth and the BRA has helped with design and permitting work. |
 |
| Moderator Posternak Blankstein & Lund?s Jo-Ann Marazullo, a retail specialist in the full-service law firm, asks about prospects for Washington Street, struggling with empty storefronts as well as the Vornado crater. Linear Retail?s Bill Beckeman says foot traffic is strong and fundamentals good, especially with the academic and entertainment projects recently completed by Emerson College and Suffolk University. He says that One Franklin can't progress with retail alone, the high land cost dictates mixed-use. Throughout the metro market, some Class-A rents have returned to peak pricing and locations bypassed during the recession are being considered. He agrees that Boston and Cambridge are helpful during permitting; if landlords have development issues in the big cities, they're more often with neighbors. Smaller communities with volunteer municipal boards can at times be more challenging. |
 |
| Emily Seluga (second from left) of event sponsor Vanasse Hangen Brustlin?s, with colleagues Hugh Hahn and Karen Wynne. They're excited that activity is ramping up at Assembly Row in Somerville— they're working with Federal?s Don Briggs. VHB is also redeveloping Stop & Shop grocery stores around the city in places like Grove Hall, Roslindale, Hyde Park, and Dorchester. At South Bay, Karen helped usher Target through the permitting process for its expansion. Without giving away any family secrets, she also says that VHB is working on a mixed-use residential/retail project in the South End. |
