Retailers 'Flock To The Suburbs' As Many Boston-Area Residents Shop, Dine Closer To Home

Boston's suburban retail is seeing a resurgence as residents spend less time commuting downtown and want more shopping and dining options closer to home. 

Retail businesses are responding to shifting consumer behaviors by looking to expand in the suburbs, but that demand isn't funneling into the enclosed shopping malls that dominated the suburbs in decades past. Instead, it is going into suburban main streets and open-air lifestyle centers, brokers and landlords tell Bisnow. 

The low vacancy created by this demand is allowing owners to raise rents and pass costs on to tenants, but it is also making it harder for new businesses to open in those areas and is making developers look to add more supply. 

“The suburbs have been on fire,” said Bialow Real Estate CEO Corey Bialow, a Boston-area retail broker.

“I've never seen such a landlord-favored market,” he added. “It's become the norm that if any good space comes up in a strong suburban shopping center, there's four or five offers right out of the box.”

The changing consumer behaviors will be on full display in the coming weeks, as Boston is expected to have a strong holiday shopping season. According to Deloitte's Holiday Retail Survey, Boston shoppers plan to spend an average of $1,883 this year during the holidays, a 16% increase year-over-year and 14% higher than the national average The spending isn't just on presents: 81% of respondents said they plan to shop for non-gift items, such as clothing for themselves and home furnishings. 

The retail that will benefit from this shopping depends on where people choose to spend their time, and those choices have changed dramatically since the pandemic altered work and commute habits. Bialow said the hottest retail corridors today aren’t the downtown districts like Newbury Street and the Seaport but rather suburban town centers.

These classic New England main streets — seen in places like Newton, Brookline, Dedham, Arlington, Wellesley and Lexington — consist of charming low-rise buildings with local ground-floor retail. These areas have seen strong demand from retail tenants, but they have little to no vacancy to accommodate new businesses, Bialow said, pointing to Newton Centre as an area with less than 2% vacancy.

“As people are spending more time at home instead of going to lunch down on Boylston Street, they're having lunch around the corner from their house in downtown Newton or downtown Beverly,” Bialow said. “We're just seeing a lot of these small downtowns re-emerge, which is good for the community.”

Suburban town centers aren't the only place people are flocking to. Open-air lifestyle centers that have apparel retailers, eateries, fitness brands and entertainment options have grown in popularity over the years as a one-stop shop for residents looking for variety that was traditionally found in urban environments.

“There's certainly been a flock to the suburbs,” said Whitney Gallivan, managing director at Boston Realty Advisors. “With the access to the work-from-home environment, as well as hybrid workplaces, I think more and more people are able to gravitate further away from the city.”

As consumer behavior shifts, Gallivan said suburban residents are looking for more retail options closer to home. 

“Young families and young people want their suburbs and want their town to have more,” Gallivan said. “They want the fitness concept, they want the fast-casual place to grab food, they want a brewery. We are starting to see the suburbs light up.”

In Greater Boston, retail vacancy remained at 3.1% in the second quarter, the most recent data available, with suburbs in the inner circle seeing rates as low as 1.6%, according to Marcus & Millichap.

This low vacancy means there still isn’t enough space to accommodate all of the demand the market is seeing, and it can be hard for some businesses to open up shop. Judy Cazeau, associate retail broker at Avison Young’s Boston office, said that retail's high demand has led to landlords raising annual rents by 3% to 5% and pushing build-out costs on to tenants.

“You’re looking at astronomical numbers to get your storefront running,” Cazeau said. “I've seen several landlords, even in markets that aren't even in Boston, asking for 5% annual increases, and it's kind of jaw-dropping.”

CBRE Executive Vice President Rob Robledo said that higher interest and construction rates, local zoning restrictions and expensive land sales have made it nearly impossible to get projects started.

“You're looking at pretty much the same major markets, but there’s just no new supply,” Robledo said. “When something does come available, rents are actually flat or, if not, probably a little bit stronger this year versus last year.”

Last summer, popular Boston-based bakery Tatte opened three new suburban locations in Belmont, Arlington and Wellesley, Wicked Local reported. The bakery was the first retail tenant to open at Desco Associates’ The Station in Belmont, a mixed-use development in the town’s Waverley Square.

Todd Norley, vice president of leasing at WS Development, said the company’s suburban, open-air shopping centers are seeing historically strong activity. The developer owns multiple suburban centers, including The Street Chestnut Hill in Chestnut Hill, MarketStreet Lynnfield in Lynnfield, Legacy Place in Dedham and Derby Street Shops in Hingham.

On Wednesday, the landlord announced the opening of Brooklyn-based Mia Bakery at The Street Chestnut Hill. Norley said other urban brands have expanded to the suburbs, like Studs, a New York-based jewelry piercer that opened a pop-up location in Chestnut Hill.

“You have a population base that is used to an urban lifestyle, maybe like an aging millennial-type demographic who's moved out and they're accustomed to urbania,” Norley said. “We've seen retail brands look at the market more holistically recently and figure out how they can grow in Greater Boston.”

The growth in open-air lifestyle centers has come at the expense of traditional suburban malls, with Class-B and C malls struggling the most as valuations continue to decrease. 

“The traditional retail mall is definitely struggling,” Bialow said. “The teenagers aren't hanging out at the mall like they used to. You’re more likely to see them hanging out at a lifestyle center.”

While it can be difficult to add new retail space to the main streets of Boston’s close-in suburbs, retail brokers are also seeing strong demand in farther-out suburbs that have more room for development.

In Essex County and Southern New Hampshire, there is 700K SF of development in the construction pipeline, as retailers are following residents who are moving to areas with lower costs of living, according to Marcus & Millichap. The area also saw the highest net absorption, with nearly 147K SF taken off the market.

Cazeau said suburban areas even farther from Boston like Danvers, Woburn and Norton are seeing retail activity because residents are favoring options closer to home rather than driving into Boston.

“Cities and towns are just becoming a little more hip,” Cazeau said. “They’re investing in their smaller communities and small businesses.”

WS Development has also found ways to add retail space to its properties, announcing plans last year to expand the Chestnut Hill shopping center to add nearly 20 new retailers, offices and public space. The 90K SF expansion will redevelop a former AMC movie theater that closed in 2013.

Federal Realty Investment Trust also announced plans to expand Somerville’s Assembly Row with several new retailers, including Coach, Athleta, Zwilling J.A. Henckels and Paper Source, NBC Boston reported.

“We see tons of opportunities to just continue to invest in,” Norley said. “In general, we're really bullish on the space that we're sitting in right now and the different pockets that we're involved with in suburban Boston.”

New opportunities to add suburban retail could also come out of the rezoning plans that communities are undergoing to comply with the MBTA Communities law, as they could spur multifamily buildings with ground-floor retail. Some communities like Brookline and Newton specifically pushed to ensure that retail would be incorporated into the rezoning plans.

“There will be a boost because retailers will say, ‘OK, well, if there is that many more people that can get to me because they have public transit access,’” Gallivan said. “Whenever there is some sort of development that goes up, retail will likely be at the base to add an amenity. … That will certainly impact and add retail, food and beverage to the suburbs.”