Old Invites New
It’s a study of contrasts: The New England states of Massachusetts, Maine and New Hampshire are home to some of the oldest cities and towns in the United States.
But this historic area is seeing examples of the latest retail formats, as lifestyle and neighborhood-center builders find opportunities in a solid, affluent region.
“It’s an attractive market, an established market,” said Andrew Couch, VP of investments in the Boston office of Jacksonville, Fla.-based Regency Centers. The developer opened the office in 2006 to expand throughout New England.
The small, densely populated region has always been difficult for developers, with tales of decades-long efforts to build regional malls in the 1970s and 1980s common. Now, the trend toward open-air lifestyle centers, more in keeping with the area’s historic towns, is attracting the attention of some once-leery municipalities. Other challenges, including geography, are a bit harder to deal with. Yet builders are finding opportunities.
“Any development project is about looking at the right center in each case that dovetails with the markets’ needs,” said Deborah Black, VP of marketing and public affairs of Newton, Mass.-based New England Development, which has built in the region for decades.
Not surprisingly, the areas nearest to Boston are seeing the greatest interest, offering the irresistible combination of healthy incomes and comparatively little competition.
“In general, it’s somewhat under-retailed,” said Leo Ullman, CEO of Port Washington, N.Y.-based Cedar Shopping Centers, which is acquiring and developing centers in Eastern Massachusetts and Connecticut. The company is particularly interested in markets within 50 miles of Boston. “There are stable patterns and a stable economy. Even the suburbs and exurbs are strong.”
Cedar, which focuses on neighborhood centers, is working on a 30,000-sq.-ft. to 50,000-sq.-ft. expansion of The Shops at Suffolk Downs in Revere, Mass., anchored by Stop & Shop.
“[Our opportunities] are very much in infill properties that will provide development and acquisition properties,” Ullman said.
The problem, developers note, is that the most attractive markets are already densely developed, and opportunities are limited.
Regency is building Shops of Saugus, in Saugus, Mass., with 103,483 sq. ft. anchored by Trader Joe’s, PetSmart and La-Z-Boy. Other projects are in various stages of research. Still, Couch noted, there is a distinct trend toward urbanization, both in building in older areas and creating new districts.
“There are mixed-use projects bringing retail and housing together,” Couch said.
There are even opportunities close to the city itself.
“You have nodes to the north and south,” said Mark R. Roberts, senior VP of leasing for Chestnut Hill, Mass.-based W/S Development. “It’s a changing retail landscape in Boston.”
The company’s Derby Street Shoppes, in Hingham, Mass., is a lifestyle center with sales nearing $600 per square foot. Similarly, W/S’ upcoming 675,000-sq.-ft. lifestyle center Legacy Place in Dedham, Mass., will serve some 500,000 people with an average household income of $92,000. Meadow Walk at Lynnfield will bring 680,000 sq. ft. of lifestyle retail to the city’s north shore. And the company is planning Seaport Square, a mixed-use project minutes from Boston’s central business district.
Development, though, is not just centered in metropolitan Boston.
“We’ve gone in any number of areas where there is a perceived need,” New England Development’s Black said. “We’re always looking at different opportunities.”
The company is eyeing the western portion of Massachusetts, at least as far as Interstate 91, for future development opportunities.
Southern New Hampshire has the benefit of proximity to Boston, and markets such as Nashua began as tax-free shopping alternatives to the city. However, Nashua has become a market in its own right, and in 2009 will host the first lifestyle center in the state. Ground will be broken in spring 2008 on Nashua Landing, a joint venture of New England Development, W/S Development and Packard Development.
In addition to Nashua Landing, New England Development also is working on a to-be-named project in Bedford, N.H. Permitting and leasing are under way for the 315,000-sq.-ft. center, which will be anchored by Macy’s.
“New Hampshire is a great second opportunity for us,” Black said.
But opportunities are not just restricted to the southern portion of the state. Peripheral activity is taking place around W/S Development’s Upper Valley Plaza in West Lebanon, N.H., as retailers seek locations close to Dartmouth College. The company also has recently completed Meadow Brook Crossing, a Lowe’s-anchored center in Amherst, N.H.
“There are still relatively strong pockets, and players who haven’t come into the market,” Roberts said. “There is still pretty good demand, though it’s not easy to get space.”
Maine, the largest state of the three geographically, is healthy, though its cities are not as dominant as Boston. Portland is a strong market, Black reported, as are Augusta and Bangor. Smaller markets are busy, as well. Last year, New England Development opened The Shops at Biddeford Crossing, a 500,000-sq.-ft. center anchored by Lowe’s and Target.
W/S’ Acadia Crossing is opening in phases through 2009. Anchors The Home Depot and Wal-Mart already are open, with 30,000 sq. ft. of small shops to begin construction in the spring.
“[Maine] has long been a stronghold of ours, and we have the major pockets covered,” Roberts noted.
Still, the region’s very strengths make building difficult.
“These are mature markets,” Regency’s Couch said. “The development barriers to entry are high, and there is a scarcity of sites.”
Environmental concerns also are becoming increasingly important for a region filled with wetlands and rock. In addition, regulations vary by state, complicating efforts to develop. Yet developers remain committed to finding opportunities and working with the challenges.
W/S is considering an expansion of its Marketplace at Augusta, in Maine, but the back of the site is completely made of rock, and the developer must evaluate the project’s financial viability, Roberts said.
In addition, development must be tenant-driven, Cedar’s Ullman added, particularly for grocery-anchored projects.
“Hannaford, Stop & Shop and Shaw’s are dominant and the consumers are so used to their existing grocers,” Ullman said. These anchors are necessary unless a project is anchored by a gourmet grocer such as Whole Foods Market, which is expanding in the region.