Hartford Business Journal

16 Hartford Business Journal • June 29, 2020 • www.HartfordBusiness.com By Joe Cooper jcooper@hartfordbusiness.com G reater Hartford's retail real estate market held steady in recent years despite a nationwide boom in online shop- ping, but experts say the local indus- try won't be able to avoid suffering in the wake of the COVID-19 pandemic. Area brokers estimate that Greater Hartford's 10.8% retail vacancy rate at the end of Aug. 2019 could nearly double by year-end, as consumers and restaurant-goers become less willing to visit shopping centers during the pandemic and spend on discretionary items like clothing. A second wave of the virus later this year could also further discourage brick-and-mortar activity, they said. Landlords are also rejiggering lease agreements with tenants — many of which have refused to pay rent — that were temporarily closed during the first few months of the outbreak. Brokers say smaller subur- ban retailers in towns like Windsor, Newington or Wethersfield will be hit much harder than those located in larger high-end retail corridors like West Hartford, Glastonbury or Avon. Still, brokers are optimistic that the region's most successful retail- ers and restaurateurs will survive the pandemic while landlords work to stabilize their tenant base. "We are in the middle, and hope- fully coming to the end of the largest social experi- ment ever with people working from home and buying from home," said Frank Amodio, a partner of Farm- ington broker Amodio & Co. Real Estate. "Re- tail before this was in a bit of a decline. That's only gotten worse as far as vacancies." Meanwhile, local landlords, and many others across the country, are bracing for the continued decline of big-box retailers. Macy's, J.C. Penney Co., Pier 1 Imports and others, which often anchor large shopping centers or malls, have closed several Connecticut stores in recent months, and are set to shutter hundreds more across the U.S. Other national chains like Star- bucks, Victoria's Secret, GNC, Nor- dstrom, AT&T, 24 Hour Fitness and J. Crew are also closing hundreds of locations nationally. By the end of this year as many as 25,000 retail stores are expected to permanently close, which would crush 2019's record of 9,302 closures, according to retail research and ad- visory firm Core- sight Research. Retail's down- ward trajectory comes as sev- eral Connecticut malls, including Meriden and Enfield Square, recently changed hands. West- farms mall's parent company, Taubman Centers, was in the process of being acquired by Simon Property Group, America's largest mall opera- tor, before the deal fell apart due to economic uncertainties created by COVID-19. The acquisition is now tied up in a messy court dispute. It's not yet clear what the future holds for the Meriden and Enfield malls, which were both bought in the last two years by Namdar Realty Group. The New York-based com- mercial real estate investment firm, which also oversees the SoNo Collec- tion mall in Norwalk, did not respond to requests for comment on its long- term plans for the properties. Westfarms occupancy strong, ownership unclear Westfarms, a 1.3 million-square- foot mall straddling the Farming- ton-West Hartford border, reopened May 20 with reason for optimism. After recently implementing new social distancing and safety rules for customers and employees, the upscale shopping center is entering July with 140 tenants and a roughly 95% occupancy rate, according to Amanda Sirica, a Westfarms spokes- person. National retail tenants in- clude Nordstrom, Kate Spade, Macy's, Apple and H&M, among others. The mall also signed new leases prior to the pandemic with activewear- apparel company Fabletics and Maggie McFly's, a restaurant and bar that's still on pace to open in a 10,000-square- foot space with 150 employees, she said. It also currently offers a mix of 40-plus exclusive retailers. "That draws the demand from the consumer and makes us unique to other retailers," Sirica said, noting that sales have slowly ramped up since late May. Far from the steps of Westfarms, a Michigan court will decide whether the Simon Property Group will be forced to acquire a majority stake in Taubman Centers and its real estate portfolio, which includes Westfarms and 25 other high-end indoor shop- ping centers nationwide. Simon earlier this month termi- nated its February $3.6 billion merger agreement, citing Taubman's failure to mitigate the impact of the COVID-19 pandemic on the business. Taubman said Simon's termination is invalid and it plans to move forward with the deal. Alexander Goldfarb, an analyst for Minneapolis investment bank Piper Sandler & Co., said the legal spat will be tied up in court for months as the deal could be renegotiated at a lower price due to the economic damage COVID-19 has caused retailers. Goldfarb said the merger decision won't have much of an impact on Westfarms' tenants, although they'd likely prefer to have the case re- solved quickly with Simon emerging as the new operator. "Because from a capital perspec- tive and deep pockets, Simon is it," he said. "If you are Taubman as a stand- alone, the tenants are still fine, but Empty Storefronts Hartford area's retail realty market faces major vacancy, rent-collection hurdles amid coronavirus fallout A look at Greater Hartford's retail market Category 2019 2018 % Change Total market size (square feet) 37,722,300 37,556,000 0.4% Total number of retail properties 3,300 3,300 0.0% Total number of retail establishments 8,300 8,200 1.2% Total market vacancy (square feet) 4,080,000 3,965,200 2.9% Vacancy rate 10.8% 10.6% Source: KeyPoint Partners LLC Frank Amodio, Partner, Amodio & Co. Real Estate Michael Gallon, Managing Partner, Reno Properties Group Westfarms mall was forced to close temporarily due to COVID-19, but it has reopened and maintains a 95% occupancy rate, putting it in a better position than many other U.S. malls. HBJ PHOTO | JOE COOPER

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