Securing sites, permits in New England isn’t easy, and some developers say that’s just fine

To help the Shaw’s supermarket chain open a store in the densely populated Little Italy section of Providence, R.I., Retail Development Corp. and Feldco Development Corp. are undertaking a project that isn’t for the faint of heart.

The partnership, which broke ground in February, had to cobble together the site for its 15-acre, mixed-use project by purchasing 38 parcels from 15 different owners. Before Eagle Square, as the project is called, opens during the first quarter of next year, the developers will demolish half the 750,000 square feet of former mill facilities and convert the rest of the structures into retail and office space.

Such ordeals are becoming more common for shopping center developers in New England, where fierce competition for a dwindling pool of desirable sites combined with heavy local regulation have sharply slowed construction.

But while some developers have virtually abandoned New England in favor of more-accessible markets in the U.S. South and Midwest, a determined few are finding ways to put up new centers, braving soaring land costs and permit delays. One reward: The market’s barriers keep out competitors.

“We continue to look for supermarket-anchored sites in New England that are very close to population centers. That sounds like we are a glutton for punishment,” said Gene Beaudoin, president of Simsbury, Conn.-based Retail Development, which since 1993 has partnered with Roslyn Heights, N.Y.-based Feldco to build about a half dozen Shaw’s supermarket-anchored centers throughout New England.

Mashpee, Mass., a Cape Cod community that has grown by 64 percent in the past decade, is getting some much-needed retail with South Cape Village.

Some developers are building on sites they would have snubbed a few years ago because of their rough, hilly terrain or remote locations. Others are doing as Retail Development and Feldco have done, patiently patching together multiple tracts from different owners.

Fueling these efforts is an ongoing push into New England by national big-box retailers, including The Home Depot, Kohl’s and Target, and the intense competition between dominant grocery chains such as Shaw’s and Stop & Shop, which have been squeezed by the rollout of Wal-Mart Stores’ Supercenters. All of this is helping to absorb vacancies created by bankrupt Bradlees and Caldor and other troubled regional chains.

“If you’re looking for the path of least resistance, you’re not going to find it in New England,” said R. Michael Goman, president of Konover & Associates, the Farmington, Conn., development firm. “What keeps a lot of us working here is that the markets in New England are fundamentally good.” Indeed, New England has many densely populated markets, high levels of disposable income and an economy that has held up relatively well.

“In New England anchors are paying more than the small tenants because it’s hard to find the appropriate-sized spaces,” said Jed Hayes, president of Sullivan Hayes Cos., a Farmington, Conn.-based tenant representation firm. “The retailers that are here know that when they get into these markets they are going to do well. So they are willing to step up and pay.”

In March the unemployment rate in New England was 4.1 percent, well below the national rate of 5.7 percent, according to the U.S. Bureau of Labor Statistics. Last year New England’s per capita income of $36,870 was 22 percent higher than the national average. The area ranked first in per capita income among the eight regions tracked by the U.S. Department of Commerce.

“Like the rest of the country, New England has been in a mild recession,” said Yolanda Kodrzycki, an economist at the Federal Reserve Bank of Boston, but as in the rest of the country, it seems to be over.

Though New England has seen retail vacancy rates creep up recently, the influx of national chains has helped to mitigate the damage. In fact, the Greater Hartford, Conn., area, one of New England’s three largest population centers, actually saw its vacancy rate drop to 10.4 percent in the fourth quarter of last year, from 12.4 percent during the comparable period the year before, according to Burlington, Mass.-based real estate services firm Finard & Co. That drop, the biggest in five years, was largely the result of expansion by Wal-Mart and Kohl’s, which took over former Caldor stores.

“Everyone is trying to position themselves for the long run by expanding stores, opening new stores and trying to outposition their competitors,” said William Beckeman, a partner at Finard.

That jockeying is good news for developers such as Boston’s C. Talanian Realty Co. The firm spent seven years getting approvals from local regulatory agencies to build South Cape Village, a 160,000-square-foot community center in Mashpee, a Cape Cod, Mass., town that was once considered a vacation destination. Mashpee has seen its population swell by 64 percent over the past decade as the high cost of living in the Boston area pushed some residents to the state’s south shore, while infrastructure improvements, including new train service, have improved the commute to Boston, according to Finard, which is leasing the village-style center.

Finard is also touting the Cape’s strong tourism trade, with 16 million visitors annually. What’s more, the center, which will be anchored by a specialty grocery store, isn’t likely to see any new competition anytime soon. Local regulators recently made it even harder to secure permits for projects larger than 40,000 square feet, said Finard partner Ellen Lee.

Konover, too, is betting that its future 450,000-square-foot power center in rural Keene, N.H., won’t have a lot of competition. Construction is scheduled to begin this summer, following almost two decades of legal challenges by the city and a local opposition group.

Konover has refused to back away from the market because of what it sees as pent-up retail demand. Although the population of Keene itself is relatively small, the city is the economic hub of southwestern New Hampshire, and the closest regional mall is an hour’s drive away. Home Depot will anchor the center, to be called Monadnock Marketplace.

“Because of the difficulty in locating appropriate sites, it is unlikely that New England will be overbuilt,” said Konover’s Goman. “It’s just too hard to get this stuff done.”

One of New England’s most prolific developers, W/S Development Associates, has found a formula to take some of the pain out of the process. For many of its recent projects, it has targeted areas outside of established retail hubs, where more land is available and traffic is less of a headache.

The Chestnut Hill, Mass.-based firm has selected sites off major roads for their accessibility and has combined power center tenants with traditional high-end mall tenants in an effort to change regional shopping patterns. It has also targeted areas where population growth and household income are on the upswing.

The company has built about 10 of these open-air hybrid projects in New England and is currently developing another that will be the largest open-air center in central Massachusetts. The 750,000-square-foot center, called The Shoppes at Blackstone Valley, is under construction in Millbury, off a new interchange on the Massachusetts Turnpike. Tenants will include Ann Taylor Loft, Babies “R” Us, Barnes & Noble, Chico’s, Kohl’s and Target, as well as several Limited divisions.

Jeremy Sclar, a principal at W/S Development and its management affiliate, S.R. Weiner & Associates, said the centers appeal to many traditional mall-based retailers because common area maintenance costs are lower and very few new regional malls will be built in New England.

Sclar said his companies have remained active in a difficult market where the permit process can take three to five years by having a number of projects in the pipeline at once and by making big up-front commitments of time and money. The affiliates own and operate 65 centers in the Northeast and plan to build about 2 million square feet of retail space during the next year.

“The bigger picture is that it is good to own in New England because there are few vacant properties,” he said. “Your risk of owning something that gets outpositioned is greatly diminished in a market like this.”

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by Anna Robaton