Northern NJ Retail Vacancy Rate Falls To Five-Year Low Of 7.3% Thanks To Big-Box Deals, R.J. Brunelli Annual Survey Finds
OLD BRIDGE, N.J., Nov. 5, 2014 /PRNewswire/ -- The vacancy rate in retail properties along northern New Jersey's six major shopping corridors fell to 7.3% from 8.1% a year ago thanks to ongoing absorptions of empty 'big-box' stores—including some long-dormant spaces—according to the latest survey by R.J. Brunelli & Co., LLC. With Routes 17 and 10 leading the way, conditions improved on all roadways with the exception of Route 4, as the region's vacancy factor reached its lowest level in five years.
All told, the Old Bridge-based retail brokerage firm's 24th annual study of the six-county northern New Jersey market found 2.19 million square feet of vacancies in the 30.12 million square feet of space examined along the six corridors, with availabilities seen in 173 of the 915 properties reviewed. In the 2013 study, the firm found 2.40 million square feet of vacancies in 29.50 million square feet of space.
R.J. Brunelli's 2014 study, which was conducted during the third quarter, reviewed shopping centers and freestanding buildings exceeding 2,000 square feet along State Highways 4, 10, 17, 22, 23 and 46/3, and certain intersecting arteries in Bergen, Essex, Morris, Passaic, Somerset and Union counties. Freestanding restaurants, auto service facilities and auto dealerships are also included, while enclosed regional malls and centers under construction or in early- to mid- stages of redevelopment are excluded.
"The northern New Jersey retail real estate market still has a way to go before returning to the nationally envied 2% to 4% vacancy factors seen between 1999 and 2008, but with two straight years of decline from the 8.2% peak attained in 2012, the region is clearly battling back from the impact of the spate of retailer bankruptcies and downsizings that drove big-box closures between 2009 and 2012," said Richard J. Brunelli, president of the firm.
Underscoring the big-box recovery, spaces of 20,000 square feet and above accounted for 658,168 square feet, or 30.1%, of the region's vacancies in the 2014 study, down sharply from 1.06 million square feet, or 45.7%, a year ago. With that, the empty big boxes represented just 2.2% of the six corridors' total inventory of retail space, compared with 3.6% in 2013.
"What was encouraging about this year's crop of new big-box leases along the corridors was that they were spread across a range of uses, led by furniture, apparel, supermarkets/food, and health clubs," Mr. Brunelli continued. "These included the first New Jersey locations for Cost Plus World Market on Route 10, and the PGA Tour Superstore and Mitchell Gold + Bob Williams Furniture on Route 17, as well as two all-new concepts: the Home & Kidz children's furniture superstore on Route 17 and Route 10's Farmtastic, a new upscale independent supermarket banner from the Allegiance Retail Services supermarket co-op."
But the strong progress in big-boxes was partially offset by rising vacancies in locations under 20,000 square feet. Across the six corridors, the survey found that vacancies in those smaller spaces jumped 14.5% to 1.53 million square feet from 1.34 million square feet a year ago. "In addition to the bankruptcies of Coldwater Creek and Dot's (the latter being resurrected under new ownership), and strategic downsizings by Radio Shack, Shoe Carnival, Game Stop and more, the increase in vacancies in smaller spaces continues to be fueled by mom & pops and small chains," said R.J. Brunelli senior vice president Ron DeLuca.
"Against a backdrop of still-sluggish consumer spending and high rents, many marginal operators elected to shut their doors as leases expire," Mr. DeLuca explained. "What's more, although bank lending has loosened a bit from previous years, with the exceptions of established franchise operators with strong balance sheets, many small chains and mom & pops continue to have a tough time getting financing for additional locations or start-up ventures. And in the wake of heightened scrutiny from bank regulators, entrepreneurs that are getting funding often find that the process can drag on for months, delaying the leasing process. On top of that, many landlords have been reluctant to give measurable tenant improvement allowances to independents, unless they can show a significant net worth, often a minimum of $1 million or more."
"Besides the absorption of big-box spaces, the other major story this year in the northern New Jersey retail real estate scene is the ramping up of new projects and redevelopments on and off the corridors," said Mr. Brunelli. Notable new developments include RD Management's planned Whole Foods-anchored community center on a 26.6-acre site along Route 46 in Parsippany; a Wegman's-anchored center at the Mack-Cali business campus on Route 10 in Hanover; and, off the corridors, The S. Hekemian Group's planned The Shoppes at DePiero Farm in Montvale, which would also feature Wegman's. Also off the corridors, Whole Foods opened in a former A&P in downtown Morristown.
New projects with site work substantially completed or under way include The Shoppes at Randolph on Route 10, which has been approved for up to 90,000 square feet, on which R.J. Brunelli serves as exclusive leasing agent; and the Chimney Rock Crossing site on Route 22 in Bridgewater, which is being prepared to accommodate more than 214,000 square feet of new retail space.
Additionally, two major redevelopments are nearing completion in the region. At the junction of Routes 23 and 46, Vornado's transformation of the once partially-enclosed Wayne Town Center into a 664,000-square-foot open-air property took another major step forward with the recent opening of Costco, and Dick's Sporting Goods in the near future. Costco relocated to the site of the former Fortunoff's building from the adjacent Willowbrook Plaza , creating an additional 150,000-square-foot vacancy at the latter center. The two latest entrants join the property's longstanding JC Penney, newcomer DSW Shoes and various restaurants. (With its redevelopment nearing completion, Wayne Towne Center is now included in the R.J. Brunelli survey). On Route 10 in Livingston, G&S Investments has nearly re-tenanted a 138,000-square-foot power center that had been totally vacant for several years after the bankruptcies of three of its anchors: Circuit City, Linens 'N Things and Borders. To date, deals have been signed with Nordstrom Rack, TJ Maxx, Cost Plus World Market, Buy Buy Baby, DSW and Ulta, taking approximately 121,500 square feet of vacant space off the market.
Results for the individual northern New Jersey roadways are as follows:
Route 17. Following three straight years of increases, the vacancy rate along the 15-mile section extending from Paramus to Mahwah plunged to 6.2% from 8.3% in 2013. Over the last 10 years, the roadway's vacancy factor hit a low of 3.2% in 2005 and a high of 8.7% in 2010.
The firm's 2014 study found 311,537 square feet of vacancies in the corridor's 5.05 million square feet of space, with empty storefronts seen in 20 of the 152 properties reviewed. Big-boxes accounted for 43.3% of the vacant space, down sharply from 60.8% a year ago, but still the highest ratio in northern New Jersey.
Big-box absorption along Route 17 was led by the aforementioned Home & Kidz takeover of the long-vacant, 90,000-square-foot former Home Depot Expo in Paramus. Other notable moves in Paramus included Mitchell Gold+Bob Williams Furniture's lease of the former Pearl Art building and Equinox health club's deal for the former K&G Menswear store, taking a combined 50,000 square feet off the market. In Ramsey, L.A. Fitness leased the remaining 20,000 square feet of the former Circuit City store, taking the space occupied for a short time by XSRE (Basset Furniture took the other half last year).
Those new deals were partially offset by the closings of a 25,000-square-foot Staples in Paramus as part of that chain's strategic downsizing and the 25,000-square-foot Golf Galaxy at 160 Route 17 in Paramus (the latter relocating to Paramus Town Square), adding to an inventory that includes multi-year vacancies of the former Syms, Electronics Expo and Sixth Ave. Electronics spaces.
At the same time, several big-boxes opened along Route 17 in new space or locations that were occupied in last year's survey. These included the 55,000-square-foot PGA Tour golf superstore in Paramus; a 20,000-square-foot showroom from tile manufacturer Porcelanosa on the roadway's southbound side in Paramus, adding to a presence that already included a showroom in its U.S. headquarters building on the northbound side in Ramsey; and a 20,000-square-foot Screamin' Parties kids party venue in Paramus.
Route 4. The vacancy rate along the three-mile stretch between River Edge and Paramus rose for the fourth consecutive year to 7.8% from 5.4% in 2013, as closures of a 15,000-square-foot Famous Footwear in the Kohl's center and several other smaller spaces added to the 42,000-square-foot former Daffy's building that went dark several years ago. Over the last 10 years, the corridor's vacancy rate ranged from a low of 3.2% in 2007 to a high of 10.6% in 2005.
R.J. Brunelli's 2014 study uncovered 163,027 square feet of vacancies in the 2.09 million square feet reviewed, with 12 of the highway's 47 properties having availabilities. With Daffy's the only empty large building, big-boxes accounted for 25.9% of the corridor's vacancies.
Route 10. Sparked by a 68.5% plunge in empty big-box space, the vacancy rate along the 20-mile Livingston-to-Ledgewood corridor fell to 11.6% from 13.5% over the past year. While down from the 10-year high of 13.8% recorded in 2011, the 2014 rate still contrasts sharply with the low of 1.5% in 2005, as landlords' progress in leasing a huge inventory of empty big-boxes has been partially offset by rising availabilities of smaller spaces.
The 2014 study showed a total of 629,178 square feet of vacancies in the 5.41 million square feet evaluated, with availabilities in 39 of the 179 properties. Notably, with over 234,000 of large spaces leased during the past year, big-boxes' share of total vacancies tumbled to 17.1% from 47.1% in the 2013 survey.
Big-box absorptions were led by the aforementioned 121,000 square feet in deals at the revived former power center in Livingston (now called Livingston Center); Farmtastic's takeover of the 43,200-square-foot former Pathmark in Whippany; Fresh Market's lease for a 23,000-square-foot portion of the former Pathmark in Livingston; Big Lots' deal for the long-empty 25,000-square-foot Office Depot at 585 Route 10 in Livingston; Jo-Anne Fabrics' lease of the 22,000-square-foot former Stein Mart in Roxbury Mall; and At Home Furniture's move into a 22,500-square-foot pad site at the Kmart-anchored center in Randolph.
On the other hand, two big-boxes became available when Shop-Rite closed its 40,200-square-foot store in the Kohl's anchored center at the intersection of Route 202, and the 25,000-square-foot Electronics Expo in the Roxbury Mall that closed in the wake of the chain's 2013 bankruptcy filing.
Other big-boxes opening in the past year included the 23,000-square-foot Affinity Fitness in Whippany.
Route 46/3. The vacancy rate along the 21-mile corridor of Route 46 between Dover and West Paterson and the adjoining section of Route 3 in Clifton slipped to 5.5% this year from 5.7% in 2013. This continues a roller-coaster ride over the past 10 years that's seen the rate go from a low of 2.1% in 2008 to a high of 7.3% in 2011.
In its 2014 survey, R.J. Brunelli found 414,024 square feet of vacancies in the 7.56 million square feet studied, with availabilities in 37 of the 203 sites studied. Big-boxes accounted for 45.5% of the corridor's vacancies, up from 31.5% a year ago.
Only two big-boxes were available at the time the survey was conducted, both at Willowbrook Plaza: the aforementioned, newly vacant Costco building and a 38,200-square-foot Electronics Expo that's been empty for several years. In addition to the new Costco and Dick's at Wayne Towne Center, new big-box leases completed during the past year included Bloomingdale's Furniture's deal for a 40,000-square-foot space in Parsippany's Morris Hills Shopping Center that became available after P.C. Richards relocated to a freestanding former Circuit City building in Wayne; Retro Fitness' take-over of a vacant 28,000-square-foot health club in Ledgewood's Kenvil Shopping Plaza; and a Farmers Market's move into the 20,500-square-foot former All Brands Furniture in Rockaway.
Additional big-boxes debuting in the past year the 34,300-square-foot Bow Tie Cinema, which took over the former AMC in Parsippany, and the 40,000-square-foot Hobby Lobby in Totowa.
Route 23. Maintaining its status as the roadway with the lowest vacancy rate among the 10 corridors studied by R.J. Brunelli in northern and central New Jersey, the 10-mile section between Wayne and Butler saw its vacancy factor inch down to 4.6% from 4.7% in 2013 and the 10-year high of 4.9% set in 2012. Over the last 10 years, Route 23's vacancy rate has been as low as 1.4% in 2005, as a lack of buildable land prevents any measurable expansion of the highway's overall inventory.
R.J. Brunelli found 109,663 square feet of vacancies in 2.36 million square feet, with availabilities in 15 of the 76 properties evaluated. No big-box spaces were empty at the time the survey was conducted. Big-boxes debuting on the corridor during the past year included the 20,000-square-foot Spa 23 Fitness and Lifestyle in Pompton Plains.
Route 22. After reaching a 10-year high of 9.7% in 2012, the vacancy rate along northern New Jersey's most heavily-retailed corridor continued its descent to 7.4% from 8.3% a year ago behind another flurry of big-box deals. But with smaller-store vacancies weighing on the market, the corridor's rate has a long way to go before moving down to the 10-year low of 2.4% set in 2007.
The firm's 2014 survey uncovered 561,769 square feet of empty space in the 7.64 million square feet reviewed along the 21-mile stretch of Route 22 from Union to Somerville, as well as nearby properties along intersecting Route 202/206 from the Somerville traffic circle north into Bridgewater, plus the nearby Route 28/287 intersection in Bridgewater. Availabilities were seen in 45 of the 254 sites.
Big-box vacancies dwindled to just 185,000 square feet (all in the former Sixth Ave. Electronics building in Springfield and the former Home Depot Expo on Route 202 in Bridgewater) from 302,500 square feet a year ago, slashing their share of total vacant space to 32.9% from 48.1%. Capturing two spaces that became available last year, Ashley Furniture took the 30,000-square-foot former Jason's Furniture store in Greenbrook and Mavis Tire leased the former 25,000-square-foot Sears Auto Center in Union. Elsewhere, Kidstown moved into an empty 25,000-square-foot space in Union Plaza and Steinmart leased the former 25,000-square-foot Borders at Watchung Square.
R.J. Brunelli expects to release its report on the central New Jersey market next week.
For copies of the firm's northern or central New Jersey studies, contact R.J. Brunelli & Co., 400 Perrine Road, Suite 405, Old Bridge, N.J., 08857, or visit www.njretailrealty.com. Telephone is (732) 721-5800.
SOURCE R.J. Brunelli & Co.
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