A&P BANKRUPTCY PUSHES CENTRAL NJ RETAIL VACANCY RATE TO 8.8%, R.J. BRUNELLI STUDY FINDS

OLD BRIDGE, N.J. (12/16/15)—The demise of The Great Atlantic & Pacific Tea Co. elevated the retail

vacancy rate along central New Jersey’s major shopping corridors to 8.8% from 7.5% in 2014, according

to the latest study by R.J. Brunelli & Co., LLC. Despite the uptick, the region’s 2015 vacancy factor

remained a healthy distance from the 10.2% recorded in 2013 and the eight-year high of 10.5% set in

2011, but was well above the period’s low point of 4.8% posted in 2008.

In its 26th annual study of the central New Jersey market, the Old Bridge-based retail real estate brokerage

uncovered 2.87 million square feet of vacancies in the 32.58 million square feet of space reviewed along

State Highways 1, 9, 18 and 35 in Mercer, Middlesex and Monmouth counties, and a small section of

Ocean County. A slight reduction in the vacancy factor along Routes 1 was unable to compensate for

A&P-induced increases on Routes 9, 18 and 35.

R.J. Brunelli’s 2015 study found vacancies in 179 of the 821 sites visited throughout the region during

this year’s third quarter. The study evaluates shopping centers and freestanding buildings exceeding 2,000

square feet—including restaurants, auto service facilities and vacant auto dealerships whose location and

configuration makes them viable for retail use. Regional malls and centers under construction or in the

early or mid-stages of major redevelopment are excluded.

When combined with the year-over-year increase in the vacancy factor for six northern New Jersey

highways to 7. 9% from 7.3%, the overall north/central vacancy rate for the 10 retail corridors surveyed

by the firm rose to 8.4% from 7.4% a year ago. R.J. Brunelli found a total of 5.23 million square feet of

empty space in the 62.36 million square feet reviewed in the two regions, with big-box spaces (20,000

square feet and above) representing 2.07 million square feet, or 45.7%, of the vacancies—up sharply from

1.41 million, or 31.2%, in the 2014 study.

“Clearly, the A&P bankruptcy was the big story for New Jersey retail real estate in 2015,” said R.J.

Brunelli CEO/Principal Ron DeLuca, who directs the firm’s annual survey. “Along the four central New

Jersey corridors alone, recent closures of four A&P and two Pathmark locations that have yet to find new

occupants threw approximately 322,000 square feet of space on the market. Indicative of the impact of the

closings, had those stores remained occupied, the central region’s vacancy factor would have ticked up 30

basis points from a year ago to 7.8%.”

Mr. DeLuca added that those A&P totals exclude a number of locations off the four corridors that remain

vacant. “A&P’s bankruptcy exacerbated another difficult year for supermarkets in central New Jersey,

compounding the effects of closures of a Stop & Shop on Route 9 in Manalapan and several Foodtowns

off the corridors. The closings point to heightened competition from the likes of volume-leader ShopRite,

such higher-end players as Wegman’s and Whole Foods, Aldi at the low end, as well as Walmart

Supercenters, Costco and other warehouse clubs, and the growing web-based delivery services,” he said.

“On the other hand,” Mr. DeLuca continued, “there was some good news in the central region,

highlighted by Acme’s re-opening of five former A&P sites in Monmouth and Middlesex counties,

including corridor locations on Route 9 in Old Bridge and Route 35 in Wall. Acme was far and away the

most opportunistic buyer at the A&P auction, beefing up its presence in New Jersey by snapping up 35

sites statewide, including 25 in northern counties, the five central stores and another five in the southern

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Shore region. These accounted for nearly half of the 72 locations the chain took in an area extending from

Maryland to Connecticut.”

Stop & Shop, the second largest player in the A&P auction, took 24 locations in the metro New York

area, including three in northern New Jersey. The eight other New Jersey locations acquired to date

through the auctions—all but one in northern counties—were taken by smaller operators, including

several focused on ethnic fare. That ethnic group includes California-based Tawa Supermarket Inc.,

which announced lease acquisitions of Pathmark locations on Route 1 in Edison and in Jersey City. This

will pave the way for a Garden State debut for Tawa, which currently operates 39 Asian supermarkets

under the 99 Ranch Market name in California, Washington, Nevada and Texas.

“Tawa’s move is emblematic of ethnic grocers’ efforts to seize opportunities in areas whose

demographics are appropriate for their offer,” noted Mr. DeLuca. “We suspect that some of A&P’s

remaining locations throughout the state could go to ethnic operators in the months ahead. More

conventional chains looking at former A&P sites include The Fresh Market, Best Market, Kings, and

others. However, given the competitive climate, we believe that a fair number of locations will ultimately

go to non-food uses. Examples to date include the long-vacant Pathmark on Route 35 in Middletown,

now being subdivided to accommodate TJ Maxx and Bed, Bath & Beyond stores, and the re-leasing of

another previously vacant Pathmark and adjoining space on Route 1 in North Brunswick to accommodate

Raymour & Flanigan. In a number of cases, where zoning allows, landlords will be also looking at non-
retail uses that can fill space and drive traffic to satellite tenants.”

After experiencing a decline in the firm’s 2014 survey, the amount of empty big-box spaces (20,000

square feet and above) along the central New Jersey corridors expanded once again in the wake of the

A&P bankruptcy to 1.02 million square feet from 796,053 square feet a year ago. Big boxes accounted for

43.6% of all empty space, up from 34.1% a year ago.

The 2015 ratio would have been higher but not for several key big-box absorptions that partially offset the

impact of the 322,000 square feet of recently closed A&P and Pathmark space, the 50,000-square-foot

Stop & Shop in Manalapan, and a 21,600-square-foot Tuesday Morning in Howell. In addition to the

aforementioned re-leasing of the previously vacant Pathmarks in Middletown and North Brunswick, Auto

Zone took a 36,000-square-foot portion of the long-empty 54,700-square-foot former Home Depot

building on Route 18 in East Brunswick. Finally, on Route 35 in Ocean, Prime Fitness took over the

vacant 20,000-square-foot Ocean Fitness space.

“Outside of the turbulent supermarket situation, the central region’s big-box inventory was relatively

stable during the past 12 months,” noted Danielle Brunelli, the firm’s President/Principal.

“Major tenant changes that did not impact the vacancy factor were highlighted by Hobby Lobby’s current

renovation of the freestanding former American Signature Furniture building on Route 1 in Woodbridge,

Gourmet Giant’s takeover of the ShopRite on Route 9 in Lakewood that was vacated when ShopRite

opened a new World Class store a few miles north in Howell’s redeveloped Friendship Plaza, and the

recent debut of Nordstrom Rack in new space added to the Eatontown Crossing center at the junction of

Routes 35 and 36.”

Vacancies also increased in the central region’s small-store and restaurant space, albeit at a slower pace

than the 27.9% jump in big-box inventory. All told, the corridors’ inventory of vacant smaller (sub-

20,000 square feet) spaces grew by a net of 312,388 square feet, or 20.3% to 1.54 million square feet.

These included multiple closings in the region by chains that filed for bankruptcy, are in downsizing

mode or are selectively shutting unproductive locations. These included Radio Shack, Buddy’s Small

Lots, Friendly’s, Staples, AAA, and GAP, to name a few.

Active players in central New Jersey included R.J. Brunelli clients AAMCO, Dollar Tree, Max Fitness,

and Red Robin. Other operators with multiple deals along the corridors include AT&T, Auto Zone, CKO

BRUNELLI CENTRAL NJ STUDY…3

Kickboxing, Farmer’s Insurance, Jersey Mike’s, Sports Clips, and Starbucks, while convenience

store/fuel centers Quick Check and WAWA, have been active players on and off the corridors.

“In terms of non-retail concepts, full-scale gyms, specialized exercise and dance studios, children’s gyms,

tutoring and day-care centers continue to expand, while family recreation and entertainment concepts

have been accelerating their growth,” Mr. DeLuca noted. “The e-cigarette business has also spawned a

large number of so-called vape shops. Demand from urgent care and other medical facilities appears to

have slowed a bit, perhaps due to the consolidation of hospitals and concurrent moves by some to open

their own, off-site outpatient facilities. The latter trend is exemplified by Monmouth Medical Center’s

plans to build a 50,000-square-foot facility on an empty outparcel at nearby Monmouth Mall (a property

not included in the vacancy study).”

On the new development front, progress remains mixed on several major projects proposed for the central

region. Among those now out of the ground, Greenleaf at Howell (formerly The Grove at Howell), a

200,000-square-foot power center on Route 9 North, welcomed its first tenant, an 88,000-square-foot

B.J.’s Wholesale Club, earlier this year. Next in line for the site is Xscape Theatres, which is reportedly

opening in March 2016. On Route 1, Edison Town Square announced that its long-open Sam’s Club will

be joined late next year by Topgolf, a family entertainment and event venue combining a multi-level

driving range, upscale sports bar/restaurant, kids play area, and more. Upon completion, the development

on the site of a former General Motors plant is expected to house up to 600,000 square feet of retail,

restaurant and entertainment space. Further south on the roadway, Target and Costco remain the sole

occupants of Main Street North Brunswick, a major mixed-use transit village with up to 450,000 square

feet of retail and restaurant space, along with multi-family housing and a new NJ Transit train station.

In eastern Middlesex County, Bass Pro Shops and Regal Cinema are signed as the initial anchors for the

550,000 -square-foot power center at The Point at Sayreville, a phased, mix-use development of a former

industrial site that’s proposed to include an upscale enclosed regional mall and waterfront housing. R.J.

Brunelli & Co. brokered a deal that will bring a Wawa convenience store and fuel center to the site. On

Route 35 in Monmouth County, pre-leasing is under way on The Shoppes at Middletown, a proposed

380,000-square-foot town center that calls for a special grocer, luxury movie theater, and a mix of

specialty retailers and restaurants.

Results for central New Jersey’s individual roadways are as follows:

Route 1. The 30-mile corridor extending from Woodbridge to Trenton was once again the strongest

highway in central New Jersey, as the vacancy factor declined for the seventh straight year to 6.0% from

6.3% in 2014. Over the past eight years, the corridor’s vacancy factor has ranged from a low of 3.5% in

2008 to a high of 9.5% in 2009.

R.J. Brunelli’s 2015 study found 624,137 square feet of vacancies in 10.4 million square feet;

availabilities were seen in 37 of the roadway’s 140 retail sites.

Route 1’s big-box vacancies edged down 2.7% to 247,662 square feet, or 39.7% of the roadway’s empty

space—vs. 43.8% in 2014. The only new big box vacancy to emerge in 2015 was the 55,300-square-foot

A&P in North Brunswick—not far from the previously empty Pathmark that, along with adjoining space,

was absorbed this past year by the 62,000-square-foot Raymour & Flanigan. The balance of the inventory

comes from a number of longstanding vacancies.

In addition to the aforementioned Hobby Lobby in Woodbridge, another bog-box newcomer to the

corridor was Value City Furniture, which rapidly took over the 40,000-square-foot Sports Authority in

Iselin.

BRUNELLI CENTRAL NJ STUDY…4

Route 18. The closure of a 55,600-square-foot Pathmark pushed the vacancy rate along the five-mile

retail corridor in East Brunswick to 13.9% from 12.1% a year ago. Over the last eight years, the

roadway’s vacancy factor has been as high as a whopping 22.1% in 2011 and as low as 7.3% in 2008.

All told, there were 378,090 square feet of vacancies in the roadway’s 2.72 million square feet of space;

availabilities were found in 22 of the 89 properties reviewed.

With the Pathmark vacancy partially offset by the aforementioned move by Auto Zone to take 36,000

square feet of the former small-format Home Depot in that same center (leaving 18,700 square feet

available), Route 18’s inventory of empty big-box space increased by 25.2% to 96,947 square feet, or

25.6% of the corridor’s vacancies—up from 23.5% a year ago.

Meanwhile, the 15,000-square-foot former 6th Ave. Electronics building was subdivided, with R.J.

Brunelli brokering a deal for a 6,600-square-foot AAMCO that was joined by a pet hotel and deli, leaving

3,000 square feet available. Elsewhere, newcomers in the 10,000- to 20,000-square-foot range included

Room & Home Furniture and The Learning Experience.

Route 9. Closings of a 59,250-square-foot Pathmark in Old Bridge, the 50,000-square-foot Stop & Shop

in Manalapan and 21,600-square-foot Tuesday Morning in Howell caused the vacancy rate along the 35-

mile Woodbridge-to-Lakewood corridor to jump to an eight-year high of 11.2% from 7.7% in 2014. Over

that period, the roadway’s vacancy factor reached a low of 3.6% in 2008.

A total of 1.05 million square feet was vacant in the 9.41 million square feet studied by the firm, with

availabilities in 62 of the 249 properties visited.

The three aforementioned closures caused the inventory of empty big-boxes to surge by 67.8% to 323,853

square feet, or 30.7% of the highway’s total vacancies—up from 27.8% in 2014. The three new big box

vacancies are joined by two longstanding ones: a 165,000-square-foot former Lowe’s in Old Bridge and a

28,000-square-foot former Linens ‘n Things in Howell. Route 9’s big-box picture would have been worse

but not for Acme’s re-opening of the A&P in Old Bridge and Gourmet Giant’s absorption of the

Lakewood ShopRite.

As noted, the roadway’s big-box activity during 2015 was also marked by BJ’s debut as the first anchor in

the new Greenleaf at Howell power center.

Openings in the 10,000- to 20,000 square-foot range included Power House Gym in Old Bridge Plaza.

Route 35. Following a steep decline in 2014 to 7.2% from an eight-year high of 13.0% in 2013, the

vacancy rate along the most heavily-retailed corridor in central and northern New Jersey escalated to

8.1%, with A&P again playing a major role. Looking back over the last eight years, the vacancy factor

was as low as 6.1% in 2008.

R.J. Brunelli’s 2015 study found 812,865 square feet of vacancies in the 10.06 million square feet

reviewed along the 25-mile Aberdeen to Brielle corridor and an adjoining section of Route 36 extending

from its intersection with Route 35 in Eatontown to West Long Branch. Availabilities were seen in 58 of

the 821 properties studied.

Closures of A&P stores in Aberdeen and Holmdel and a Pathmark in Hazlet—all within several miles of

one another—added nearly 152,000 square feet to the corridor’s inventory of empty big boxes. With those

closings offsetting the aforementioned absorptions of the long-vacant Middletown Pathmark to TJ Maxx

and Bed, Bath & Beyond, and the former Ocean Fitness in Wall to another gym, empty big-box space

climbed by 29% to 349,742 square feet, or 43.0% of the corridor’s vacancies—up from 37.2% in 2014.

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On a positive note, Acme re-opened the recently shuttered A&P in Wall, just south of a new Whole Foods

that, in late-2014, had leased the former Brielle Sports Club space.

Notable openings in the 10,000- to 20,000-square-foot category included New Jersey’s second Cost Plus

World Market in Shrewsbury, R.J. Brunelli client Athena Learning Center in Middletown, an AAA car

care, travel and insurance center in Middletown, Value City Furniture in Eatontown, and Ulta in

Consumer Square on Route 36 in West Long Branch.

For copies of R.J. Brunelli & Co.’s central or northern New Jersey studies, contact R.J. Brunelli & Co.,

400 Perrine Road, Suite 405, Old Bridge, N.J., 08857; visit www.njretailrealty.com, or call (732) 721-

5800.