CENTRAL N.J. RETAIL VACANCY RATE DECREASED TO 3.8% IN 2003, ANNUAL R.J. BRUNELLI SURVEY REPORTS
Vacancies in retail properties along central New Jersey’s four most significant shopping corridors decreased for the third consecutive year during 2003, reaching its lowest level in over 10 years. According to R.J. Brunelli & Co., Inc., the region’s vacancy factor dropped to 3.8% last year from 4.8% in 2002 and 5.7% in 2001, with declines on Routes 1, 9 and 35 offsetting an increase on Route 18.
The Old Bridge-based retail real estate brokerage’s 15th annual study of the central New Jersey region found a total of 946,783 square feet of vacancies in the 24.77 million square feet of space reviewed along the four highways in Mercer, Middlesex and Monmouth counties, and a small section of Ocean County. This compared with 1.16 million square feet of availabilities in the 24.27 million square feet evaluated in the firm’s 2002 study. The 2003 study, which was conducted in January 2004, examined shopping centers and freestanding buildings exceeding 2,000 square feet-including restaurants and auto service facilities. Regional malls and centers under construction or major redevelopment are excluded.
“Two-thousand-three was simply an excellent year for retail real estate in central New Jersey,” commented Richard J. Brunelli, president of the brokerage. “The 3.8% vacancy factor was not only the lowest we’ve seen in over the last 10 years, but also within striking distance of the 3.2% we found for northern New Jersey, which, due to its dense population and lack of new development opportunities, has traditionally been the stronger of the two regions. Since the time we began conducting the surveys, this is the first year that the two regions were so close.” As reported last week, R.J. Brunelli found 807,669 square feet of vacancies in the 25.44 million square feet studied along Routes 4, 10, 17, 22, 23 and 46.
“Notably, approximately 70,000 square feet of the 2003 vacancies evolved from three closed Kids ‘R’ Us locations in the properties we studied along the four corridors,” Mr. Brunelli said. “Those openings should all be absorbed very shortly, with Office Depot expected to take most of the nine locations along the northern and central New Jersey corridors, operating some under its own banner and subleasing the balance to non-competing retailers.”
Results for central New Jersey’s individual roadways are as follows:
Route 1. After climbing to 4.8% in 2002 from a slight 1.8% in 2001, the vacancy factor settled down to 2.5% last year along the 30-mile Woodbridge-to-Trenton corridor. Until the spike in 2002, the roadway’s rate had steadily declined from the 7.7% registered in 1997.
The firm’s 2003 study uncovered 189,267 square feet of availabilities in the 7.52 million square feet evaluated, down from 361,400 square feet in 7.48 million square feet in 2002. Openings were found in 17 of the corridor’s 106 properties, versus 16 in the 103 reviewed in the 2002 survey.
“Absorptions of a number of vacant big-box spaces drove the vacancy rate along Route 1 to its second lowest level over the last 10 years,” noted Mr. Brunelli. “We could see further improvements on the corridor this year, as the property that currently has the largest amount of vacant space, Mercer Mall in Lawrenceville, was recently sold to a more active owner, Federal Realty. In particular, that center’s vacant Kids ‘R’ Us store is expected to be leased shortly, along with the defunct chain’s other Route 1 location in Woodbridge’s Plaza 1.”
The decline in the 2003 vacancy rate was primarily triggered by a series of major deals in the central and southern segments of the corridor. In North Brunswick’s Brunswick Shopping Center, vacancies plunged from 67,000 square feet in 2002 to just 4,500 square feet after LA Fitness and A.J. Wright took over the former Ames space. In Plainsboro, the 75,000 square feet of retail vacancies in the mixed-use Forrestal Village in 2002 were trimmed to approximately 16,000 square feet following a redesign under which a major portion of the property’s store space was converted to office. In Lawrenceville, vacancies in Mercer Mall were halved to just over 50,000 square feet during 2003 after Shop-Rite took over a former Kmart space, with this gain partially offset by the aforementioned departure of Kids ‘R’ Us.
In one of the most notable developments along the corridor, Home Depot and Stop & Shop have leased the remaining available space in the 266,000-square-foot South Brunswick Square, a redeveloped property that had approximately 12,000 square feet of vacant space in 2002, but took a hit earlier last year when the freestanding Macy’s department store closed. “For years, this center was a sore thumb along the whole Route 1 corridor,” Mr. Brunelli commented. “First, Jamesway closed, then Stern’s came in, only to be replaced by sister store Macy’s when Federated Department Stores phased out the Stern’s brand. Not long after that conversion, Macy’s decided to close that location. The additions of Home Depot and Stop & Shop to the existing Bloomingdale’s Furniture Outlet represent a very significant, positive change for a property that was really not suited for a freestanding department store.”
Route 18. Due largely to problems at a single property, the vacancy rate along the five-mile East Brunswick corridor expanded to 4.9% in 2003 from 2.9% in 2002, reaching its highest level since the peak of 9.4% in 1997.
With the roadway’s total amount of space unchanged from 2.22 million in the 2002 survey, R.J. Brunelli found that vacancies escalated to 108,700 square feet from 64,500 square feet over the past 12 months. Eight of the highway’s 61 properties had openings, down from nine a year ago.
“Route 18’s problems during 2003 were primarily focused at 18 Central, a center whose owner experienced financial difficulties and subsequently sold or lost a number of its properties to lenders,” Mr. Brunelli said. After losing its Wiz store to bankruptcy in 2001, the property saw its Office Max and Party City stores relocate across the highway to Midstate Mall in 2003. Taken together with a Kids ‘R’ Us store that occupied its own parcel, approximately 64,000 square feet is now vacant at the 100,000-square-foot site. “With retailers concerned about the property’s ownership status, it has been difficult to generate interest for space at 18 Central,” he explained.
Elsewhere on the highway, R.J. Brunelli recently filled an 8,000-square-foot vacancy at The Miracle Mall with Lakeshore Learning Center, filling space left by Lucille Roberts. Moving further east, the long-awaited redevelopment of the Meyers Center-a largely vacant center taken off the survey for the last several years pending the redevelopment-is expected to begin this year, with a sale of the property now
under contract. R.J. Brunelli has been appointed exclusive leasing agent for the property, which is expected to house approximately 135,000 square feet of space.
Route 9. After plunging to 5.0% in 2002 from 10.8% in 2001, the vacancy rate along the 35-mile Woodbridge-to-Lakewood corridor dropped to 3.9% during 2003-its lowest level in more than 10 years. During that timeframe, the rate had been as high as 11.5% in 1997. Notably, the improvement during 2003 came despite the net addition of approximately 580,000 square feet of space to the highway’s inventory, primarily in the Howell area.
All told, the 2003 survey found 278,666 square feet of vacancies in 7.08 million square feet, compared with 326,180 square feet in 6.50 million square feet in 2002. Vacancies were seen in 20 of the 128 properties evaluated, down from 23 in 128 sites the prior year.
“The big news along Route 9 was the completion of two fully leased, major projects on the southern end of the corridor in Howell,” said Mr. Brunelli. Opening last year were Lanes Mill Marketplace, a 400,000-square-foot power center anchored by Target, Lowe’s Home Improvements, Stop & Shop and Barnes & Noble. Additionally, build-out was completed on the 280,000-square-foot Howell Commons, where T.J. Maxx, Linens ‘N Things, Pier 1 Imports and others joined Kohl’s and Applebee’s, which had previously opened.
“These two projects vividly represent how strong residential growth along the Route 9 corridor has historically supported major new retail developments,” Mr. Brunelli observed. “Now, for the first time, the Howell Township/Lakewood trade area has a major grouping of modern shopping centers servicing the thousands of new residents that have moved into this area. For years, once you went south of Freehold, there were no major retail developments until you got to Brick Township in Ocean County. That began to change in the late 1990s when Wal-Mart and Home Depot broke into these areas with freestanding locations. As we’ve seen in many other markets, these two retailers set the trends and the others followed.”
Heading north, the move of Stop & Shop to Lanes Mill pushed up vacancies in Howell’s Aldrich Plaza to over 68,000 square feet, with that center still unable to fill an Rx Place space that had been available since 2002. In Freehold, a portion of a low-visibility, 45,000-square-foot former Rickel location in a Pathmark-anchored center was leased to Rainbow Direct, trimming vacancies there to 25,000 square feet.
In the high-income Manalapan/Marlboro area, the only major remaining vacancy is the 30,000-square-foot former Wiz building in Manalapan Epicenter anchored by Wegman’s, Target, Value City and Dick’s Sporting Goods. However, a deal is currently in progress for that space, which would leave just 8,000 square feet available in Manalapan. While the former Kmart building in Marlboro’s Cambridge Square remains unoccupied, the space has been leased to Home Depot, which is in the process of appealing the township planning board’s decision to prevent the chain from opening at that site.
Another former Kmart location in Old Bridge went dark last year, creating the single largest vacancy, 94,000 square feet, along the corridor. The impact of this opening, however, was countered by an R.J. Brunelli-brokered deal for the nearby, former 100,000-square-foot Home Depot building, which is being converted into The King Sports Plaza bowling and recreational center. Home Depot moved in 2001 from the site, one of its first in New Jersey (which R.J. Brunelli brokered in 1988) to a larger building across the road, just north of new Wal-Mart and Lowe’s stores. Also in Old Bridge, vacancies at Gateway Center were nearly halved during 2003 to 17,300 square feet, following deals with Bayshore Fitness and Hamilton Home Furnishings (the latter also brokered by R.J. Brunelli).
Route 35. The vacancy rate along the 25-mile corridor from Aberdeen Township to Brielle-which has the most retail space of the 10 central and northern New Jersey roadways reviewed by R.J. Brunelli-declined for the third straight year, dropping to 4.7% from 5.1% in 2002 and 5.8% during 2001. The 2003 rate is less than half of the 10-year peak of 9.6% set in 1997.
For 2003, the firm found 370,150 square feet of openings in the 7.95 million square feet surveyed, compared with 408,777 square feet in 8.07 million square feet in 2002. The net reduction of 120,000 square feet in the highway’s inventory was primarily triggered by the temporary removal from the survey of Ocean Plaza, an Ocean Township property saddled with 57,000 square feet of vacancies in 2002 that is now being demolished and redeveloped to make way for a Wegman’s supermarket. All told, 27 of the 139 properties reviewed in 2003 had vacancies, unchanged from a year ago. The firm’s study area also includes a section of Route 36, extending from its intersection with Route 35 in Eatontown, east to West Long Branch.
Moving south along the roadway, in Hazlet, Bayshore Plaza has still been unable to fill the vacant 53,000-square-foot former Service Merchandise space and will soon have an additional empty store following The Rag Shop’s upcoming relocation to Middletown Plaza, a transaction brokered by R.J. Brunelli. In Holmdel, vacancies nearly doubled last year at Holmdel Towne Center to 93,000 square feet following the closure of The Wiz. The A&P and Mega-Marshall’s anchored power center was sold last year to Kimco, which also just purchased The Commons, a fully-leased lifestyle center just across the highway that was completed in 2002. “Kimco, the largest owner of open-air centers in the country, is apparently still in the process of formulating a strategy for these two recently acquired centers,” Mr. Brunelli noted. “Once they have properly communicated that strategy to the brokerage community, we anticipate that the long-successful Holmdel Towne Center will return to high occupancy levels.”
While vacancies were on the rise in Hazlet and Holmdel, Middletown was the site of several big-box deals. Most notably, Whole Foods will open its first location in Monmouth County in the long-vacant former 42,000-square-foot A&P space in Chapel Hill Plaza. In the Pathmark-anchored Middletown Shopping Center, True Value Hardware will be filling an endcap space next to Applebee’s, bringing vacancies in that property down to just 2,700 square feet.
Space remained extremely tight in the Shrewsbury and Eatontown areas, with the only major vacancies being the remaining 17,000-square-foot portion of the former Toys ‘R’ Us store across from Monmouth Mall and the longstanding availability of the 26,000-square-foot former Rex Gene supermarket on the Route 36 extension. Approximately 16,000 square feet of the Toys ‘R’ Us space was leased to Fortunoff’s for its Backyard Store concept in a deal brokered by R.J. Brunelli. At the Route 66 crossroads in Neptune, vacancies were cut by over 50% to 56,000 square feet in a center anchored by Shop-Rite after Marshall’s and Workout World took more than half of the site’s former Ames building.
In the affluent Wall Township/Spring Lake/Brielle area, another section of the road with few availabilities, construction is expected to begin this spring on Brook 35 Plaza West, a 22,000-square-foot specialty center just across the road from Brook 35 Plaza, an upscale fully leased, 80,000-square-foot center also developed by Terranomics. “We expect this new project to be 100%-leased within the next 30 days,” said Mr. Brunelli, whose firm is exclusive leasing agent for the new site.
For copies of the central or northern New Jersey studies, contact R.J. Brunelli & Co. by filling out the NJ Vacancy Survey Request Form.