CENTRAL NEW JERSEY RETAIL VACANCY RATE ROSE TO 4.7% DURING 2007, ACCORDING TO R.J. BRUNELLI & CO. SURVEY
The vacancy rate in retail properties along central New Jersey’s four largest shopping corridors edged up to 4.7% in 2007 from 4.3% a year earlier in the wake of the bankruptcies of Levitz Furniture and The Rag Shops, and closings of Comp USA stores in all but a handful of Sunbelt markets, according to R.J. Brunelli & Co., Inc.
All told, the Old Bridge-based retail real estate brokerage’s 19th annual study of the central New Jersey market found 1.33 million square feet of vacancies in the 28.11 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. In its 2006 study, the firm found 1.19 million square feet of availabilities in 27.53 million square feet. The region’s 2007 rate was just below the mid-point of a 10-year vacancy factor that ranged from a low of 3.4% in 2005 to a high of 6.4% in 1998. While Route 9 posted a lower vacancy rate during 2007, that improvement was countered by increases on Routes 1, 18 and 35. Among the 517 properties reviewed along the four corridors, 96 had vacancies.
Conducted in January 2008, the 2007 study evaluated 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.
The 0.4-point increase in the region’s vacancy rate compared with the 0.7-point rise found in northern New Jersey. According to an R.J. Brunelli study released earlier this month, the vacancy factor along six major corridors in that region expanded to 3.6% in 2007 from 2.9% the previous year.
“Despite the increases experienced over the past year, northern and central New Jersey continue to post some of the lowest retail vacancy rates among major U.S. markets,” said Richard Brunelli, president of the firm. “As in northern New Jersey, the departures of Levitz, The Rag Shops and Comp USA had a sizable impact on the central market. Excluding a Rag Shop space that was already re-leased, the three Levitz, three Rag Shop and two Comp USAs that closed created approximately 305,000 square feet of new vacancies along the four corridors. Add in another Levitz location on Route 35 in Wall that has remained empty since our 2006 survey, and these three chains accounted for nearly 375,000 square feet, or 28%, of the central region’s available space.”
On the new development front, 2007 was marked by openings of a pair of fully-leased lifestyle centers by Stanbery Development on Route 9 in Old Bridge and Route 1 in North Brunswick (each with approximately 130,000 square feet), as well as Heritage Square, a 190,000-square-foot power center anchored by Target on Route 1 in South Brunswick, which is also 100%-leased.
This year is expected to bring the debut of the first phase of Summerhill Square, a 170,000-square-foot center now under construction on Route 18 in East Brunswick. R.J. Brunelli & Co., which is exclusive leasing agent for the property, has already lined up a combination Toys ‘R’ Us/Babies ‘R’ Us, which hopes to open in time for the 2008 holiday season in 64,000 square feet, as well as a 60,000-square-foot, two-level, Raymour & Flanigan furniture store. “We are now in negotiations with over a dozen other prospects for the balance of the space,” Mr. Brunelli said.
Other major new projects on the horizon in central New Jersey include Hartz Mountain Industries’ transformation of the former Ford plant on Route 1 in Edison into a 1 million-square-foot,
mixed-use center, as well as The Village at Manalapan, a planned 500,000-square-foot center near the Route 9 corridor. “Pre-leasing on The Village continues as we redesign the original site plan to accommodate the anticipated access point from State Highway 33,” said Mr. Brunelli, whose firm serves as exclusive leasing and development agent for the project.
Looking ahead, Mr. Brunelli said: “Unlike northern New Jersey, which has very little developable land left, the central part of the state has room for significant residential growth. In time, such residential growth will resume, supporting the development of additional shopping centers—assuming that municipalities accommodate commercial development and the tax relief it brings.”
Results for central New Jersey’s individual roadways are as follows:
Route 1. Following four straight years in the mid-2% range, the vacancy rate along the 30-mile section extending from Woodbridge to Trenton rose to 3.5% from 2.4% in 2006 and 2005. Over the past 10 years, the corridor’s vacancy factor has ranged from a low of 1.8% in 2001 to a high of 6.3% in 1998.
The firm’s 2007 study found 279,200 square feet of vacancies in 7.93 million square feet, up from 184,400 square feet in 7.55 million square feet a year ago. Twenty of the roadway’s 106 properties had availabilities.
Moving from north to south, Route 1’s vacancy rate was elevated primarily by closings of the 100,000-square-foot Levitz and 10,000-square-foot Domain furniture in Woodbridge, 15,000-square-foot Rag Shop in Edison’s Wick Plaza, 10,000-square-foot Pier One at North Brunswick Promenade, and 19,000-square-foot Comp USA at Nassau Park Pavilion in West Windsor. Meanwhile, approximately 14,500 square feet of the former 23,500-square-foot Office Max that closed in Woodbridge remains available.
In the roadway’s most significant absorption, Filene’s Basement took over the vacant Treasure Island at Mercer Mall, helping drive vacancies at that center down from 30,000 square feet to zero.
Elsewhere on the highway, the study found scattered small store vacancies, including availabilities totaling 25,000 square feet at Plainsboro’s Forrestal Village. “Although vacancies at this mixed-use property are up from last year, Levin Management has done a good job breathing new life into the center, recruiting exciting new tenants like Salt Creek Grille, Ruth’s Chris Steakhouse, CAN Do Fitness, and Koi Spa,” said Mr. Brunelli.
As noted, 2007 also brought the openings of the lifestyle center in North Brunswick and power center in South Brunswick, adding some 370,000-square-feet of fully-leased space. “Coming on top of other new developments and redevelopments in recent years, these point to the emergence of the North Brunswick-South Brunswick section of the highway as an important retail hub,” Mr. Brunelli commented.
Route 18. Propelled by the closure of a freestanding Levitz, the vacancy rate escalated to a 10-year-high of 7.3% in 2007 from 5.2% a year earlier along the five-mile East Brunswick corridor. Over the past 10 years, the highway’s vacancy rate has been as low as 2.8% in 2001.
The firm’s 2007 study found 177,200 square feet of vacancies in 2.42 million square feet of space, up from 124,000 square feet in 2.37 million square feet the prior year. Eleven of the corridor’s 63 properties had vacancies.
“If you factor out the impact of the 49,500-square-foot Levitz building, the vacancy rate for Route 18 would have remained stable at 5.2%,” Mr. Brunelli noted. Other closings driving up the 2007 rate included Rag Shops and Tuesday Morning stores at Loehmann’s Plaza; Borders at Midstate Mall; and The Gap and several smaller stores at 18 Central.
Notable additions to the Route 18 mix during 2007 included Golf Smith in the former 20,000-square-foot Seaman’s furniture building and Bonefish Grille and Carrabba’s restaurants on the pad of the power center co-anchored by Kohl’s, TJ Maxx, Dick’s and Circuit City.
Elsewhere, the owner of the 88,000-square-foot Miracle Mall has obtained approvals to add 30,000 square feet in connection with a renovation of the center. “Taken together with adjoining expiring leases, this gives them the ability to assemble a single space of approximately 64,000 square feet, which
would be the largest block available in East Brunswick today,” said Mr. Brunelli, whose firm is exclusive broker for the site. “We are currently in negotiations with prospective tenants.”
Elaborating on the aforementioned development of Summerhill Square, he commented: “This new property will add new life to a highly visible parcel where the long vacant Meyers center had been a blight on Route 18 for many years. The end product will be a credit to the developer and township. Developer Pagano Realty patiently and diligently steered its way through an unusually arduous process to gain title to the property. For their part, East Brunswick officials set the wheels in motion to accommodate Toys ‘R’ Us’ need to open in time for the 2008 holiday season—a tremendous display of municipal cooperation and vision that we’d like to see more often in New Jersey.” Toys ‘R’ Us will be relocating to the site from Loehmann’s Plaza, where it operates a smaller store, and adding its Babies ‘R’ Us unit to create a new dual concept store that will be its first in central New Jersey.
Route 9. The vacancy factor along the 35-mile Woodbridge-to-Lakewood corridor fell from 4.8% in 2006 to 3.6%–marking the highway’s lowest rate over the last 10 years. During that period, the rate peaked at 10.8% in 2001.
Vacancies in the 2007 study receded to 290,004 square feet in the 8.16 million square feet reviewed from 380,800 square feet of vacancies in 8.00 million square feet a year ago. Availabilities were seen in 28 of the 160 properties surveyed.
The decline was driven chiefly by Kohl’s absorption of the 84,000-former Kmart in Old Bridge that had been empty since 2003 and Best Buy’s takeover of a former 25,000-square-foot Frank’s Nursery site in Howell. Apart from the previously noted debut of Stanbery’s fully-leased, 130,000-square-foot lifestyle center in Old Bridge, other positive developments included the addition of a 18,000-square-foot Drug Fair at Pond Road Center in Freehold, and a 26,000-square-foot site with Walgreens and Ruby Tuesday adjoining the Lanes Mill Marketplace in Howell.
The lift from these and other new deals on the roadway was partially offset by closings of the 13,000-square-foot Rag Shop at the Old Bridge center where Kohl’s debuted; approximately 20,000 square feet from a pair of Old Country Buffets at Gateway Center in Old Bridge and Pond Road Center; an 8,900-square-foot Party City at Manalapan Epicenter; the 15,000-square-foot Odd Job Trading at the Bed, Bath & Beyond/Best Buy-anchored power center in Manalapan; and the 20,600-square-foot Comp USA on the ring road of Freehold Raceway Mall. Nearby on the ring road, a 25,000-square-foot former Marshall’s remains vacant. Those ring road sites are across from an approximate 100,000-square-foot outdoor lifestyle center addition to the mall that is fully leased. Also in Freehold Township, a 110,000-square-foot site that previously housed Pathmark (which closed in 2006) and Staples (closed in 2007), is being redeveloped as Patriots Crossing. Some 70,000 square feet remains available at the site, where local chain Jason’s Furniture recently took over the building long occupied by Steven’s Furniture.
Elsewhere on the highway, Costco backed away from plans to build on a site at Route 9 and Texas Road in Marlboro that now houses an under-performing Regal Cinema and an adjoining strip with several smaller tenants. “The owners of those parcels continue to pursue redevelopment options for the site, which is just across Texas Road from Stanbery’s lifestyle center,” Mr. Brunelli noted.
“At the southern end of our study area, the opening of Best Buy represented a continuation of the trend that’s seen the Howell-Jackson-Lakewood area add major national big-box retailers that were already in the Marlboro-Manalapan-Freehold market,” he said. “With no vacancies in the 700,000-plus-square-feet of power center space added in recent years, this area has clearly emerged as its own market, driven by the strong residential growth in those municipalities over the past decade.”
Route 35. With the departure of the 70,000-square-foot Levitz store in Eatontown joined by scattered closings of smaller stores and restaurants up and down the highway, the vacancy rate along the
25-mile corridor stretching from Aberdeen Township to Brielle increased from 5.2% in 2006 to 6.1% in 2007—the highest level over the last 10 years. Over that extended period, vacancies hit a low of 3.3% in 1999.
The firm’s most recent survey uncovered 588,218 square feet of vacancies in the 9.61 million square feet studied, compared with 501,263 square feet in 9.61 million square feet in 2006. Vacancies were found in 37 of the corridor’s 188 retail sites. The study area—which includes a section of Route 36, extending from its intersection with Route 35 in Eatontown, east to West Long Branch—has the most retail space of the 10 retail corridors studied by R.J. Brunelli in central and northern New Jersey.
The closing of the Levitz location in Eatontown added to an existing big-box inventory on the highway that included the furniture chain’s 70,000-square-foot store in Wall Township that went dark in late-2005, as well as the 165,000-square-foot Lowe’s store at Seaview Square in Ocean Township that was put back on the market in 2006 when the power center’s new owner announced plans to correct structural defects in the building’s floor rather than demolish the building. “Repairs are now under way on the floor and our brokerage now has three significant deals pending for the building and other space at Seaview Square,” Mr. Brunelli said.
In other activity at the nearly 1-million-square-foot Seaview Square, Michaels took over the lease of the center’s Rag Shop store and PetSmart opened in a new freestanding building. Value City is currently running a going-out-of-business sale at the center in connection with a move by the off-price department store chain’s new ownership to close a number of under-performing locations nationally.
Nearby in Ocean Township, plans have been announced for Kohl’s to open in Middlebrook Shopping Plaza, as space currently occupied by Cost Cutters and several smaller adjoining tenants will be demolished to make way for an approximate 95,000-square-foot store. Further north in Eatontown, in a deal brokered by R.J. Brunelli, Avalon Carpet took over an entire 26,000-square-foot-building previously occupied by Squan Furniture and Boater’s World. Across the road, in another R.J. Brunelli deal, Houlihan’s is now reportedly thriving in a freestanding building that previously housed a Lonestar Steakhouse.
In Shrewsbury, the perennially fully-occupied Grove replaced the departed Sealfon’s department store with Monmouth County’s first Anthropologie (in a deal procured by Brunelli vice president Danielle Brunelli) and Brooks Bros., which relocated from a smaller space in the lifestyle center. J. Crew took over the former Brooks Bros. space. Directly across Route 35, The Grove’s owners re-leased the space where Storehouse Furniture closed, rechristening the site as The Grove West and bringing in Ann Taylor Loft, Jack Rabbit and Billabong.
Further north in Holmdel, the deal to bring L.A. Fitness into the former Pharmor space at the 300,000-square-foot Holmdel Towne Center has been revived after the township reversed a previous zoning ruling forbidding this use. “This will help make a dent in major vacancies at a busy center where some headway was made last year with the openings of Jos. A. Bank and some smaller tenants in the former Wiz building and PetSmart’s relocation next door to the larger former Office Max space,” Mr. Brunelli noted. Also in Holmdel, Stein Mart just opened its second Monmouth County location at Kohl’s Plaza, taking over adjoining spaces previously occupied by T.J. Maxx and Boat U.S.
For copies of R.J. Brunelli & Co.’s central or northern New Jersey studies, contact R.J. Brunelli & Co., Inc., 400 Perrine Road, Suite 405, Old Bridge, N.J., 08857. Telephone is (732) 721-5800.
Press contacts: At R.J. Brunelli & Co., Inc., Richard J. Brunelli, president, (732) 721-5800; at Parness & Associates Public Relations, Bill Parness or Lisa Kreda (732) 290-0121.