RETAIL VACANCIES IN NORTHERN N.J. FELL TO HISTORIC LOW OF 2.0%, R.J. BRUNELLI & CO. 2002 SURVEY REPORTS
OLD BRIDGE, N.J. (3/10/03)— Vacancies in retail properties along northern New Jersey’s major shopping corridors dropped to an historic low of 2.0% during 2002, according to R.J. Brunelli & Co., Inc., which has been evaluating the region’s retail real estate landscape since 1990. The improvement from the 3.1% vacancy factor in the firm’s 2001 study was triggered by declines on Routes 4, 10, 46 and 22, offsetting higher rates on Routes 17 and 23.
According to the Old Bridge, N.J.-based retail real estate firm’s thirteenth annual study of the northern New Jersey market, 487,651 square feet of vacancies were found among the 24.71 million square feet of space reviewed along the six highways. By contrast, Brunelli’s 2001 report revealed 752,102 square feet of vacancies in the 24.16 million square feet studied. The region’s previous low, a 2.6% vacancy factor, was set in 1999.
Conducted in January, the study evaluated shopping centers and freestanding buildings exceeding 2,000 square feet along the six roadways and certain intersecting arteries in Bergen, Essex, Morris, Passaic, Somerset and Union counties. Freestanding restaurants and auto service facilities are also included, while enclosed regional malls and centers under construction or redevelopment are excluded.
“Reducing its already low vacancy factor in the face of a very difficult retail environment, northern New Jersey once again demonstrated why it remains one of the nation’s most desirable markets for retailers,” said Richard J. Brunelli, president of the firm. “With limited opportunities for new development, this densely populated region is able to easily absorb the effects of retailer bankruptcies and downsizings; as one chain goes out, another is waiting in the wings to step in. In fact, with possibly as much as 200,000 square feet of the region’s 488,000 square feet of available space situated in ill-conceived properties that have longstanding vacancies, Northern New Jersey’s rate could effectively be as little as 1.1%.
“Considering this supply-demand equation,” he continued, “the upcoming closings of Wiz and Zany Brainy stores, all of which were still operating at the time of our 2002 survey, are not expected to have a major impact on the region’s vacancy factor. None of the corridors’ Kmart locations were included in the chain’s first or second round of store closings. However, if any are ultimately shuttered, rapid absorption could be expected.”
Results for the individual northern New Jersey roadways are as follows:
Route 17. The vacancy rate along the 15-mile Paramus to Mahwah stretch rose slightly to 1.9% during 2002 from the historic low of 1.5% in the 2001 survey, but compared favorably with the 2.1% factor in 2000, 5.2% in 1999, and 3.7% in 1998. Brunelli’s 2002 survey uncovered just 76,300 square feet of vacancies in the 3.97 million square feet evaluated. Only six of the 138 properties along the corridor had vacancies, compared with eight in the 139 surveyed in 2001.
The 0.4-point increase in Route 17’s vacancy rate was triggered primarily by a rise in vacancies to 39,000 square feet in the 446,800-square-foot Fashion Plaza power center (which is still better than 91%-leased), as well as the closing of Service Merchandise in the center anchored by Burlington Coat Factory. Modell’s took a portion of the former Service Merchandise space, leaving 6,000 square feet available.
Meanwhile, Ikea has commenced development on the long-vacant former Alexander’s property at the junction of Route 4. The Swedish retailer will be adding approximately 170,000 square feet of new GLA to the roadway, including 130,000 square feet for its own store. “Ikea’s development team has just begun discussions with prospective retailers for the 40,000 square feet of satellite space that will adjoin its store,”
Mr. Brunelli noted. “Given this high-profile location, we anticipate that this space will be quickly leased.”
Route 4. Vacancies along the three-mile area from Paramus to Fairlawn fell sharply to 1.7% during 2002 from 3.8% in 2001, moving the factor closer to the record low of 1.0% found in the firm’s 1998 survey. Brunelli’s 2002 report showed just 17,500 square feet available in the 1.04 million square feet of space situated along the roadway. Small-store vacancies—none exceeding 5,000 square feet—were found in five of the 46 properties reviewed, down from six in the 2001 survey.
The drop in the roadway’s vacancy rate was keyed by the opening of Thomasville Furniture in the former Mall at Four site, leaving just 5,000 square feet available in the ‘de-malled,’ 135,000-square-foot center.
Route 23. After plunging to a record low 1.1% during 2001 from 3.9% during each of the three previous years, vacancies edged up to 1.6% along the 10-mile Wayne-to-Butler portion of Route 23. All told, the 2002 survey uncovered 26,900 square feet of available space in the 1.67 million square feet studied. Vacancies were found in four of the 53 properties reviewed; in 2001, five properties had openings.
Brunelli attributed the roadway’s increase to vacancies at the 300,000-square-foot Plains Plaza in Pompton Plains, which went from 100%-leased in the 2001 survey to 96%-leased.
Route 46. The absorption of two major spaces at Arlington Plaza in Parsippany nearly halved this roadway’s vacancy factor to 1.5% from 2.9% in 2001, moving the rate closer to the 1.0% set in 1999. Brunelli’s most recent study showed 81,645 square feet of vacancies in the 5.59 million square feet evaluated, with openings in 10 of the 160 properties reviewed (unchanged from a year ago).
The firm’s Route 46 study area includes the 21-mile Dover to West Paterson corridor, as well as over 800,000 square feet of space along an adjoining section of Route 3 in Clifton. For 2002, the study also added a 442,000-square-foot power center just behind Beltway Mall in Wayne, where 63,000 square feet of vacancies include former Wiz and Today’s Man locations.
“Route 46’s improvement during 2002 centered on the leasing of the 122,000 square feet of vacancies at Arlington Plaza to Home Depot and an undisclosed retailer that has yet to open,” said Mr. Brunelli. The stores filled the property’s former Bradlees’ and Shop-Rite spaces. Shop Rite previously relocated to an adjoining center co-anchored by Kmart.
“On the western portion of the roadway, the Ames store that closed last year in the Rockaway center co-anchored by Shop-Rite is being demolished to make way for new, undisclosed tenants,” he added.
Route 10. After three years of slim increases, vacancies along the 20-mile Livingston to Ledgewood corridor dropped to 1.9% from 2.9% in 2001. The 2002 rate was in striking distance of the record low of 1.8% established in 1998. A total of 86,500 square feet of vacancies were uncovered in the 4.53 million square feet studied along the corridor. Openings were found in 10 of the 126 properties reviewed, compared with 17 in the 125 studied in 2001.
The opening of a Target on the site of a former golf driving range in East Hanover added 100,000 square feet to Route 10’s inventory last year. Absorption of existing space was aided by Loehmann’s takeover of the former Phar-Mor store in an East Hanover center anchored by Home Depot.
“On the new development front, a new 83,000-square-foot lifestyle center in Denville, The Shops at Union Hill, is said to be virtually 100% pre-leased,” Mr. Brunelli reported. “The property offers great exposure to the highway in an area that perfectly fits the lifestyle center mode—high incomes and no major mall nearby.”
Route 22. The vacancy factor along northern New Jersey’s most heavily-retailed corridor fell
significantly to 2.5%, after rising to 4.5% in 2001 and 2.9% in 2000 from a low-point of 1.8% in 1999. Route 22’s rate had been as high as 7.3% in 1997 and 6.6% in 1998. The firm’s survey area covers the 21-mile
portion of Route 22 extending from Union to Somerville, as well as nearby space along intersecting Route 202/206 from the Somerville traffic circle north into Bridgewater, plus the nearby Route 28/287 intersection in Bridgewater.
According to the 2002 survey, there were 198,806 square feet of vacancies in 7.91 million square feet of space, down from 357,706 square feet in the 7.90 million square feet reviewed in 2001. Vacancies were found in 24 of the 234 properties studied; in the 2001 report, 32 of those properties had openings.
The improvement during 2002 was propelled by the leasing of former Harrow’s locations in Union and Greenbrook to a Mercedes Benz dealership and furniture store, respectively—taking about 50,000 square feet off the market. Additionally, 20,000 square feet of small-store vacancies in Watchung’s Blue Star shopping center were snapped up during 2002, leaving the 465,000-square-foot property fully-leased.
“The lease-up of small store space at Blue Star is symptomatic of a trend we’ve seen throughout northern and central New Jersey during the past year, as demand for spaces in well-located ‘A’ and ‘B’ centers has reached unprecedented levels,” noted Mr. Brunelli. “In addition to national and regional chains, landlords are getting offers from the growing ranks of mom-and-pop entrepreneurs who are using their early retirement buyouts from major corporations to open independent or franchised stores, restaurants or service businesses. While the chains and well-capitalized entrepreneurs continue to shun ill-conceived centers, owners of better properties are clearly in the driver’s seat.”
R.J. Brunelli & Co. will release its annual study 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., 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 (732) 290-0121.