RETAIL VACANCY RATE IN CENTRAL N.J. DECLINED TO 3.4% IN 2005
OLD BRIDGE, N.J. (3/15/06)—The vacancy rate in retail properties along central New Jersey’s four largest shopping corridors declined to 3.4% during 2005 from 4.1% in 2004, hitting the lowest level in 10 years, according to R.J. Brunelli & Co., Inc.
The Old Bridge-based retail real estate brokerage’s 17th annual study of the central New Jersey region found a total of 938,823 square feet of vacant space in the 27.38 million square feet reviewed along State Highways 1, 9, 18 and 35 in Mercer, Middlesex and Monmouth counties, and a small section of Ocean County. By comparison, in its 2004 report study, the firm found 1.05 million square feet of availabilities in the 25.40 million square feet studied. Over the past year, improvements in the vacancy factor along Routes 1, 9 and 35 offset the effects of an increase on Route 18 (which has the least amount of total space of the four corridors). The 2005 study, which was conducted in January 2006, 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. All told, openings were found in 93 of the 507 properties reviewed
As reported by the firm in a separate survey last week, vacancies along six major corridors in northern New Jersey increased slightly to 3.0% in 2005 from 2.8% in 2004
“The central New Jersey region’s improvement to the lowest vacancy factor in the last 10 years was especially notable in that it was achieved despite the effects of bankruptcy filings of Treasure Island and Levitz Home Furnishings that, collectively, placed approximately 230,000 square feet of space on the block on the four roadways in late 2005 and the beginning of this year,” said Richard J. Brunelli, president of the brokerage. “While Levitz is in the midst of reorganizing and downsizing under new ownership, Treasure Island is going out of business, its management blaming the impact of increased competition in its year-round arts and crafts business due to the expansion of major chains like A.C. Moore and Michaels.
“Overall, landlords in the region countered the effects of those vacancies during the past year through a combination of moves,” he continued. “These included absorptions of several major and mid-sized ‘big-box’ spaces that became available during 2004, openings of several new centers that were fully leased or had minimal vacancies, and the ongoing absorption of small spaces throughout the region. Given those factors, rents in the region continue to escalate. For example, rents for satellite tenant space in well-anchored strip centers along the four corridors have broken the $30-per-square-foot barrier in some cases, while rents on mid-sized boxes in the 15,000- to 20,000-square-foot range are now nearing $20 per square foot in some properties.”
Looking ahead, Mr. Brunelli said that he expects that the central New Jersey market should be able to withstand the impact of the Levitz and Treasure Island store closings, as well as the upcoming closures of OfficeMax locations in Holmdel and East Brunswick that are part of the chain’s recently announced program to shutter 110 under-performing locations throughout the country. “Most of these stores are in situated in high-traffic areas where big-box opportunities are limited and, accordingly, should be absorbed rather quickly,” he noted. “Those whose locations are not as strong could be on the market longer, but should ultimately be taken.”
Results for central New Jersey’s individual roadways are as follows:
Route 1. The vacancy factor along the 30-mile Woodbridge-to-Trenton corridor declined to 2.4% in 2005 from 2.6% in 2004—the second best showing for the roadway over the past 10 years after the 1.8% rate recorded in the firm’s 2001 survey and far removed from the peak of 7.7% posted in 1997.
More specifically, R.J. Brunelli’s 2005 study found 179,158 square feet of vacancies in the 7.55 million square feet reviewed, an improvement from the 198,526 square feet of availabilities in 7.54 million square feet evaluated the prior year. The 2005 survey found openings in 19 of the roadway’s 104 properties.
Major vacancies arising in the 2005 study included the 24,600-square-foot Treasure Island space at Mercer Mall in Lawrenceville and Levitz’s 23,880-square-foot former Seaman’s at Plaza 1 in Woodbridge. However, the impact of those and other scattered vacancies along the corridor was offset by the lease-up of several large blocks of space, including 23,000 at Ford’s Center in Woodbridge that went to an Asian market; 16,000 square feet at a Shop-Rite-anchored center in Woodbridge that went to Pier 1 and Golf Galaxy; and the absorption of over 27,000 square feet at the 1.06 million-square-foot Nassau Park Pavilion in West Windsor, where vacancies dropped to 19,000 square feet thanks to additions last year of such retailers as Pottery Barn’s new West Elm furniture concept and Zale’s (the latter deal brokered by R.J. Brunelli & Co. in its capacity as a real estate representative for the chain).
Elsewhere, the redevelopment of the 269,640-square-foot South Brunswick Square was completed last year, with Home Depot taking over the parcel that previously housed a Macy’s department store (formerly Stern’s) and Bob’s Stores leasing the former Bloomingdale’s Furniture Outlet space, leaving just 4,200 square feet available at the property.
“Looking ahead, more so than any of the 10 corridors we study in central and northern New Jersey, Route 1 will be the scene of a number of significant new developments over the next several years,” Mr. Brunelli noted. “In Edison, site work is underway on the redevelopment of the former Ford plant property into Edison Town Center, which will be one of the largest new shopping centers under construction in New Jersey in 2006. Across the highway from South Brunswick Square, Fameco is now leasing Heritage Square, a 300,000-square-foot project being built in two phases. Target has been approved for the site, and other retailers reportedly coming include Best Buy, Staples and PetSmart.
“Down in the Princeton area, it is rumored that industry leader Simon Property Group, the owner of Quakerbridge Mall, is contemplating a substantial addition to the center targeting upscale retailers,” he continued. “However, those plans could be thwarted by the potential development across from the mall in West Windsor of a mixed-use center with hundreds of thousands of square feet. That site is controlled by General Growth, the nation’s second largest mall company, which would conceivably go after many of the same upscale tenants that Quakerbridge would be seeking for its prospective project.”
Route 18. Continuing its up-and-down performance, the five-mile East Brunswick corridor saw its vacancy rate increase to 5.7% in 2005 after dropping to 4.0% in 2004. This highway’s vacancy factor during the past 10 years has gone from a low of 2.8% in 2001 to a peak of 10.1% in 1996.
In the 2005 study, the firm uncovered 135,500 square feet of vacancies in 2.37 million square feet of space, up from 87,000 square feet in 2.17 million square feet a year ago. Openings were seen in 15 of the corridor’s 62 properties.
The Levitz Chapter 11 filing led to the vacancy of the 20,000-square-foot former Seaman’s space, while Treasure Island’s departure is freeing up another 12,000 square feet. Other major vacancies to arise included the 10,000-square-foot building that formerly housed a patio and rattan furniture store. As in recent years, the 100,000-square-foot 18 Central has the largest amount of available space among the corridor’s centers, with availabilities increasing by 6,000 square feet over the past year to 39,000 square feet.
Elsewhere, the 212,000-square-foot Loehmann’s Plaza saw its overall vacancies decline slightly from 18,000 square feet in the 2004 study to 15,000 square feet, even with Eckerd relocating across the highway to a new freestanding location at the 400,000-square-foot Mid-State Mall, which is fully occupied.
Approximately 146,000 square feet of new space will ultimately be added to the corridor’s eastern end when Pagano Real Estate breaks ground on Summerhill Square on the site of the former Meyers Center—a largely vacant property center taken off the Brunelli survey for the last several years pending the redevelopment. The planned upscale specialty center has received approvals from the Township of East Brunswick, with the developer awaiting final state approvals before commencing work. R.J. Brunelli & Co. has been appointed exclusive leasing agent for the project.
Route 9. The vacancy rate along the 35-mile Woodbridge-to-Lakewood corridor receded to 3.8% last year from 4.4% during 2004—reaching the lowest level over the past 10 years on a highway where the rate spiked to 11.5% in 1997. The previous low was the 3.9% factor recorded in the firm’s 2003 study.
All told, the firm found 299,500 square feet of vacancies in 7.97 million square feet, down from the 326,400 square feet in 7.39 million square feet evaluated in 2004. The 2005 study found openings in 27 of the 158 properties surveyed.
The decrease in Route 9’s vacancy rate was triggered in large measure by the opening of BJ’s Wholesale Club in the 100,000-square-foot former Home Depot building in Old Bridge through a deal brokered by R.J. Brunelli & Co. Other major factors contributing to the roadway’s improvement included the addition of the 81,000-square-foot Marlboro Diamond Plaza specialty center, where just 2,100 square feet was available at the time of the survey.
Elsewhere, a number of major spaces that became available during the course of 2005 were snapped up quickly. The Dick’s Sporting Goods at Manalapan Epicenter—which became available when the chain acquired the larger Gaylan’s store at nearby Freehold Raceway Mall—has been taken by Marshall’s, which will be relocating from a smaller space it occupied on the Freehold Raceway Mall ring road. In a neighboring Vornado center anchored by Best Buy, A.C. Moore opened in the former Amazing Savings space, while further down the highway in Howell, an 18,000-square-foot freestanding building that previously housed a Frank’s Nursery has reportedly gone to L.A. Fitness (which will likely tear down the structure and construct a larger facility in accordance with its larger footprint). This, along with leases on other Frank’s sites, had been acquired by a real estate investment trust, which is leasing the locations to other operators.
The only major new vacancy recorded in the firm’s 2005 survey is the 35,000-square-foot Treasure Island located in the 300,000-square-foot power center in Woodbridge anchored by Wegman’s and Lowe’s Home Improvement. This became the second largest availability along the corridor after the 94,000-square-foot former Kmart in Old Bridge that has been vacant since 2003. “However, it is rumored that the landlord now has interest from another major retailer for the Kmart site,” Mr. Brunelli noted. “Another major vacancy will arise along the roadway in Freehold this year when Pathmark closes an under-sized, 47,000-square-foot store in Freehold.
“Notwithstanding the Pathmark closing, availabilities remain scarce in the Manalapan- to -Freehold section of the corridor, compelling developers to seek opportunities in nearby sites along Route 537 and State Highway 33,” he continued. Construction is now under way on Route 537 on the 403,000-square-foot Freehold Marketplace, which will be anchored by Wal-Mart and Sam’s Club. Sam’s will be relocating from a smaller site on the Freehold Raceway Mall ring road. “Meanwhile, a lease for Sam’s former site is reportedly in the works with Raymour & Flanigan, as that furniture chain continues to expand its presence in central and northern New Jersey markets,” Mr. Brunelli said.
Nearby on Route 33, a development group led by R.J. Brunelli & Co. expects to gain approvals this year for The Village at Manalapan, which will house approximately 500,000 square feet of retail and restaurant space. “With no room left for developments of any size on Route 9, The Village and the Wal-Mart-anchored center on Route 537 will help meet demand from retailers and restaurants in the affluent and fast growing Freehold-Millstone-Manalapan-Marlboro area,” Mr. Brunelli explained.
Route 35. Like Route 9, this corridor bounced back from an upturn in its vacancy factor in 2004 to post a decline in 2005. The vacancy rate along the 25-mile corridor stretching from Aberdeen Township to Brielle fell to 3.4% last year from 5.3% in 2004. This marked the second lowest rate during the last 10 years along the highway—which has the most retail space of the 10 central and northern New Jersey roadways reviewed by R.J. Brunelli—coming up just short of the 3.3% set in 1999 and well below the 9.6% high recorded in 1997.
In its latest survey, the firm found 324,665 square feet of vacancies in the 9.49 million square feet studied, an improvement from 441,102 square feet of openings in 8.30 million square feet in 2003. Among the corridor’s 183 properties, 32 had vacancies. As in prior years, the corridor’s study area includes a section of Route 36, extending from its intersection with Route 35 in Eatontown, east to West Long Branch.
Key factors contributing to the year-over-year decline included the reported absorption of the 165,000-square-foot former Lowe’s store at Seaview Square, which became available in 2004 when the chain found structural problems with the building’s floor. “Fidelity Land Development, which acquired Seaview Square from an affiliate of the Heller group last year, said that they have a means to correct the structural problem and have also lined up a tenant for the space,” Mr. Brunelli noted. Lowe’s, meanwhile, recently opened a 165,000-square-foot freestanding building on Route 35 in Eatontown, adding more fully occupied space to the road’s 2005 inventory.
Just north of Seaview Square in Ocean Township, Stavola unveiled the final phase of its redeveloped 258,000-square-foot Ocean Plaza anchored by Wegman’s, adding 81,000 square feet of fully occupied space to the roadway’s inventory, including the region’s first Stein Mart store. Moving south to Sea Girt, in deals brokered by R.J. Brunelli & Co., 20,000 square feet of new, fully occupied space was added to the inventory at the upscale Brook 35 West, where tenants include Ann Taylor Loft, Storehouse and Jack Rabbit children’s wear.
Near the northern end of the survey area, major absorption was seen at the 300,000-square-foot Holmdel Town Center, where deals with L.A. Fitness and several smaller tenants drove down vacancies from approximately 60,000 square feet in the 2004 survey to some 22,000 square feet today. However, the upcoming departure of OfficeMax (which is still operating), will add another 24,000 square feet of vacancies to that property this year. Heading further north to Hazlet, the former 20,000-square-foot Frank’s site in Hazlet has been absorbed, with the parcel reportedly being taken over by an automobile dealership. The corridor’s other Frank’s, a 20,000-square-foot location in Sea Girt, is rumored to be going to Staples, but was still classified as vacant at the time of the 2005 survey.
Major vacancies arising in the 2005 survey include a 72,650-square-foot Levitz store in Wall Township (one of several locations that chain acquired from Huffman Koos, but put back on the market after the October 2005 Chapter 11 bankruptcy filing); Levitz’s former 23,880-square-foot former Seaman’s store in Eatontown; the 21,900-square-foot Treasure Island store in Shrewsbury; and a freestanding, 10,000-square-foot former Eckerd store in Aberdeen.
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 (732) 290-0121.