RETAIL VACANCY RATE IN CENTRAL N.J. ROSE TO 4.1% IN 2004, ANNUAL R.J. BRUNELLI SURVEY REPORTS
After falling to their lowest level in the past 10 years during 2003, vacancies in retail properties along central New Jersey’s four largest shopping corridors edged up to 4.1% during 2004, according to R.J. Brunelli & Co., Inc. Nonetheless, last year’s performance was still the region’s second best showing over the past 10 years, trailing only the 3.8% rate posted during 2003, and less than half of the 9.3% and 9.0% rates set in 1997 and 1996, respectively.
In its 16th annual study of the central New Jersey region, the Old Bridge-based retail real estate brokerage uncovered a total of 1.05 million square feet of openings in the 25.40 million square feet of space evaluated along State Highways 1,9, 18 and 35 in Mercer, Middlesex and Monmouth counties, and a small section of Ocean County. This compared with the 946,783 square feet of openings in 24.70 million square feet in the firm’s 2003 study, as a decline in the vacancy rate on Route 18 was countered by increases of varying degrees along Routes 1, 9 and 35. Conducted in January 2005, the 2004 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.
As reported by the firm in a separate survey last week, vacancies along six major corridors in northern New Jersey slipped to 2.8% in 2004 from 3.2% in 2003
“Though the vacancy rate may be up from 2003, the central New Jersey region still enjoyed its second best year over the past 10 years,” said Richard J. Brunelli, president of the brokerage. “The market’s strength is underscored by the ever-growing ability of landlords to command higher rents. With satellite tenant space in well-anchored strip centers increasingly hard to find, we’ve seen rents per square foot in those properties along the four corridors rise from the low-twenty-dollar range to the high-twenties in the course of the last few years. Over that same timeframe, we’ve seen rents of mid-sized boxes in the 15,000- to 20,000-square-foot range move from $11 to $12 per square foot to the $14 to $17 range.
“The central region’s desirability was again demonstrated by landlords’ ability to withstand retail chain bankruptcies, shutdowns and downsizings,” he continued. “The three Kids ‘R’ Us stores that were vacant along the four corridors in our 2003 study were all quickly taken by Office Depot in 2004. Additionally, the corridors’ four Huffman Koos furniture showrooms that became available last fall following the bankruptcy of the chain’s parent company were all rapidly absorbed by Levitz and Raymour & Flanigan. At the time of our 2004 survey, the bankruptcies of the Frank’s Nursery and Floor Superstore chains created a total of six vacancies along the four corridors. A real estate investment trust is reportedly finalizing a deal to acquire all four of the Frank’s leases in the region and we anticipate that the well-located Floor Superstore locations should also be absorbed relatively soon. We also expect to see strong demand for the two Amazing Savings locations along the corridors that were conducting going-out-of-business sales at the time of our survey and thus counted as occupied.”
Results for central New Jersey’s individual roadways are as follows:
Route 1. The vacancy rate edged up to 2.6% from 2.5% in the 2003 study along the 30-mile Woodbridge-to-Trenton corridor. This marked the roadway’s third best performance since the 1.8% registered in 2001 and was well below the 10-year peak of 7.7% recorded in 1997.
All told, the firm found 198,826 square feet of vacancies in the 7.54 million square feet studied, compared with 189,267 square feet in the 7.52 million square feet reviewed in the 2003 report. Availabilities were found in 18 of the corridor’s 101 properties.
“Vacancies along Route 1 rose slightly during 2004, as scattered availabilities that popped up along the roadway offset the gains arising from Office Depot’s takeover of the vacant Kids ‘R’ Us stores in
Woodbridge’s Plaza 1 and Lawrenceville’s Mercer Mall,” said Mr. Brunelli. “Also at Mercer Mall, the balance of a vacant former Kmart store was absorbed by furniture retailer Raymour & Flanigan, driving the
property’s vacancy rate down to zero. Raymour & Flanigan, which is new to the central Jersey market, also took over the former Huffman Koos space in Plaza 1.”
Besides Raymour & Flanigan, major additions to the highway included the 35,000-square-foot Babies ‘R’ Us built in new space in West Windsor Township’s Nassau Park Pavilion under a deal brokered by R.J. Brunelli & Co. With 46,000 square feet of vacancies at the time of the survey, that 1.06 million-square-foot power center had the largest amount of available space of any property along the highway.
Route 18. The vacancy rate along the five-mile East Brunswick corridor receded to 4.0% in 2004 from 5.0% in 2003, with much of the decline triggered by Office Depot’s takeover of the Kids ‘R’ Us space at 18 Central. Over the past 10 years, the roadway’s vacancy factor has ranged from a low of 2.8% in 2001 to a high of 10.1% in 1996.
The 2004 study found 87,000 square feet of vacant space in the roadway’s 2.17 million square feet of space, compared with 108,700 square feet in 2.16 million square feet in 2003. Eight of the highway’s 61 properties had openings.
While the Office Depot deal drove down openings at 18 Central to approximately 33,000 square feet from 64,000 square feet in the firm’s 2003 survey, that absorption and others were partially offset by the closures of Gateway Computer and Floor Superstore locations elsewhere on the highway.
Meanwhile, near the eastern end of the corridor, 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 closer to becoming a reality. New owner Pagano Real Estate Inc. has appeared before the township’s planning board to gain approval for plans to transform the site into an upscale specialty center with approximately 135,000 square feet of space. Pagano hopes to break ground on the project this summer, with R.J. Brunelli & Co. appointed exclusive leasing agent.
Route 9. Following sharp declines from 10.8% in 2001 to 5.0% in 2002 and a 10-year low of 3.9% in 2003, the vacancy rate along the 35-mile Woodbridge-to-Lakewood corridor rose to 4.4% during 2004. Despite the increase, the 2004 vacancy factor was still the second lowest over the past 10 years on a roadway where the rate peaked at 11.5% in 1997.
The firm’s latest study uncovered 326,400 square feet of vacancies in 7.39 million square feet, compared with 278,666 square feet in 7.08 million square feet in 2003. Vacancies were seen in 18 of the 130 properties evaluated.
Route 9’s increase in 2004 was due primarily to the re-availability of the 100,000-square-foot former Home Depot building in Old Bridge. However, R.J. Brunelli & Co. currently has a lease out for the space with a prospective tenant. Nearby, a former 94,000-square-foot Kmart that was vacant in the 2003 survey, remains unoccupied. The re-availability of the Home Depot and smaller scattered vacancies offset gains realized from several big-box deals, including Home Goods’ takeover of the former Wiz space at the Manalapan Epicenter; Acme’s takeover and expansion of the former Drug Fair store at Stavola Plaza in the southern end of Freehold; and Bed, Bath & Beyond’s and Drug Fair’s absorptions of the former Stop & Shop and Pharmor spaces, respectively, at Aldrich Plaza in Howell. Like Drug Fair, Stop & Shop relocated to a larger space further down the highway, in its case moving to the new Lanes Mill Marketplace power center, joining Target and Lowe’s.
At the northern end of the highway in Woodbridge, 300,000 square feet was added to the inventory through the opening of a fully-leased center featuring Wegman’s, Lowe’s, Home Goods, Treasure Island, Annie Sez and Electronics Expo. The property is just south of Woodbridge Center Mall.
“The dual openings by Home Goods, additions of second locations along the roadway by Wegman’s and Bed, Bath & Beyond, unveiling of a fourth location by Lowe’s, and relocations of Stop & Shop and Drug Fair, point to the desirability of Route 9, up and down the corridor,” said Mr. Brunelli. “In particular space remains extremely tight in the Manalapan section of the corridor, where over 99% of the 958,000 square feet evaluated was occupied at the time of our study. The upcoming availability of the Dick’s Sporting Goods space at Manalapan Epicenter – which arose from the chain’s acquisition of the larger Galyan’s store at nearby Freehold Raceway Mall-is expected to absorbed rapidly, with a lease reportedly out with another major retailer. In fact, extremely tight conditions in Manalapan and the section adjoining Freehold Raceway Mall have prompted developers to meet demand in this fast-growing area by turning to nearby sections of Route 537 and State Highway 33, including the proposed 800,000-square-foot Village at Manalapan, a mixed-use project being pre-leased by R.J. Brunelli & Co.”
Route 35. Snapping a string of three consecutive years of improvement, the vacancy factor rate along the 25-mile corridor from Aberdeen Township to Brielle rose to 5.3% in 2004 from 4.7% in 2003. Over the last 10 years, the rate along the highway-which has the most retail space of the 10 central and northern New Jersey roadways reviewed by R.J. Brunelli-has ranged from a low of 3.3% in 1999 to a high of 9.6% in 1997.
The firm’s 2004 survey found 441,102 square feet of openings in the 8.30 million square feet evaluated, compared with 370,150 square feet in 7.95 million square feet in 2003. Openings were found in 27 of the corridor’s 140 properties. 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.
The majority of the increase in the highway’s inventory stemmed from the return to the survey of two properties with major long-term vacancies that were being redeveloped: Ocean Plaza, in Ocean Township, and Chapel Hill Plaza in Middletown. Much of the Ocean Plaza was demolished to make way for an expanded 170,000-square-foot center featuring new Wegman’s, Staples and Stein Mart stores. The smaller 54,000-square-foot Chapel Hill will introduce another prominent grocery operator to Route 35, with a 42,000-square-foot Whole Foods now under construction.
Further north in Hazlet, another supermarket chain has reportedly leased the long-vacant, 53,000-square-foot former Service Merchandise store at Bayshore Plaza. Other major absorptions accomplished over the past year included MJM Designer Shoes’ lease of the former Barnes & Noble building at Holmdel Towne Center, reducing vacancies at the 300,000-square-foot property to approximately 60,000 square feet. These and other deals, however, were offset primarily by the availabilities of Frank’s Nursery locations in Hazlet and Wall Townships, the Floor Superstore in Eatontown, and Lowe’s closure of its 125,000-square-foot store at Seaview Square due to a major structural issue with the building’s floor.
For copies of the central or northern New Jersey studies, please click here.