RETAIL VACANCY RATE IN CENTRAL NJ DECLINED TO 4.8% IN 2002, ANNUAL R.J. BRUNELLI SURVEY REPORTS
OLD BRIDGE, N.J. (3/17/03)—The retail vacancy rate along central New Jersey’s four primary shopping corridors declined to 4.8% during 2002 from 5.7% the previous year, according to R.J. Brunelli & Co., Inc., as a steep downturn in the vacancy factor on Route 9 and a slighter decrease on Route 35 offset rising rates on Routes 1 and 18.
All told, the Old Bridge-based retail real estate brokerage’s 14th annual study of the central New Jersey region found 1.16 million square feet of vacancies in the 24.27 million square feet of space reviewed along the four highways in Mercer, Middlesex and Monmouth counties, and a small section of Ocean County. In its 2001 study, the firm found 1.29 million square feet of vacancies in 22.78 million square feet. Rates for the region, which climbed to 9.5% in 1997, had dropped to 6.3% in 1998 and to record lows of 4.3% in 1999 and 2000. The latest survey, which was conducted in January, 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.
Despite the improvement over the last year, the central region continued to support more empty space than the northern New Jersey market. As reported last week, R.J. Brunelli found that the vacancy factor in the more densely populated region dwindled to just 2.0% during 2002 from 3.1% a year earlier in the 24.71 million square feet studied along Routes 4, 10, 17, 22, 23 and 46.
“Apart from the 4.3% ratios witnessed in 2000 and 1999, the rate for 2002 was the best we’ve seen in all the years we are conducting the central New Jersey survey,” said Richard J. Brunelli, president of the firm. “The decline during the past year was fueled by the absorption of several big-box spaces left behind by the since-departed Bradlees, Phar-Mor and Drug Emporium chains, accelerated demand for small stores, and the successful lease-up of several major new properties that opened during 2002.
“In a year denoted by sagging sales and retailer bankruptcies or downsizings, high-performing big-box chains like Wal-Mart, Target, Lowe’s, The Great Indoors, Wegman’s, Kohl’s, Bed, Bath & Beyond, Linens ‘N Things, Circuit City, Borders, Barnes & Noble, and Modell’s were stepping up their presence in this fast-growing region by seizing opportunities in existing centers or anchoring new properties,” he continued. “And, as we saw in northern New Jersey, demand for spaces under 5,000 square feet in better centers was heightened by the growing ranks of new entrepreneurs using proceeds from their early retirements to open franchised or independent stores, restaurants or service businesses.”
Looking ahead, Mr. Brunelli said that closings of Wiz, Zany Brainy, Kmart and Macy’s locations that were running final sales along the four corridors at the time of the 2002 survey, could drive up the central region’s vacancy rate during 2003. “Still, given the ability of this region’s properties to defy a difficult retail climate during this past year, one cannot rush to judgment and predict a major spike in the rate,” he observed.
Results for central New Jersey’s individual roadways are as follows:
Route 1. The vacancy rate jumped to 4.8% during 2002 from a record low 1.8% the previous year along the 30-mile Woodbridge-to-Trenton corridor, putting the brakes on a string of steady annual declines from the 7.7% registered in 1997. R.J. Brunelli’s most recent survey found 361,400 square feet of vacancies in the 7.48 million square feet reviewed, compared with 126,442 square in 6.96 million square feet in 2001. Sixteen of the roadway’s 103 properties had openings, compared with 17 of the 100 reviewed the previous year.
“Following measurable improvements from the peak of 10.7% reached 11 years ago, Route 1 hit a bump in the road, as the closures of Kmart and Ames stores in Lawrence and North Brunswick, the
redevelopment of parts of Forrestal Village in Plainsboro, and the un-leased portion of a relocated Shop-Rite in Woodbridge put almost 260,000 square feet on the market,” Mr. Brunelli observed. “Negotiations are reportedly under way with a supermarket company for the Kmart space in Lawrence’s Mercer Mall, but the
absorption of this location during 2003 could be virtually offset by the availability of the 90,000-square-foot Macy’s in South Brunswick Square that was running a store-closing sale at the time of our 2002 survey.” Other major spaces that have since become available include the 51,440-square-foot Pathmark store in West Windsor’s Windsor Green shopping center. R.J. Brunelli is exclusive broker for the sub-lease on behalf of Pathmark.
On a positive note, new development along the corridor during 2002 was highlighted by the opening of a fully-leased, 225,000-square-foot power center adjoining Woodbridge Center mall anchored by the state’s first Great Indoors store, along with Circuit City, Modell’s and Linens ‘N Things.
Route 18. Following declines from 4.8% in 1998 to a record low of 2.7% in 2001, the vacancy factor along the five-mile East Brunswick corridor edged up to 2.9% during 2002. With no new development during the past year, the firm uncovered 64,500 square feet of availabilities in the highway’s 2.22 million square feet, up from 60,500 square feet in 2001. Nine of the road’s 61 properties had openings, up from seven a year ago.
“The face of Route 18 has changed dramatically over the past few years, as major retailers who are new or recent newcomers to the central New Jersey market continue to snap-up big-box vacancies arising from bankruptcies, lease expirations and relocations,” Mr. Brunelli noted.
During 2002, for example, Best Buy opened in the former Phar-Mor space and A.C. Moore debuted in the former Marshall’s location in Mid-State Mall. Major activity at that 400,000-square-foot property also included Shop-Rite’s expansion into the adjoining former Michael’s space. Diagonally across the highway, Kohl’s opened in a former Bradlees building, and was later joined by Dick’s Sporting Goods in the former Shoppers World space. Shoppers World, whose lease expired, relocated to the former Stop & Shop in space Loehmann’s Plaza, which, with 16,500 square feet still available, has the largest vacancy on the highway. The second largest vacancy was at 18 Central, where a 15,000-square-foot former Wiz space that closed in 2001 remains unclaimed. Elsewhere, the Meyers Shopping Center continued to be excluded from the survey as the owners deliberately keep it vacant pending the completion of a development plan.
“The biggest question for Route 18 is what will happen to the roadway’s Kmart store, which also houses regional offices for the chain,” Mr. Brunelli said. “To date, the store has survived the company’s first two rounds of closings. In the event it ultimately did become available, we believe that this prime piece of real estate would be quickly absorbed.”
Route 9. The vacancy factor along the 35-mile Woodbridge-to-Lakewood corridor was more than halved to 5.0% from 10.8% in 2001, sparked primarily by the lease-up of former Bradlees stores in Woodbridge and Manalapan that drove up the rate from the 6.1% recorded in 2000. The road’s rate has been on somewhat of a roller-coaster ride in recent years, going from the high of 11.5% in 1997 to as low at 4.7% in 1999.
Brunelli’s most recent survey showed 326,180 square feet of vacancies among the highway’s 6.50 million square feet, down sharply from 682,688 square feet in 6.33 million square feet in 2001. Availabilities were found in 23 of the 128 sites, compared with 28 in 126 the prior year.
Among this past year’s significant absorptions, the 236,000-square-foot center in Woodbridge that had 132,000 square feet of vacancies in 2001 due largely to closures of Bradlees and A&P stores, is now reportedly fully-leased, with the new occupants yet to be announced by landlord Vornado. At another Vornado property in Manalapan, Bed, Bath & Beyond, and soon-to-open Babies ‘R’ Us, Petsmart and Modell’s stores have filled the 125,000 square feet of space previously leased to Bradlees and several smaller retailers. In Old Bridge, vacancies in Gateway Center were more than halved to 32,000 square feet as Bayshore Health & Fitness and Modell’s took over the vacant Wiz and Drug Emporium spaces, partially offset by several smaller store closings. However, more space opened up since the time of the survey following the recent closing of Old Navy.
Down the road in Old Bridge, R.J. Brunelli now has a lease out for signature on the 100,000-square-foot Home Depot building that became vacant in 2001 when the chain relocated to a larger store just across Route 9 (the original space was still counted as vacant in the 2002 survey). In an adjoining center, however, a going-out-of-business sale is under way in the Kmart store. “The landlord has indicated that they will consider subdividing this 87,100-square-foot space, which is just across the highway from a newer Wal-Mart,” Mr. Brunelli related. On a more encouraging note, the landlord for Cambridge Square in Marlboro reported that the Kmart space that closed last year has already been leased to an undisclosed retailer.
Elsewhere in Marlboro, 165,000 square feet of new, fully-leased space was added to the survey with the opening of the roadway’s second Lowe’s Home Improvement Center. Heading south to Manalapan, 30,000 square feet became available during 2002 with the closing of The Wiz in the Epicenter. In a Freehold center anchored by Pathmark, poor visibility continues to keep a 45,000-square-foot former Rickel’s space on the market, Mr. Brunelli noted. The highway’s other remaining Rickel, at Friendship Plaza in Howell, was leased to The Rag Shop during 2002. Also in Howell, the owners of Aldrich Plaza are still left with 25,000 square feet of vacant space arising from the Phar-Mor that closed in 2001. Excluded from the 2002 survey was a long-vacant, 50,000-square-foot former Shop-Rite building in Lakewood. “Burdened as a location that’s a block in from the highway, this building has for years been unable to attract a new retail use and may be more suitable for a non-retail tenant. Accordingly, we have removed it from the corridor’s inventory,” he explained.
Meanwhile, near the southern edge of the survey area in Howell, 100,000 square feet of fully-leased space was added during 2002 with the debuts of Kohl’s and Applebee’s at Howell Commons. “Just adjacent to that site, approximately 500,000 square feet of additional space is under construction, including Lowe’s, Target , Stop & Shop, T.J. Maxx, and Barnes & Noble,” Mr. Brunelli reported. “This emerging commercial hub in southern Howell will have the critical mass needed to keep residents of the Howell-Lakewood area from traveling to Brick Township or Freehold for their non-mall purchases. Given the extraordinary residential growth in the southern and western Monmouth and northern Ocean County markets, the development of this new hub should not have a significant adverse impact on existing properties in the Freehold or Brick areas.”
In fact, Mr. Brunelli noted that a proposed new power center in Freehold would add Wal-Mart, Sam’s Club and some 60,000 square feet of satellite space just off the corridor at the junction of Route 537 and the Highway 33 Bypass. Sam’s would relocate from its existing store on the perimeter of Freehold Raceway Mall.
Route 35. Despite a significant increase in new footage, the 25-mile corridor from South Amboy to Brielle—which has the most retail space of the 10 central and northern New Jersey roadways reviewed by R.J. Brunelli—experienced a decline in the vacancy factor to 5.1% from 5.8% during 2001. Though down from 2001, this past year’s rate was still above the 4.5% in 2000 and 3.3% posted in 1999, but an improvement from the 5.5% in 1998 and 9.6% set in 1997.
R.J. Brunelli’s 2002 survey showed 408,777 square feet of vacancies in the 8.07 million square feet studied, compared to 421,198 square feet in 7.26 million square feet during 2001. Twenty-seven of the 139 properties studied had openings, contrasted with in 24 in 138 properties 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.
The roadway’s inventory in the 2002 survey was expanded principally by the additions of 400,000 square feet in the initial phase of the ‘de-malled’ Seaview Square in Ocean Township, the new 235,000-square-foot Commons at Holmdel lifestyle center, and the new 164,000-square-foot Lowe’s in Holmdel. R.J.
Brunelli is exclusive broker for The Commons, which opened 99%-leased, and also brokered the Lowe’s deal. Prominent tenants opening at The Commons during 2002 included Best Buy, Linens ‘N Things, Modell’s, Old Navy, Pier One and Houhlihan’s. The initial phase of Seaview Square is fully occupied by Sears and Value City (anchors of the property’s previous enclosed mall, which was not included in the R.J.
Brunelli survey) and newcomers like Target, Rag Shops and Applebee’s. The power center’s initial tenants will be followed by big-boxes Costco and Lowe’s, and additional satellite space. “Although Seaview Square’s big-boxes are all lined up, what remains to be seen is how the approximately 30,000-40,000 square feet of additional new speculative satellite space will be absorbed,” Mr. Brunelli remarked.
While these new projects were opening, a number of major vacancies were filled up and down the highway. In Hazlet, the owners of Bayshore Plaza report that just 4,000 square feet remains after receiving a commitment from an unidentified tenant for the Service Merchandise store that closed during 2002. In nearby Hazlet Plaza, the former 20,000-square-foot Staples building was leased to a dollar store. In Middletown, Kohl’s has leased the former Bradlees’ location at a center co-anchored by Stop & Shop, filling a 100,000-square-foot vacancy. Elsewhere, other big-box retailers unveiling their first Route 35 stores during 2002 included Border’s at a new R.J. Brunelli-represented property in Eatontown where Toys ‘R’ Us opened in 2001. Nearby, Lowe’s has been given the green light to construct a 165,000-square-foot store on a former industrial property.
Major vacancies arising during 2002 along the corridor and still not filled include the 110,000-square-foot Ames in a Neptune center anchored by Shop-Rite, and closings of Phar-Mor and a dollar store at Holmdel Towne Center. The latter two departures, coupled with the late-2001 relocation of Barnes & Noble to a larger space across the road at The Commons, elevated vacancies at the 300,000-square-foot Holmdel Towne Center to 49,000 square feet. “However, negotiations are in progress for the former Barnes & Noble. What’s more, the recent relocation of Michaels to The Commons has allowed Marshall’s to begin construction on the expansion of its existing store to the ‘Mega-Marshall’s’ format,” Mr. Brunelli noted. “On the other hand, The Wiz is running a going-out-business sale at its long-successful store at this property.”
Big-box vacancies that carried over from prior years include the 26,000-square-foot former Rex-Gene store adjoining Kmart on Route 36 in West Long Branch; the 40,000-square-foot former Toys ‘R’ Us building across from Monmouth Mall in Eatontown; 45,000 square feet at the Chapel Hill Shopping Center in Middletown, where A&P had closed; and 57,000 square feet at Ocean Plaza in Ocean Township. Ocean Plaza will get a major boost with the announcement that Wegman’s will build a superstore on the property. “This project will have a very positive impact on retail businesses in that area, except perhaps for nearby supermarkets,” Mr. Brunelli observed. “Following the accompanying reconfiguration and redevelopment of Ocean Plaza, the vacancy rate will plunge from almost 50% to about 10% at a property that has long been plagued by empty space.”
At the southernmost end of the roadway, only a single 3,000-square-foot space was available in the affluent and fast-growing Wall, Spring Lake, and Brielle area. Approximately 18,000 square feet of new space is scheduled to be added to the inventory at Brook 35 West, a property being developed by Terranomics across the road from its upscale, high-performing Brook 35 specialty center. R.J. Brunelli was retained as exclusive leasing agent for the new site.
For copies of the 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.