RETAIL VACANCY RATE IN CENTRAL NJ INCREASED TO 4.3% IN 2006, ANNUAL R.J. BRUNELLI SURVEY REPORTS
OLD BRIDGE, N.J. (3/20/07)—After falling to a 10-year-low of 3.4% in 2005, the vacancy rate in retail properties along central New Jersey’s four largest shopping corridors expanded to 4.3% in 2006, according to R.J. Brunelli & Co., Inc.
In its 18th annual study of the central New Jersey region, the Old Bridge-based retail real estate brokerage uncovered a total of 1.19 million square feet of vacant space in the 27.53 million square feet evaluated along State Highways 1, 9, 18 and 35 in Mercer, Middlesex and Monmouth counties, and a small section of Ocean County. This contrasted with 938,828 square feet of availabilities in the 27.38 million square feet reviewed in the firm’s 2005 study. Over the past 10 years, the region’s vacancy rate has ranged from the low of 3.4% set in 2005 to a high of 9.3% in 1997.
During the past year, an improvement in the vacancy factor on Route 18 (which has the least amount of total space of the four highways) and stable conditions on Route 1 were unable to compensate for increases along Routes 9 and 35. Throughout the central study area, availabilities were found in 87 of the 513 properties reviewed.
Conducted in January 2007, the 2006 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.
In a separate survey released by R.J. Brunelli last week, vacancies along six major corridors in northern New Jersey edged down to 2.9% in 2006 from 3.0% in 2005.
“Considering the effects of the Treasure Island bankruptcy, Levitz bankruptcy reorganization and Office Max downsizing during the past two years, the central New Jersey retail real estate market has held up pretty well,” commented Richard J. Brunelli, president of the firm. “In fact, nearly two-thirds of the 251,640-square-foot year-over-year increase in vacancies can be attributable to one space: the 165,000-square-foot former Lowe’s Home Improvement building at Seaview Square on Route 35 in Ocean Township that has been put back on the market by that property’s new owner, Investcorp. In our capacity as exclusive leasing agent for the new owner, our firm is now in negotiations to subdivide that space between three tenants.”
As for the three aforementioned chains that collectively put 10 locations with nearly 280,000 square feet of space on the market, to date, two of the four Treasure Island stores have been absorbed, two of the four Levitz/Seaman’s stores are now occupied, and two of the three Office Max spaces have been leased. Those remaining spaces will be joined in the central New Jersey market by three locations aggregating over 66,000 square feet from Comp USA, which recently launched a major downsizing initiative. “Consistent with our view on the six Comp USA stores being closed in north Jersey, we believe that the Freehold, West Windsor and Edison locations should not be on the market for too long,” Mr. Brunelli said.
Results for central New Jersey’s individual roadways are as follows:
Route 1. The vacancy rate along the 30-mile section stretching from Woodbridge to Trenton remained unchanged at 2.4% for 2006 and 2005, down from 2.6% in 2004. This represented the second lowest vacancy factor for the corridor during the last 10 years, exceeded only by the 1.8% rate attained in 2001 and well below the high of 7.7% recorded in 1997.
In the 2006 study, the firm uncovered 184,400 square feet of vacancies in the 7.55 million square feet reviewed. Availabilities were found in 22 of the corridor’s 103 properties.
The most notable addition to the roadway’s vacancies was the 23,500-square-foot Office Max in Woodbridge that remains unclaimed—joining the 24,600-square-foot Treasure Island space at Mercer Mall in Lawrenceville that went dark in 2005. On the other hand, a liquor store now occupies the former 23,880-square-foot Seaman’s store in Woodbridge. Subsequent to the completion of the 2006 survey, it was learned that a deal is in process for Filene’s Basement to take the Treasure Island space at Mercer Mall.
Meanwhile, Comp USA will be shutting its two stores along the corridor this year: a 27,000-square-foot location in Edison and a 19,000-square-foot unit in West Windsor.
“What’s most notable about Route 1 is not what occurred during 2006, but what lies ahead,” said Mr. Brunelli. “In a prime example of a project that ties in with the state’s ‘smart growth’ initiatives, the former Ford plant in Edison will be transformed by Hartz Mountain Industries into Edison Town Square, a 1 million-square-foot mixed-use project that will reportedly include a Sam’s Club that will be relocating from Route 18 in East Brunswick. On a smaller redevelopment scale, Stanbery Development just broke ground on The Shoppes at North Brunswick, a 131,000-square-foot lifestyle center and, in South Brunswick, Heritage Square will ultimately house approximately 300,000 square feet of space, including Target, Best Buy and PetSmart.”
Route 18. The vacancy factor along the five-mile East Brunswick corridor declined to 5.2% from 5.7% in 2005. Over the past 10 years, the highway’s vacancy rate has ranged from a low of 2.8% in 2001 to a high of 7.3% in 1997.
R.J. Brunelli’s 2006 study found 124,000 square feet of vacancies in 2.37 million square feet of space, down from 135,500 square feet in 2.37 million square feet the prior year. Among the corridor’s 62 properties, 14 had vacancies.
Key absorptions during 2006 included the leasing of the long-vacant Wiz space in 18 Central to a small grocery store, while the nearby freestanding Pier 1 Imports building is being subdivided to house a Citibank branch and Coldwell Banker residential office in a deal brokered by R.J. Brunelli. Near the Old Bridge border, the Central 18 center saw vacancies climb to 20,000 square feet after Pelican Ski relocated to a smaller space further north on the highway. ‘For Rent’ signs remained on the 20,000-square-foot Seaman’s and 12,000-square-foot Treasure Island stores that went vacant in 2005. R.J. Brunelli was recently appointed exclusive broker for the Treasure Island site. However, Staples moved into the Office Max that closed last year at Midstate Mall.
In the highway’s biggest news, Pagano Realty has begun sitework on Summerhill Square on the parcel that once held the Meyers Center—a largely vacant property taken off the Brunelli surveys for the last several years pending the redevelopment. R.J. Brunelli is serving as exclusive leasing agent for the 140,000-square-foot specialty center. Further north, Edgewood Properties has announced plans to redevelop the site that now houses Sam’s Club—which is reportedly moving to Edison Town Square after its lease on Route 18 expires—into The Marketplace at Regency Square. Plans call for approximately 200,000 square feet of upscale retail and dining establishments in a downtown transit village setting that will also include over 400 townhomes.
“The Regency Square project may be somewhat challenging to pre-lease, as most of the lifestyle retailers Edgewood would be targeting have already committed to two Stanbery centers just outside of East Brunswick’s southern and northern borders,” Mr. Brunelli observed. “These include The Shoppes at Old Bridge at the junction of Routes 18 and 9, which is opening this year, and the upcoming Shoppes at North Brunswick at Routes 1 and 130.”
Route 9. After receding 0.6 points to 3.8% in 2005, the vacancy rate escalated to 4.8% during 2006 along the 35-mile Woodbridge-to-Lakewood corridor. Over the last 10 years, the highway’s vacancy factor has ranged from the low of 3.8% set in 2005 to 11.5% in 1997.
The firm’s 2006 study uncovered 380,800 square feet of vacancies in 8.00 million square feet, up from 299,500 square feet in 7.97 million square feet the year before. Openings were seen in 24 of the 160 properties surveyed.
Major factors driving up the rate during 2006 included the closings of the 47,500-square-foot Pathmark in Freehold and the 25,000-square-foot Marshall’s on the ring road of Freehold Raceway Mall. In a game of retail musical chairs, Marshall’s relocated to a larger space at the Manalapan Epicenter that had been occupied by Dick’s Sporting Goods. That space became available when Dick’s consolidated its western Monmouth County presence in the large freestanding building at Raceway Mall it gained through the acquisition of Galyan’s. Elsewhere on the mall’s ring road, Christmas Tree Shops and Raymour & Flanigan absorbed the former Sam’s Club space that was freed up after that chain relocated to a new nearby center on Route 537 that it co-anchors with Wal-Mart. This year will bring the closure of Comp USA’s 20,600-square-foot store on the ring road.
Meanwhile, the corridor’s lone Treasure Island store—a 35,000-square-foot location in the Wegman’s-anchored power center adjoining Woodbridge Mall—was snapped up during 2006 by Bob’s Discount Furniture. However in Old Bridge, the 84,000-former Kmart that was vacated in 2003 remains empty.
On the new development front, several projects are in various stages of development on and off the corridor. In Old Bridge, Stanbery will soon be opening the aforementioned 100,000-square-foot lifestyle center at the junction of Route 18. The center is reportedly 95% pre-leased. Nearby in Marlboro, approvals have been granted for the construction of a Costco on a site at Route 9 and Texas Road that now houses an under-performing Regal Cinema and several smaller tenants. At the intersection of Routes 9 and 520, R.J. Brunelli has been appointed exclusive leasing agent for The Commons at Marlboro, which will introduce approximately 70,000 square feet of specialty stores to one of the last developable parcels in the heart of the Route 9 corridor.
Further south, pre-leasing has reportedly been progressing well on an approximate 100,000-square-foot outdoor lifestyle center addition to Freehold Raceway Mall. Nearby, off the corridor on Route 33, preliminary site plan approval has been granted for another R.J. Brunelli project, The Village at Manalapan. This town center’s first phase will include 500,000-square feet of retail and restaurant space in lifestyle, community center and ‘main street’ settings.
Route 35. Largely reflecting the availability of the former Lowe’s building at Seaview Square, the vacancy rate along the 25-mile corridor stretching from Aberdeen Township to Brielle jumped to 5.2% in 2006 from 3.4% in 2005—which was the second lowest level during the last 10 years. Over that period, the highway—which has the most retail space of the 10 central and northern New Jersey roadways reviewed by R.J. Brunelli—has seen its vacancy factor range from 3.3% in 1999 to 9.6% in 1997.
The firm’s 2006 survey showed 501,263 square feet of vacancies in 9.61 million square feet, up from 324,665 square feet in 9.49 million square feet in 2005. Of the corridor’s 188 properties, 27 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.
Mr. Brunelli noted that the 165,000-square-foot Lowe’s store at Seaview Square in Ocean Township was put back on the market by the power center’s new owner, which plans to correct structural defects in the building’s floor rather than demolish the building. (In the wake of those issues, Lowe’s relocated north on the highway to a new Eatontown site that opened in 2005.) Elsewhere at the 973,000-square-foot power center—whose anchors include Target, Sears and Costco—a 37,000-square-foot space became available in 2006 following the bankruptcy of the Furniture King chain. “As with the Lowe’s building, we also have tenants interested in that space,” he reported.
Other major factors contributing to the increase in Route 35’s vacancy rate included the closing of the 19,000-square-foot Velocity sports training center in Shrewsbury and the collapse of the deal to bring L.A. Fitness into the former Pharmor space at the 300,000-square-foot Holmdel Town Center. “Our firm, which was recently given the exclusive on the Velocity site, now has interest in that space,” Mr. Brunelli noted. “At Holmdel Town Center, L.A. Fitness was turned down by the municipality’s zoning board. Since acquiring the property a few years ago, Kimco—the nation’s largest owner of community and power centers—has seen its efforts to re-lease large vacant blocks of space like the former Pharmor and Wiz stores frustrated by Holmdel’s difficult building permit and zoning processes. While tenant work is finally under way for portions of the former Wiz building, the Pharmor space remains available.”
Elsewhere at that property, PetSmart will be relocating next door into the larger 24,000-square-foot space that Office Max closed in 2006. Other major Route 35 vacancies that have been absorbed included the 23,880-square-foot Seaman’s in Eatontown that went to Petco and the 21,900-square-foot Treasure Island in Shrewsbury that was taken by Staples. On the other hand, the 72,650-square-foot Levitz store in Wall Township that went dark in late 2005 remains vacant.
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.