RETAIL VACANCY RATE IN NORTHERN NEW JERSEY INCREASED TO 3% DURING 2005
OLD BRIDGE, N.J. (3/10/06)—With the recently announced demise of the Treasure Island chain putting over 145,000 square feet of space in four highway locations on the market, the vacancy rate in retail properties along northern New Jersey’s six major shopping corridors increased slightly to 3.0% during 2005 from2.8% the previous year, according to R.J. Brunelli & Co., Inc. Nevertheless, with three of northern New Jersey’s roadways registering improvements in their vacancy factors from 2004, the region managed to retain its standing as one of the tightest retail real estate markets in the country.
The Old Bridge, N.J.-based retail real estate company’s sixteenth annual study of the northern New Jersey market uncovered 797,333 square feet of vacancies among the 26.51 million square feet of space evaluated along the six highways, with availabilities seen in 95 of the 791 properties studied. Brunelli’s 2004 report on the region found 729,472 square feet of vacancies in the 25.78 million square feet reviewed. Over the last 10 years, the northern market’s vacancy rate ranged from a low of 2.0% in 2002 to a high of 5.4% in 1997.
Conducted in January 2006, the firm’s 2005 study reviewed shopping centers and freestanding buildings exceeding 2,000 square feet along State Highways 4, 10, 17, 22, 23 and 46, 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.
“Although the vacancy factor moved up a bit in the wake of Treasure Island’s decision to totally close its doors and targeted closings by Levitz Home Furnishings and several other chains, northern New Jersey retained its longstanding position as one of the country’s hottest retail real estate markets,” observed Richard J. Brunelli, president of the firm. “With new development opportunities along the six corridors few and far between, availabilities that arise in existing properties offering good visibility and access are typically gobbled up right away by retailers and restaurants desiring to capitalize on the region’s high population density and strong incomes. For the most part, large blocks of spaces that linger on the market are in properties with visibility or access issues.”
Among this past year’s major closings, the Treasure Island bankruptcy will leave three of the northern region’s corridors with four vacancies ranging in size from 21,900 square feet to 47,500 square feet, including two locations on Route 17 and one each on Routes 22 and 23. Levitz Home Furnishings, which previously acquired the Seaman’s chain and picked up several desirable former Huffman Koos locations, filed for Chapter 11 Bankruptcy Protection in October 2005 and is now reorganizing under new ownership. Northern New Jersey closures to date include a 53,000-square-foot Seaman’s on Route 23 in Wayne and a 20,000-square-foot Seaman’s Kids on Route 4 in Paramus, but the lease for the 130,000-square-foot location on Route 4 in River Edge that Levitz took over from Huffman Koos last year is now also on the block (although the store continues to operate).
The northern New Jersey inventory will get another jolt later this year after OfficeMax completes closures of four locations along the corridors totaling almost 93,000 square feet as part of a plan announced in January to shutter 110 under-performing stores nationwide. The four local highway stores being closed include units on or just off the Route 22 corridor in Union, Watchung and Bridgewater (Route 202/206), as well as on Route 10 in East Hanover. Off the corridor, the chain will also be closing a store on Mt. Pleasant Ave. in Dover.
“Given the level of demand for retail space in the region, we anticipate that virtually all of these ‘big-box’ stores that are already on the market or in the process of being closed will be absorbed over the course of 2006,” Mr. Brunelli said.
Results for the individual northern New Jersey roadways are as follows:
Route 17. Primarily reflecting the availabilities of the 21,900-square-foot Treasure Island in Paramus and 47,500-square-foot location Ramsey, the vacancy rate increased to 5.1% in 2005 from 3.2% the previous year along the 15-mile section extending from Paramus to Mahwah. The corridor’s vacancy factor has ranged from just 1.5% in 2001 to a high of 6.0% in 1996 over the past 10 years.
The firm’s 2005 study found 245,700 square feet of availabilities in the 4.80 million square feet of space evaluated, with openings in 23 of the 142 properties reviewed. This compared with 143,500 square feet of vacancies in 4.54 million square feet in the 2004 study.
Other large vacancies arising along the roadway last year included the 25,000-square-foot former K&G Menswear space adjoining Pearl Art Supply in Paramus, 14,000 square feet from the closure of the Nassau Windows store adjoining Petco in Paramus, and 12,000 square feet from the departure of an independent furniture store in a 200,000-square-foot center in Paramus anchored by Burlington Coat Factory. Elsewhere in Paramus, the 10,000-square-foot space vacated in 2004 by Gateway Computers remains available, while 50,000 square feet is still on the market at the 446,800-square-foot Fashion Center.
“The effects of the aforementioned vacancies and scattered small store closings were partially offset by Ikea’s successful development of approximately 150,000 square feet of fully leased space adjoining its previously opened store on the former Alexander’s site at the junction of Route 4,” Mr. Brunelli said. The new space is occupied by Sports Authority, Bed, Bath & Beyond and the first New Jersey location for Christmas Tree Shops (a New England-based chain that was acquired by Bed, Bath & Beyond). “With these openings, Ikea has now completed the development of over 525,000 square feet of retail space on the prime 30-acre site it purchased from Vornado in 2004 for a reported $100 million, which may be the highest price paid for raw retail acreage in New Jersey,” he added.
Route 4. Vacancies along the three-mile Paramus segment dropped from a 10-year high of 10.6% in 2004 to 4.2% last year, due largely to Levitz’s aforementioned takeover of the 130,000-square-foot former Huffman-Koos building in River Edge. All told, the 2005 study found 46,033 square feet of vacancies in the corridor’s 1.10 million square feet, with openings in six of the 48 properties. Even with the improvement, the current rate is relatively high for a road where the vacancy factor stood at less than 2.0% for five of the last 10 years.
Nearly half of the 2005 study’s vacant space emanated from Levitz’s closing of the 20,000-square-foot Seaman’s Kids store in Paramus. Meanwhile, 11,000 square feet of new inventory was added to the roadway at Plaza 35 in Paramus, which was renovated and expanded to 51,000 square feet, with 7,800 square feet still available. New tenants at the property include Loehmann’s Shoes and Houlihan’s (which replaced the Caruso’s restaurant).
Route 10. Although vacancies inched up to 1.6% from 1.5% in 2004, the 20-mile Livingston to Ledgewood corridor had the best rate among the six northern New Jersey corridors this past year. With that, the roadway’s vacancy factor has remained under 3.0% for eight straight years—coming down from 3.4% in 1997 and 5.1% in 1996. All told, the firm’s 2005 survey found 81,200 square feet of vacancies in 4.94 million square feet, compared with 71,000 square feet in 4.71 million square feet the prior year. Seventeen of the 131 properties studied had available space, with none offering more than 10,000 square feet.
“Availabilities are expected to remain tight for the foreseeable future along Route 10, which transverses high income areas and offers very little in the way of new development opportunities,”
Mr. Brunelli observed.
Route 46. The vacancy factor subsided to 2.5% in 2005 from 2.7% the previous year on a roadway where the 10-year rate has ranged from a low of 1.5% in 2002 to a high of 7.5% in 1996. According to the firm’s 2005 survey, the corridor had 149,000 square feet of vacancies in the 5.85 million square feet reviewed, versus 161,200 square feet in 5.88 million square feet the previous year. Availabilities were seen in 20 of the 172 properties surveyed in an area which includes the 21-mile Dover to West Paterson corridor, as well as nearly 800,000 square feet of space along an adjoining section of Route 3 in Clifton, and a 442,000-square-foot power center just behind Beltway Mall in Wayne.
“Changes in the retail furniture industry were quite evident along this corridor, as Raymour & Flanigan took over the 100,000-square-foot Levitz building in Wayne (which was occupied in 2004 as well), but the neighboring 53,000-square-foot Seaman’s went dark—creating the roadway’s largest vacancy,” Mr. Brunelli said. “Elsewhere, Bassett Furniture opened in a new 20,000-square-foot freestanding store in Ledgewood.”
Other large vacancies evolving in 2005 included to 20,000-square-foot Franks Nursery in Kenvil and an 18,000-square-foot Harrows in Totowa. These availabilities were countered over the past year by, among other deals, T.J. Maxx’s opening in a major portion of the former Ames space at a Shop-Rite anchored center in Dover, driving down vacancies in that property to 5,000 square feet from 38,000 square feet a year ago; and K&G Menswear’s lease for the remaining 29,000 square feet in a 441,950-square-foot center anchored by Costco in Wayne.
In other news, the owner of Wayne Towne Center, a property anchored by Fortunoff’s and Sears at the intersection of Route 23, has disclosed plans to ‘de-mall’ the site’s small enclosed mall area to make way for a lifestyle center.
Route 23. The availability of the 36,000-square-foot Treasure Island in Riverdale elevated the vacancy factor to 3.2% from 1.4% during in 2004 along the 10-mile Wayne-to-Butler corridor. Over the last 10 years, the roadway’s vacancy rate has ranged from a low of 1.1% in 2001 to 3.9% in both 1999 and 2000.
In its 2005 study, the firm recorded 62,000 square feet of vacancies in 1.94 million square feet, up from 23,700 square feet in 1.71 million square feet the previous year. Only four of the corridor’s 58 properties had availabilities.
“Other than the Treasure Island building, the only sizable block of space available is the 16,000 square feet in Riverdale Plaza, a to-be-renovated 40,000-square-foot center that will effectively serve as a pad site for the new 130,600-square-foot Target that is under construction on a separate parcel further back from the highway,” Mr. Brunelli noted. R.J. Brunelli & Co. is currently the exclusive leasing agent for Riverdale Plaza.
In addition to the new Target, total footage along Route 23 will soon get another lift with the opening of Riverdale Crossing, a fully-leased Wal-Mart-anchored center that will reportedly also house Linens ‘N Things and a Borders bookstore—the latter deal brokered by R.J. Brunelli in its capacity as a leasing representative for the chain.
Route 22. The vacancy rate along northern New Jersey’s most heavily-retailed corridor dropped for the second straight year to 2.7% from 2.8% in 2004. Over the last 10 years, the rate has ranged from a low of 1.8% in 1999 to a high of 7.3% in 1997 in an area that now includes the 21-mile stretch from Union to Somerville, plus nearby sites along intersecting Route 202/206 from the Somerville traffic circle north into Bridgewater, as well as the nearby Route 28/287 intersection in Bridgewater.
In the 2005 study, the firm reported 213,400 square feet of openings in the 7.90 million square feet reviewed, compared with 218,572 square feet in 7.89 million square feet in 2004. Twenty-five of the 240 properties evaluated had vacancies.
The highway took its biggest hit with the availability of the 40,000-square-foot Treasure Island in North Plainfield, joining the former 47,000-square-foot Lord & Taylor Clearance Center, also in North Plainfield, that has remained unclaimed since the 2004 study. On the other hand, the 36,000-square-foot former Sears Hardware in Springfield has been leased to an undisclosed tenant, 30,000 square feet of vacancies were filled at the now fully-leased Somerset County Shopping Center on Route 202/206 in Somerville, and the remaining 15,000 square feet was absorbed at an adjacent small center anchored by Electronic Expo.
“Between the availability of the Lord & Taylor and Treasure Island sites, and the upcoming closures of OfficeMax stores in Union, Watchung and Bridgewater, the Route 22 corridor will have over 152,000 square feet of big box space on the block this year,” Mr. Brunelli noted. “This will indeed be a test for a corridor which has long been an extraordinary highway for major retailers. However, we anticipate that most of these locations should be absorbed over the course of the year.”
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.