OLD BRIDGE, N.J., Sept. 3, 2013 /PRNewswire/ -- Thanks to absorptions of numerous empty big-box spaces on Route 22, the vacancy rate in retail properties along northern New Jersey's six major shopping corridors inched down to 8.1% from a high of 8.2% a year ago, according to the latest survey by R.J. Brunelli & Co., LLC. With Route 23 the only other highway to show an improvement from the firm's 2012 study, the region's vacancy factor remained stuck above the 8.0% mark for each of the last four years.
In its 23rd annual study of the six-county northern New Jersey market, the Old Bridge-based retail brokerage firm found 2.40 million square feet of vacancies in the 29.50 million square feet of space examined along the six corridors, with availabilities seen in 176 of the 909 properties reviewed. This compared with 2.33 million square feet of vacancies in 28.34 million square feet of space in the 2012 study.
Conducted during the second quarter of this year, R.J. Brunelli's 2013 study reviewed shopping centers and freestanding buildings exceeding 2,000 square feet along State Highways 4, 10, 17, 22, 23 and 46/3, and certain intersecting arteries in Bergen, Essex, Morris, Passaic, Somerset and Union counties. Freestanding restaurants, auto service facilities and auto dealerships are also included, while enclosed regional malls and centers under construction or redevelopment are excluded.
"Despite the progress shown on the hard-hit Route 22 corridor, northern New Jersey has yet to recover from the effects of the rash of big-box retail bankruptcies that began to elevate vacancies in 2009 when the rate jumped to 6.6% from 3.6% the prior year," said Richard J. Brunelli, president of the firm. "Long one of the top-performing retail real estate markets in the nation, the northern region boasted a vacancy rate of just 3% or less in less in three of the last 10 years after hitting an unheard of low of 2% in 2003. Our latest study found that big-box vacancies have stabilized as health clubs and retailers looking to expand their footprint in the region led to net absorption over the past year. But we're also seeing rising vacancies in small store space. Small chains and mom and pops continue to struggle to get financing for new locations or start-up ventures. Meanwhile, marginal operators unwilling to try to make a go of it in a tough economy are shutting their doors as leases expire."
The 2013 survey found that vacancies in the region's big-box stores exceeding 20,000 square feet declined to 1.06 million square feet, or 45.7% of total empty space, from 1.09 million square feet, or 46.7%, in 2012. Approximately 772,207 square feet, or 73%, of this year's empty big box space came from stores that remained vacant since the firm's 2012 survey and, in many cases, from 2011 and before. Indeed, spaces lingering on the market for at least three years totaled 612,700 square feet, or 58% of the region's big-box inventory. These include locations formerly operated by Circuit City, Linens 'N Things, Office Depot, Home Depot Expo, Borders, and Pathmark.
"During this past year, we saw some positive developments in particular with big-boxes left over from the Border's bankruptcy and The Great Atlantic & Pacific Tea Co.'s selective closures of under-performing Pathmarks," Mr. Brunelli noted. "Among the four Pathmarks that were still available along the corridors in our 2012 survey, two have since been absorbed by Costco and ShopRite on Route 22, leaving the pair along Route 10 in play. Similarly, of the four remaining Borders locations, the spaces on Routes 17 and 23 have been leased to DSW Shoes and Jo-Ann Fabrics, respectively, with stores on Routes 10 and 22 still available."
Among the four big-box spaces aggregating 120,000 square feet along Routes 10, 17 and 22 that were thrown onto the market in the 2012 survey from the bankruptcies of Sixth Ave. Electronics, Syms and Einstein Moomjy, only 20,000 square feet has been spoken for, with growing local chain Buddy's Small Lots taking the former Einstein location on Route 10 in Whippany. A smaller (19,500-square-foot) former Sixth Ave. space on Route 10 in Livingston was leased by growing national chain The Tile Shop, which also took approximately 23,000 square feet of the long-vacant, 32,300-square-foot Circuit City on Route 22 in North Plainfield.
Notable big-box vacancies arising over the past year included the 42,000-square-foot Daffy's on Route 4 in Paramus. The bankrupt chain's freestanding 30,000-square-foot location on Route 10 in East Hanover is being subdivided. To date, Party City has signed for 15,000 square feet and a lease is out on a 6,000-square-foot unit. R.J. Brunelli is exclusive broker for the remaining space.
Results for the individual northern New Jersey roadways are as follows:
Route 17. The vacancy factor along the 15-mile section extending from Paramus to Mahwah rose for the third straight year to 8.3% from 8.2% in 2012 and 7.4% in 2011. Over the last 10 years, this major retail corridor's vacancy factor has ranged from a low of 3.2% in 2005 to a high of 8.7% in 2010.
All told, the firm's 2013 study uncovered 411,224 square feet of vacancies in the corridor's 4.94 million square feet of space. Availabilities were seen in 21 of the 150 properties reviewed. Big-boxes accounted for 60.8% of the vacant space, the highest ratio for any of the 10 retail corridors studied by the firm in northern and central New Jersey, down slightly from a 61.9% share in 2012.
New big-box vacancies included Electronics Expo, XSRE and Loehmann's stores totaling 65,000 square feet in Paramus and Ramsey. These added to the 205,000 square feet of older big-box inventory divided between the roadway's former Home Depot Expo, Syms, Sixth Ave., K&G Menswear, and Pearl Art stores in Paramus and Ramsey.
The impact of the newer closures was partially offset by new deals with Basset Furniture for half of the former 40,000-square-foot Circuit City store in Paramus Town Center (the since-closed XSRE occupied the other half), and DSW's aforementioned lease for the former 25,000-square-foot Border's at Interstate Shopping Center in Ramsey . Additionally, the former 28,000-square-foot Lord & Taylor Home store in Paramus' Fashion Center was snapped up over the course of the year by Buy Buy Baby, which relocated from Paramus Towne Square.
Route 4. Reflecting the aforementioned closure of Daffy's in Paramus Place, the vacancy rate along the three-mile area between River Edge and Paramus increased to 5.4% from 5.0% in 2012 and 4.2% in 2011. The current rate is nearly half of the 10-year high of 10.6% reached in 2005, but well above the 1.8% low set in 2004.
R.J. Brunelli's 2013 study found 121,950 square feet of vacancies in the 2.27 million square feet reviewed, with 12 of the highway's 48 properties having dark space.
The impact of Daffy's closure was partially offset by the opening of Stickley Furniture in the long-vacant, 20,000-square-foot former Levitz building in Paramus.
Route 10. At 13.5%, 20-mile stretch from Livingston to Ledgewood again had the highest vacancy factor of any of the 10 highways studied by R.J. Brunelli in New Jersey. The most recent rate was up from 13.1% in 2012, but down from the 10-year high of 13.8% in 2011, as new and lingering big-box vacancies continue to take a toll on a highway where the rate was low as 1.5% in 2005.
The firm's 2013 study found 726,605 square feet of vacancies in the 5.38 million square feet studied, with availabilities in 48 of the 181 properties evaluated. Big-box spaces drove 47.1% of this year's vacancies, down slightly from 48.1% a year ago.
Nine spaces aggregating 272,172 square feet have now been on the market for two years or more, representing 81% of the roadway's big-box vacancies. However, approximately 45% of those longer-term vacancies are clustered in a totally empty power center in Livingston. New big-box space becoming available in the past year included a pair of 22,500-square-foot pad sites at the Kmart-anchored center in Randolph, as well as a new 20,000-square-foot building in Morris Plains.
In addition to the aforementioned deals for the former Daffy's and Einstein Moomjy buildings in East Hanover, big-box absorptions during the past year included a physical therapy practice's re-use of the 25,000-square-foot Honda Power Sport showroom in Hanover and Home Goods' lease of the 23,000-square-foot Branch Brook Pools location in East Hanover Plaza. "The relatively quick deals for the Daffy's and Branch Brook sites, both of which went on and off the market in the past year, point to the demand for well-located sites along Route 10," Mr. Brunelli commented.
Route 46/3. The vacancy rate for the 21-mile corridor of Route 46 between Dover and West Paterson and the adjoining section of Route 3 in Clifton expanded to 5.7% from 4.9% in 2012, but still below the 10-year-high of 7.3% reached in 2011. Over the last 10 years, this corridor's vacancy factor was as low as 2.1% in 2008.
R.J. Brunelli's 2013 survey found 402,079 square feet of vacancies in the 7.04 million square feet studied, with availabilities in 36 of the 203 sites studied.
Big-box spaces accounted for 31.5% of the vacant space, up from 26.7% in 2012, with just four spaces above 20,000 square feet currently on the market. Spaces going dark in the past year include a 40,000-square-foot building in Parsippany's Morris Hills Shopping Center that became available after P.C. Richards relocated to a 30,000-square-foot freestanding store in Wayne previously occupied by Circuit City; the 20,500-square-foot All Brands Furniture building in Rockaway; and a 28,000-square-foot space in Ledgewood's Kenvil Shopping Plaza that housed a health club and, previously, an independent grocer.
Elsewhere in the Morris Hills Shopping Center, Blink Fitness took approximately18,300 square feet of the former 22,400-square-foot Michaels space that became available in 2012 when the arts & crafts chain relocated to a nearby center. Additionally, in Wayne's Holiday Plaza, Buddy's Small Lots took a 23,000-square foot space previously occupied by Petco, which moved within the center to take the space previously occupied by Comp USA.
Route 23. The 10-mile corridor between Wayne and Butler once again had the lowest vacancy rate of any of the 10 New Jersey highways studied by R.J. Brunelli, dropping to 4.7% from the 10-year high of 4.9% reached in 2012. Over the last 10 years, Route 23's vacancy factor has been as low as 1.4% in 2005, as the lack of available buildable land continues to keep a lid on the corridor's overall inventory.
The firm's 2013 survey found 108,433 square feet of vacancies in 2.31 million square feet, with availabilities in 15 of the 76 properties reviewed.
With Jo-Ann Fabrics taking the 25,000-square-foot Borders at Riverside Exchange, no big-box space is currently available along the highway.
Route 22. A series of notable big-box absorptions helped drive down the vacancy rate along northern New Jersey's most heavily-retailed corridor to 8.3% from a 10-year high of 9.7% in 2012, but still above the 8.0% recorded in both 2011 and 2010. The corridor's rate had been under 3% in three of the last 10 years, dropping to a low of 2.4% in 2007.
R.J. Brunelli's 2013 survey uncovered 628,608 square feet of vacant space in the 7.57 million square feet reviewed along the 21-mile stretch of Route 22 from Union to Somerville, as well as nearby properties along intersecting Route 202/206 from the Somerville traffic circle north into Bridgewater, plus the nearby Route 28/287 intersection in Bridgewater. Availabilities were seen in 44 of the 251 sites.
Big-boxes accounted for 48.1% of the corridor's vacancies, dropping from 53.5% in 2012. Absorptions of big-box spaces were keyed by the aforementioned deals that are bringing Costco and a Village Super Markets Inc. Shop-Rite to shuttered Pathmark sites in North Plainfield and Union, respectively. Both chains are coming into the centers with bigger footprints than the Pathmarks. Elsewhere, a Nissan dealership took over the 20,000-square-foot former Ray's Sports building in North Plainfield, Harbor Freight occupied half of a 25,000-square-foot former Saturn dealership in Greenbrook, and The Tile Shop leased 23,000 square feet of the long-vacant 30,000-square-foot Circuit City in the same North Plainfield center that is adding Costco.
Those gains on the big-box side were partially offset by the closures of a 30,000-square-foot Jason's Furniture in Greenbrook and the 25,000-square-foot Sears Auto Center in Union "In Union, property owner Sears Holdings is reconfiguring the site to accommodate smaller tenants," Mr. Brunelli said. "We expect to see more of this at other Sears-owned sites in New Jersey, as the struggling retailer looks to capitalize on its real estate holdings by converting under-performing store formats in desirable areas into multi-tenant rental properties."
R.J. Brunelli expects to release its report 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., 400 Perrine Road, Suite 405, Old Bridge, N.J., 08857, or visit www.njretailrealty.com. Telephone is (732) 721-5800.
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SOURCE R.J. Brunelli & Co., LLC