OLD BRIDGE, N.J., Sept. 10, 2013 /PRNewswire/ -- After dropping from a 10-year high of 10.5% in 2011 to 9.1% in 2012, the retail vacancy rate along central New Jersey's major shopping corridors increased again to 9.8% this summer, according to R.J. Brunelli & Co., LLC, as progress in 'big-box' spaces of 20,000 square feet or more was thwarted by growing closures of smaller shops.
The Old Bridge-based retail real estate brokerage's 24th annual study of the central New Jersey market uncovered 2.95 million square feet of vacancies in the 30.22 million square feet of space studied along State Highways 1, 9, 18 and 35 in Mercer, Middlesex and Monmouth counties, and a small section of Ocean County. Improvements on Routes 1 and 18 were countered by rising vacancies along Routes 9 and 35. Over the last 10 years, the four corridors had their strongest performance in 2006, when the combined vacancy factor stood at just 3.4%.
All told, availabilities were seen in 192 of the 796 sites visited throughout the region during this year's second quarter. The study evaluated shopping centers and freestanding buildings exceeding 2,000 square feet—including restaurants, auto service facilities and vacant auto dealerships whose location and configuration makes them viable for retail use. Regional malls and centers under construction or major redevelopment are excluded.
When combined with the slight year-over-year decline in the vacancy factor for six northern New Jersey highways reported last week (to 8.1% from 8.2%), the overall vacancy rate for the 10 retail corridors surveyed by R.J. Brunelli in the central and northern parts of the state increased to 9.0% from 8.7% in 2012. The firm found a total of 5.35 million square feet of empty space in the 59.71 million square feet reviewed, with big-box spaces representing 2.15 million square feet, or 42.1%, of the vacancies.
"For central New Jersey, the encouraging news over the past 12 months was the net absorption of over 225,000 square feet of big-box vacancies, including some that lingered on the market for years," said Richard J. Brunelli, president of the firm. "But even as a still-too-high big-box inventory continues to shrink, that positive trend is being countered by growing numbers of smaller-store vacancies up and down the region's corridors. As we saw in northern New Jersey, much of the small-space woes can be attributed to a combination of unprofitable or marginally profitable tenants shutting their doors as leases expire and the inability of small chains, mom & pops and franchisees to take advantage of those vacancies because financing for new ventures or business expansion remains so difficult to get. Until the economy improves and banks genuinely start to loosen the spigots, it will be difficult to make much of a dent in the small store inventory."
In terms of the region's big-box inventory, a total of 1.09 million square feet remained available, amounting to 39.1% of the corridors' vacant space, down from a 47.1% share in 2012 and 54.5% in the firm's 2012 survey. "Landlords have been able to find newcomers for well-located properties, but others remain difficult to fill, underscored by the fact that approximately 74% of the region's vacant big-box space has been on the market for three years or more," Mr. Brunelli noted.
Among the notable absorptions, two of the corridors' four Pathmark sites were taken, with market newcomer Hobby Lobby opening in the 61,400-square-foot space at Marlboro Plaza on Route 9 and the new Lowes Express concept debuting in 49,500 square feet on Route 35 in Wall Township. Former Pathmarks on Route 1 in North Brunswick and Route 35 in Middletown remain on the market. Both of the corridors' remaining Borders spaces were absorbed, with DSW Shoes taking the 24,400-square-foot space on Route 35 in Eatontown in a deal brokered by R.J. Brunelli and Buy Buy Baby leasing the 28,100-square-foot store in Nassau Park on Route 1 in the Princeton area. Buy Buy Baby, meanwhile, also opened in another former bookstore, taking the 22,200-square Barnes & Noble space at Consumer Square on Route 36 in West Long Branch.
Of the region's three remaining Linens 'n Things sites, Big Lots leased the 40,900-square-foot store at Woodbridge Crossing on Route 1 and the 28,800-square-foot space on the Freehold Raceway Mall ring road on Route 9, leaving another Route 9 location in Howell still on the block. Rounding out the notable bog-box deals completed over the last 12 months, Shop-Rite debuted in 80,000 square feet at Bayshore Plaza on Route 35 in Hazlet, combining the center's former Foodtown with a long-vacant children's apparel superstore; the 29,400-square-foot former P.C. Richard building in Edison Woods on Route 1 was subdivided between two growing national retailers: Dollar Tree and The Tile Shop; and Tuesday Morning opened in the 21,600-square-foot former Office Depot space on Route 9 in Howell.
These absorptions were partially offset by two 'big box' closures over the past 12 months, both on Route 9: the 165,000-square-foot Lowes in Old Bridge and a 20,700-square-foot A.C. Moore in Howell. Another major space will become available On Route 9 in the months ahead when Kmart completes the going-out-of-business sale at its 68,000-square-foot location in Howell.
Apart from the aforementioned problems with small spaces, the central region's vacancy rate also took a hit from a number of closures of operations in the 8,000- to 20,000-square-foot range, including Sears Auto centers on Route 9 in Old Bridge, Route 35 in Eatontown and Route 18 in East Brunswick (the latter, part of a Kmart store). Additionally, the January 2013 bankruptcy filing by Big M. Inc. (parent of Mandee, Annie Sez and Afaze) and subsequent acquisition of the chains by Canadian retailer YM Inc. led to selective closures of under-performing locations, including an Annie Sez at Woodbridge Crosspointe on Route 9 and Mandee stores on Route 1 in North Brunswick and Route 36 in Eatontown. Finally, three Fashion Bug stores were closed along the corridors by early this year after the new owners of Fashion Bug parent Charming Shoppes, Inc. decided to shutter the entire low-priced chain. These included locations in Hazlet, Freehold and Howell.
Results for central New Jersey's individual roadways are as follows:
Route 1. With conditions continuing to improve, the vacancy rate along the 30-mile corridor extending from Woodbridge to Trenton declined for the fifth straight year to 6.7% from 7.9% in 2011. The highway's vacancy factor over the past 10 years has ranged from a low of 2.4% in both 2006 and 2007 to a high of 9.5% in 2009.
R.J Brunelli's 2013 study uncovered 577,266 square feet of vacancies in 8.59 million square feet, with availabilities in 29 of the roadway's 127 retail sites.
With no new large store closings, the aforementioned deals for the highway's empty Linens 'n Things, P.C. Richard and Borders sites brought 'big-box' availabilities down to 296,772 square feet, or 51.4% of Route 1's total vacancies—well below the 65.5% ratio posted in 2012. Notably, 100% of the available big-box space has been on the market for at least three years.
"Indicative of what can happen with well-located big-boxes, as part of its push into New Jersey, Hobby Lobby snapped up the 40,000-square-foot former Sports Authority space in Lawrenceville that was not vacant in out 2012 survey," Mr. Brunelli noted. R.J. Brunelli represented the landlord on the Hobby Lobby transaction.
Route 18. The vacancy rate along the five-mile retail corridor in East Brunswick dropped for the third consecutive year to 11.4% from 12.9% in 2012 and the record-high of 22.1% in 2011. Over the last 10 years, the roadway has its best performance in 2005 with a vacancy factor of 4.0%.
The firm's 2013 survey found 308,824 square feet of vacancies in the roadway's 2.71 million square feet of space, with availabilities in 24 of the 87 properties visited.
Hibachi Grill took approximately 14,000 square feet of the 32,500-square-foot space that went dark in the 2012 study when Car-Khuff's Furniture closed. All of the 77,437 square feet of 'big-box' space left has been on the market for at least three years.
In other news, work is under way on the redevelopment project that will bring an approximate 150,000-square-foot Wal-Mart supercenter to the site that previously housed 232,000 square-feet of vacant space divided between Sam's Club (which relocated to a bigger space on Route 1), the Route 18 Flea Market and an independent furniture store. Further south on Route 18, an additional Wal-Mart is reportedly coming to a former golf driving range site in Old Bridge.
Route 9. With the effects of growing small-store vacancies and the aforementioned Lowes and A.C. Moore closings offsetting gains from the Hobby Lobby, Big Lots and Tuesday Morning openings, the vacancy rate along the 35-mile Woodbridge-to-Lakewood corridor rose to 8.6% from the 7.0% posted in both 2012 and 2011. Over the last 10 years, the highway's vacancy factor ranged from a low of 3.6% in 2008 to a high of 7.6% in 2009.
R.J. Brunelli's latest study revealed 764,682 square feet of vacancies in the 8.91 million square feet evaluated, with availabilities seen in 63 of the 245 properties reviewed. Empty 'big-boxes' accounted for 269,000 square feet, or 35.2% of the roadway's vacancies, with 74% of those spaces empty for three years or more.
On an encouraging note, Pagano Associates' long-awaited Marlboro Commons is well under way, with exclusive leasing agent R.J. Brunelli reporting that leases are signed or out for signature for 95% of the 100,000-square-foot center. The first of the tenants, a 14,500-square-foot Walgreens, opened this summer, with Ethan Allen and Verizon scheduled to follow this fall. Meanwhile, Whole Foods just began construction on its 40,000-square-foot building. The chain's first store in western Monmouth County is expected to open next spring along with two other national tenants that have leases out.
Route 35. Closings of small shops and other spaces below 20,000 square feet overwhelmed strong progress on the 'big-box' front to elevate the vacancy rate along the 25-mile Aberdeen to Brielle corridor to 13.0% from 11.2% in 2012 and the previous peak of 12.2% set in 2011. Over the last 10 years, the vacancy factor had been as low as 3.4% in 2006.
The firm's 2013 survey found 1.30 million square feet of vacancies in the 10.0 million square feet studied, with availabilities in 76 of the 338 properties evaluated. The study area—which includes a section of Route 36, extending from its intersection with Route 35 in Eatontown, east to West Long Branch—has the most retail space of the 10 corridors evaluated by the firm each year in central and northern New Jersey.
In the absence of large-store closings, the aforementioned openings of Shop-Rite, DSW. Lowes Express and Buy Buy Baby brought the 'big-box' inventory down to 446,663 square feet, or 34.3% of the corridor's vacancies, compared with a 49.8% ratio in 2012. All of the remaining 'big-box' space has been on the market for at least three years.
"Looking ahead, the Eatontown area could see its biggest surge in new space in years as proposed redevelopments of Fort Monmouth and a site currently occupied by a golf course on Route 36 could potentially add 500,000 square feet of retail in conjunction with new housing, office space, hotels and other uses being considered for the sites," said Mr. Brunelli. "We believe these properties will have few problems attracting interest from national big box tenants who have been unable to find suitable available space in the Eatontown area, which remains a very popular regional retail hub."
For copies of R.J. Brunelli & Co.'s central or northern New Jersey studies, contact R.J. Brunelli & Co., 400 Perrine Road, Suite 405, Old Bridge, N.J., 08857; visit www.njretailrealty.com, or call (732) 721-5800.
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SOURCE R.J. Brunelli & Co., LLC