OLD BRIDGE, N.J., June 22, 2012 /PRNewswire/ --The retail vacancy rate along central New Jersey's major shopping corridors fell to 9.1% in April from a 10-year-high of 10.5% a year ago and 9.8% in 2010 as a series of 'big box' absorptions triggered improvements on three highways and a stable picture on the fourth, according to R.J. Brunelli & Co., LLC. The performance snapped a string of five consecutive years of rising vacancies, but the region's current rate remains well above the 10-year low of 3.4% attained in 2006.
In its 23rd annual study of the central New Jersey market, the Old Bridge-based retail real estate brokerage found 2.79 million square feet of vacancies in the 30.53 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. Route 18 posted the steepest drop in its vacancy factor, while Routes 1 and 35 also improved and Route 9 held even.
Vacancies were seen in 195 of the 785 sites evaluated throughout the region. 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.
Taken together with the slight increase to 8.2% from 8.1% in the vacancy rate along six northern New Jersey highways announced by R.J. Brunelli last week, the vacancy factor for the 10 retail corridors surveyed by the firm in the central and northern parts of the state declined to 8.7% from 9.3% in 2011. All told, the firm found 5.11 million square feet of empty space in the 58.87 million square feet evaluated. Big box spaces accounted for 2.41 million square feet, or 47.0%, of the vacancies.
"The improved picture in central New Jersey over the past 12 months is largely due to positive activity on the big-box front, where full or partial absorptions of 10 spaces more than offset three fresh vacancies," said Richard J. Brunelli, president of the firm. "Still, lingering vacancies in nearly 30 other big-box spaces along the corridors continued to keep the region's vacancy rate elevated."
By virtue of those absorptions, vacant big boxes of 20,000 square feet or more combined for approximately 1.31 million square feet, or 47.1%, of available retail space along the four corridors, down from a 54.5% share in the firm's 2011 study. Notably, 1.20 million, or 91.4%, of the region's big-box space has been on the market for a year or more—and, in a number of cases, for several years. These longer-term vacancies primarily emanated from bankruptcies or downsizings at such retailers as The Great Atlantic & Pacific Tea Co. (which subsequently emerged from Chapter 11), Levitz, Linens 'n Things, Circuit City, Office Depot, Value City, and, more recently, Borders. All told, those chains accounted for approximately 726,000 square feet of vacant space along the four corridors this year, down from 953,000 square feet in 2011—a net absorption of 227,000 square feet.
A&P's Chapter 11 remained the biggest contributor to the region's big-box vacancies, with four Pathmark stores aggregating approximately 218,000 square feet still available since last year. The only location absorbed since the 2011 survey was a 59,700-square-foot former A&P in East Brunswick that was snapped up by Stop & Shop.
Among the other chains that shed multiple locations in the region, Office Depot's five stores totaling approximately 118,000 square feet are all still empty; three Linens 'n Things totaling 98,000 square feet remain available following the absorption of two locations aggregating 69,000 square feet on Route 35 to Best Market in Holmdel and Lord & Taylor Home in Shrewsbury; the long-vacant 82,000-square-foot Levitz on Route 35 in Wall is still unclaimed, while Ashley Furniture took the chain's 70,000-square-foot showroom in Eatontown; the former 126,000-square-foot Value City at Seaview Square on Route 35 is still available, but the bulk of the remaining 53,000 square feet in the chain's former building at the Manalapan Epicenter on Route 9 is now being subdivided for Sports Authority and a 6,000-square-foot tenant that's in negotiations, leaving just 5,300 square feet. These newcomers to Manalapan will join the PC Richard and Son that opened last year in a deal brokered by R.J. Brunelli, which is the exclusive leasing agent for the property. Meanwhile, the region's one remaining former Circuit City--a 32,000-square-foot space at Woodbridge Crossing on Route 1--remains available, while two Borders along the corridors totaling over 52,000 square feet are empty, as the West Windsor location closed in last year's survey was joined this past year by the site in Eatontown.
The other major bankruptcy contributing to the spike in 2011 vacancies, Blockbuster, continued to have an impact in 2012. Of the 13 locations aggregating 74,000 square feet that were closed along the corridors last year, just one on Route 35 in Ocean Township was leased to a 3,600-square-foot yogurt shop.
"The drop in central New Jersey's retail vacancy rate from 10.5% to 9.1% this year confirms that fact that the retail space market has 'bottomed out.' I believe its recovery will accelerate through 2013, especially if the national Presidential election results in business friendly regulations with no increase in taxes and if the financial crisis in Europe is solved," Mr. Brunelli said.
"The two new projects by Pagano Development in East Brunswick and Marlboro reflect that new construction with appropriate pre-leasing is financially feasible once again, and I expect a limited number of other new developments to be announced over the next six months," he continued. "However, the abundance of big box space could persist as some retailers will not modify their prototypical stores and, therefore, will only consider new construction. Such retailers will anchor several new shopping centers and create tremendous new ratables for townships that understand the need to cooperate with developers rather than fight them. Interest rates have never been lower, and this too bodes well for new construction."
Results for central New Jersey's individual roadways are as follows:
Route 1. The vacancy rate along the 30-mile corridor ranging from Woodbridge to Trenton dropped for the fourth consecutive year to 7.9% from 8.7% in 2011. Over the last 10 years, the highway's vacancy factor was as low as 2.4% in 2006 and 2007, and as high as 9.5% in 2009.
In its 2012 study, R.J Brunelli found 684,682 square feet of vacancies in 8.68 million square feet, with availabilities in 30 of the corridor's 119 properties.
The corridor's improvement during the past year was triggered by Burlington Coat Factory's lease of the upper level of the 157,800-square-foot former Great Indoors at Woodbridge Crossing, taking 78,900 square feet off the market. But with no movement on any of the roadway's 11 other empty big boxes, large spaces accounted for approximately 448,500 square feet, or 65.5%, of the corridor's vacancies. On a smaller scale, a freestanding, 17,500-square-foot Sixth Ave. Electronics building in Woodbridge became vacant during the past year following that chain's demise.
Route 18. With the absorption of four big boxes taking nearly 292,000 square feet off the market, the vacancy rate along the five-mile retail corridor in East Brunswick tumbled to 12.9% from a record-high 22.1% in 2011, 13.5% in 2010 and 18.0% in 2009. For the six years prior to that, the rate ranged from a low of 3.0% in 2003 to 7.3% in 2008, when the impact of a rash of big box closures started to be felt.
R.J. Brunelli's 2012 survey found 343,361 square feet of vacancies in the roadway's 2.65 million square feet of space, with availabilities in 26 of the 82 sites reviewed.
In addition to Stop & Shop's aforementioned takeover of the former A&P, the improvement was keyed by a redevelopment project that will reportedly bring Wal-Mart to the highway. According to Ed Cohen, East Brunswick's director of economic development, the chain will be opening an approximate
150,000-square-foot supercenter on a redeveloped site that 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. Those four absorptions were partially offset by a new 32,500-square-foot vacancy arising from the closing of Car-Khuff's Furniture. These moves sliced big box vacancies along Route 18 to approximately 112,000 square feet, or 32.7% of the corridor's empty space, from 63.1% a year ago. The 2012 and 2011 figures include former Home Depot and Office Depot sites that have lingered on the market. Among smaller spaces, notable departures included Sixth Ave. Electronics from its freestanding 15,000-square-foot store.
This year's survey includes the 126,000-square-foot Summerhill Square, Route 18's first major new property in years. Over 96% of the center's space is now leased, with major tenants including a Toys 'R' Us/Babies 'R' Us superstore, Annie Sez, David's Bridal, Pier 1 Imports, and Ulta. An additional 31,000 square feet is available for development on the site. R.J. Brunelli is a co-broker on the project, which was developed by Pagano Associates.
In other major deals along the roadway, R.J. Brunelli brokered the deal that brought Harbor Freight Tools to a 16,400-square-foot space at The Miracle Mall previously occupied by PetSmart (which relocated to Mid State Mall). The firm also recently signed Dollar Tree to a 10,000-square-foot space at The Miracle Mall in its capacity as the chain's exclusive leasing representative for central and northern New Jersey.
Route 9. Its vacancy rate remaining unchanged from 2011 at 7.0%, the 35-mile Woodbridge-to-Lakewood corridor was again the healthiest of the four central New Jersey highways. Over the last 10 years, the highway's vacancy factor ranged from a low of 7.6% in 2009.
The firm's 2012 study found 639,511 square feet of vacancies in the 9.20 million square feet reviewed, with availabilities seen in 58 of 259 properties. Following the absorption of the remainder of the former Value City building, six lingering big box vacancies totaling approximately 195,000 square feet accounted for 30.5% of the highway's empty space. In a transaction that didn't impact the roadway's vacancy rate, Ashley Furniture took over a former 21,000-square-foot Comp USA space on the Freehold Raceway Mall ring road that was leased last year to an independent furniture retailer. Other national chains recently opening on the highway included Panera Bread in the Manalapan center anchored by Best Buy.
Other notable newcomers to the roadway included Wine Academy, which opened a 5,000-square-foot store in the Marlboro Diamond Plaza. The Shore-area wine superstore previously opened locations on Route 35 in Hazlet and Route 70 in Lakewood.
Meanwhile, site work is now under way on the long-awaited development of another Pagano project, the 100,000-square-foot-plus Marlboro Commons. Exclusive leasing agent R.J. Brunelli recently announced that the center is over 60% pre-leased, with deals executed for a 40,000-square-foot Whole Foods (the chain's first location in western Monmouth County), a freestanding Walgreens and a Verizon store. The center also includes the site's existing freestanding PNC Bank.
Route 35. Buoyed by several big box deals, the vacancy rate along the 25-mile corridor extending from Aberdeen Township to Brielle fell to 11.2% from the 10-year-high of 12.2% set in 2011 and 11.9% in 2010. This ended a five-year run of increased vacancy rates on a corridor where the factor had been as low as 3.4% in 2006.
The 2012 survey found 1.12 million square feet of vacancies in the 9.99 million square feet studied, with availabilities in 81 of the 325 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.
All told, the previously noted absorptions of two Linens 'n Things and a Levitz location, as well as Big Lots' lease for the former Cost Cutter in Middletown, took approximately 167,000 square feet of big box space off the market. Those were partially offset by over 80,000 square feet of fresh vacancies arising from the closures of a Foodtown in Hazlet and the Borders in Eatontown. After also including nine lingering vacancies, big boxes accounted for 559,000 square feet, or 49.8%, of the corridor's empty space.
In addition to the aforementioned big box deals, the corridor's vacancy rate was driven down by a lengthy list of small space leases. These included leases with such national chains as Euro Wax Center (two locations) and Massage Envy (both chains are represented by R.J. Brunelli in central New Jersey), as well as OMG Yogurt and Sonic.
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, or visit www.njretailrealty.com. Telephone is (732) 721-5800.
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SOURCE R.J. Brunelli & Co.