Retail Vacancy Rate in Central NJ Rises to 9.8%, According to Annual R.J. Brunelli Survey

OLD BRIDGE, N.J., Aug. 4 /PRNewswire/ -- The vacancy rate along central New Jersey's four largest shopping corridors escalated for the fourth consecutive year to reach 9.8% by late-spring, as a spike in store closures along Route 35 countered the effects of improved showings on Routes 1, 9 and 18, according to R.J. Brunelli & Co., Inc. The new 10-year high eclipsed the 9.0% vacancy rate posted by the region in the firm's February 2009 study and is well above the period's 3.4% low set in 2006.

The Old Bridge-based retail real estate brokerage's 21st annual study of the central New Jersey market found 2.93 million square feet of vacancies in the 30.01 million square feet of space reviewed along State Highways 1, 9, 18 and 35 in Mercer, Middlesex and Monmouth counties, and a small section of Ocean County. Availabilities were seen in 185 of the 762 properties reviewed. The 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.

Effective with this year, the firm shifted the study period for its annual surveys of the northern and central New Jersey retail real estate markets to spring from February, with the central study wrapped up in late spring.  "With retailers typically waiting until after the holiday season to begin liquidating failing stores, we felt that conducting the study in the spring would give a better, 'post-shakeout' view of the market, going forward," explained Richard Brunelli, president of the firm.

Beginning this year, the firm is also including some vacant auto dealerships along the highways whose location and configuration lends them viable for retail use. "Given the significant amount of consolidation that occurred at the dealer level over the past year, it's a safe bet that many of these empty sites will have to go to non-automotive uses. In most cases, these properties are well suited for conversion to retail or restaurant use, as they offer ample parking, great exposure and superb access," Mr. Brunelli said. Sites that have remained as automotive dealerships are excluded from the totals.

In mid-May, the firm issued its annual findings for the northern New Jersey market, where the vacancy rate rose to 8.0% from 6.6% the prior year, with 2.27 million square feet available in the 28.53 million square feet studied along six corridors. Combined, the two regions saw their vacancy rate increase to 8.9% from 7.8% in 2009, with 5.20 million square feet available in the 58.54 million square feet reviewed. The consolidated rate eclipsed the previous high of 8.2% for the two regions that was recorded in the firm's studies completed in February 1993.

"As in northern New Jersey, the central region remained pressured by a large number of big-box store vacancies, many of which have been empty for several years," Mr. Brunelli said. Indeed, vacant spaces of 20,000 square feet or more combined for approximately 1.50 million square feet, or 51.3%, of the available space along the region's four corridors.

"While opportunistic tenants like PC Richard, the new-to-market HHGregg, PetSmart, and several fitness and recreation chains have stepped up to the plate and absorbed a number of locations in the region, the market remains glutted with remnants from the Circuit City, Linens 'N Things, Levitz and Comp USA bankruptcies, as well as downsizings by retailers like Office Depot, Office Max, Pathmark, and The Great Indoors," he continued. "Freestanding buildings from Levitz and other furniture retailers are especially troublesome, as their limited parking generally precludes other uses. Factoring in smaller spaces, the furniture, home furnishings and accessories businesses account for the lion's share of vacancies along the four corridors. Until the residential real estate market heats up again, it could be years before some of these spaces are absorbed.  Over the past year, smaller-space vacancies have also been driven by closings of Blockbuster and Hollywood Video stores, which typically range from 5,000 to 7,000 square feet, as the full-line retail concept is squeezed by cheaper rentals from Netflix, Red Box, and Blockbuster's online service, as well video-on-demand services from cable and satellite operators."  

Results for central New Jersey's individual roadways are as follows:

Route 1. Although it continues to be hamstrung by a large number of dark big-boxes, the 30-mile section stretching from Woodbridge to Trenton saw its vacancy rate ease down a fraction to 9.4% from the 10-year-high of 9.5% set in 2009. Despite the slight improvement, this year's measure remains well out of character for a roadway where, over the past decade, the vacancy rate had been as low as 1.8% in 2002 and in the 2.4% to 2.6% range for four other years.

All told, the 2010 R.J. Brunelli study uncovered 790,109 square feet of vacancies in 8.44 million square feet, with openings in 29 of the roadway's 111 properties.

The decline in vacancies was fueled by three big-box absorptions in the southern end of the corridor: PC Richard's takeover of the former Circuit City at Lawrenceville Center, Home Goods' lease for the former Linens 'N Things at Nassau Park, and HHGregg's lease for the former Filene's Basement at Mercer Mall. In another notable development, new market entrant Buffalo Wild Wings took over the former Bennigan's restaurant at Commerce Place in North Brunswick.

Collectively, the nine lingering big-box vacancies accounted for 501,052 square feet, or 63.4%, of the roadway's vacancies, led by the 157,800-square-foot Great Indoors and 100,000-square-foot Levitz stores in Woodbridge.

Route 18. Helped by four big-box deals, the vacancy rate along the five-mile retail corridor in East Brunswick fell from a lofty 18.0% in 2009 to 13.5% this year, but remained the highest among any of the 10 roadways studied by the firm in central and northern New Jersey. Over the past decade, Route 18's vacancy factor reached a low point of 2.8% in 2002, but has been above 5% for each of the last five years.

R.J. Brunelli's 2010 survey found 357,602 square feet of vacancies in 2.65 million square feet of space, with availabilities in 16 of the 81 sites evaluated. Four big-boxes—Home Depot, Office Depot, Office Max and Levitz -- combined for 164,183 square feet, or 45.9%, of the vacant space.

In the big-box absorptions, at the power center anchored by Kohl's, P.C. Richard took the former Circuit City and L.A. Fitness leased the vacant Linens 'N Things; PetSmart is under construction in the former Borders in MidState Mall (relocating from a smaller store in the Miracle Mall); and the former Toys 'R' Us in Loehmann's Plaza is now occupied by At Home Recreation, a new retail concept from Branch Brook Pools. In a deal brokered by R.J. Brunelli, Toys 'R' Us relocated a few miles south on the corridor in late-2008 to a new 62,000-square-foot building that includes its Babies 'R' Us brand.

Route 9.  Helped by two deals with non-traditional uses, the vacancy rate along the 35-mile Woodbridge-to-Lakewood corridor fell from 7.6% in 2009 to 6.7%—the lowest among the four central New Jersey highways. Over the past decade, the roadway's vacancy factor ranged from 3.6% in 2008 to a high of 10.8% in 2002.

R.J. Brunelli's 2010 study found 607,297 square feet of availabilities in 9.00 million square feet, with vacancies in 63 of the 248 properties reviewed.  Eight big box spaces totaling approximately 247,405 square feet drove 40.7% of the highway's vacancies. These include four spaces on the ring road of Freehold Raceway Mall (the former Marshall's, Office Depot, Comp USA and Linens 'N Things locations) with a combined 103,411 square feet.    

Beyond the big boxes, vacancies continue to be fueled by the closings of a number of independent and chain home furnishings, flooring, and appliance stores in the 3,500-square-foot to 10,000-square-foot range, as well as the departures of two Blockbusters and a Hollywood Video location.

In three key absorptions, the former 17,000-square-foot La-Z-Boy Showcase in Woodbridge has reportedly been leased to a sporting goods dealer; family recreation center I Play America is under

construction in 100,000 square feet at Freehold's new Renaissance Plaza, a redevelopment of the site once anchored by Pathmark and Stevens Furniture, leaving approximately 34,000 square feet available; and another family entertainment use, Monster Mini Golf, signed for a 10,000-square-foot space that most recently housed Paradise Pet at Exclusive Plaza in Marlboro. This will be the third location in New Jersey for Monster Mini Golf, a Rhode Island-based franchisor, which subsequently appointed R.J. Brunelli as exclusive real estate representative for central and northern New Jersey. (The firm was not involved in the Marlboro lease.)

"At a time when the pool of retailers seeking large spaces has diminished, the I Play America and Monster Mini Golf deals are representative of efforts by landlords to introduce non-traditional, family-oriented uses that can generate traffic for other tenants," Mr. Brunelli commented.

Route 35.  With limited absorption of an already large inventory of big box stores exacerbated by closings of other big boxes, auto dealerships and smaller spaces, the vacancy rate along the 25-mile corridor extending from Aberdeen Township to Brielle vaulted to 11.9% from 7.4% in 2009. This marked four straight years of increases in vacancies along a highway where the rate over the past decade was as low as 3.4% in 2006.  

The firm's 2010 survey uncovered 1.18 million square feet of vacancies in the 9.91 million square feet studied, with dark spaces seen in 77 of the corridor's 322 retail sites. 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 in central and northern New Jersey.

All told, big-box spaces accounted for 592,191 square feet, or 50.3% of the vacancies. Although the vacant Linens 'N Things in Holmdel Commons was leased to Top Tomato supermarket in a deal brokered by R.J. Brunelli's Danielle Albrecht, P.C. Richard took the Circuit City building in Eatontown, and Burlington Coat Factory absorbed the lion's share of the former Lowe's site at Seaview Square, the highway's glut of big box space widened. Between the balance of the Lowe's building and empty Value City and Furniture King locations, Seaview Square alone still has approximately 223,000 square feet of big box space available.   The pair of long-vacant Levitz showrooms in Eatontown and Wall combined for another 152,000 square feet of space.  Added to that existing inventory were closings of 84 Lumber in Aberdeen, Childrenswear Centre in Hazlet (which relocated to smaller space in Holmdel Towne Center), Remsen Dodge in Hazlet, Barnes & Noble in West Long Branch (which relocated to a larger space at Monmouth Mall in Eatontown), a Mitsubishi Dealer in Eatontown, and Pathmark in Wall -- creating another 144,000 square feet of vacancies along Route 35 and the Route 36 extension.

"Route 35 could best be described as a mess," said Mr. Brunelli. "There are dozens and dozens of small vacancies up and down the highway, compounded by dark big-boxes at 15 different properties. It all adds up to create the largest inventory of available space along any of the 10 corridors we studied in central and northern New Jersey.  For retailers and other tenants, this translates to unprecedented opportunities for high-exposure space that's especially well suited for home furnishings and accessories."  

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.

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SOURCE R.J. Brunelli & Co., LLC