OLD BRIDGE, N.J., June 13, 2012 /PRNewswire/ -- With new big-box store closures negating the benefits of absorptions, the vacancy rate in retail properties along northern New Jersey's six major shopping corridors edged up to 8.2% in April from 8.1% a year ago and 8.0% in 2010, according to R.J. Brunelli & Co., LLC. The Route 10 and 46/3 corridors were the only highways to show improvement during the past 12 months.
The Old Bridge-based retail brokerage firm's 22nd annual study of the six-county northern New Jersey market uncovered 2.33 million square feet of vacancies in the 28.34 million square feet of space examined along the six corridors, with availabilities seen in 159 of the 818 properties evaluated. This compared with 2.33 million square feet of vacancies in 28.78 million square feet of space in the 2011 study, in which openings were seen in 173 of the 817 properties reviewed.
Traditionally one of the tightest retail real estate markets in the nation, the northern region has seen its vacancy factor increase for five consecutive years as big box closures began to take a toll. The region's vacancy rate escalated from just 2.9% in 2007 to 3.6% in 2008 before jumping to 6.6% in 2009 and 8%-plus in the last three years. Over the last 10 years, the region's rate was as low as 2.0% in 2003.
R.J. Brunelli's 2012 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.
Big-box spaces exceeding 20,000 square feet were once again a major driver of the region's vacancies, representing 1.09 million square feet, or 46.8% of the empty space along the six corridors, up from a 45.7% share in 2011. Notably, approximately 798,500 square feet, or 73%, of this year's empty big box space came from stores that remained vacant since the firm's 2011 survey and, in a number of cases, from 2010 and before. This represented an increase from the 62% ratio of held-over big-box inventory in 2011, but comfortably below the 84% ratio seen in the firm's 2010 survey.
"The Chapter 11 filing of The Great Atlantic & Pacific Tea Co., which has since emerged from bankruptcy protection, and the demise of Borders continued to have the biggest impact on the northern New Jersey market," said Richard J. Brunelli, president of the firm. "Of A&P's six Pathmark stores that went dark along the corridors in 2011 or 2010, only two--a 60,000-square-foot location on Route 46 that's been leased to Fairway and a 42,000-square-foot location on Route 10 that is reportedly leased to LA Fitness—have been absorbed so far. Consequently, over 226,000 square feet of empty Pathmark space lingers on the corridors."
Borders, meanwhile, shuttered a trio of 25,000-square-foot locations on Routes 17, 22 and 23 in the past year, adding to the 28,000-square-foot store closed on Route 10 in the firm's 2011 survey. With that, approximately 103,000 square feet of former Borders locations remains on the market. Moreover, the bankruptcies of Sixth Ave. Electronics, Syms and Einstein Moomjy added four stores aggregating 120,000 square feet along Routes 10, 17 and 22 to the inventory this past year. An additional 30,000-square-foot Sixth Ave. location on Route 46 in Wayne, however, was snapped up by Planet Fitness.
"On a positive note, besides the aforementioned absorptions of the Pathmark and Sixth Ave. stores on Route 46 and Pathmark on Route 10, we continued to see some of the older big box vacancies take on new life," Mr. Brunelli continued. These included Conway Stores' lease for the former Linens 'n Things on Route 46 in Totowa; Dick's Sporting Goods lease for the former Circuit City on Route 22 in Union; Harbor Freight's lease for the former Office Max on Route 22 in Union; Sears Outlet & Appliance's lease of the former Office Depot on Route 22 in Watchung; and Lord & Taylor Home's lease of the former Loehmann's on Route 17 in Paramus.
Results for the individual northern New Jersey roadways are as follows:
Route 17. The vacancy rate along the 15-mile corridor extending from Paramus to Mahwah increased to 8.2% this year from 7.4% in 2011, but is still below the 10-year high of 8.7% reached in 2010. Over the last 10 years, the roadway's vacancy factor has been as low as 1.9% in 2003.
R.J. Brunelli's 2012 study found 405,748 square feet of vacancies in the corridor's 4.94 million square feet of space, with availabilities seen in 27 of the 145 properties reviewed.
The increase in the highway's vacancy rate was fueled by the aforementioned closings of Borders, Syms and Sixth Ave. Electronics stores, putting 90,000 square feet of new space on the market. This added to a lingering big box inventory that included a total of 140,000 square feet from former Home Depot Expo, K&G Menswear, and Pearl Art stores in Paramus and Ramsey.
Prominent newcomers to Route 17 include Ulta, which is now building a 10,000-square-foot store in a 15,000-square-foot addition to Interstate Plaza in Ramsey (where the Borders remains empty). The addition to the now 390,000-square-foot power center is being built on the site of a former motel. Ulta is being joined in the new fully-leased building by Sarku Japan and Chipotle Mexican Grill. R.J. Brunelli represented Ulta on the transaction in its capacity as the chain's exclusive real estate representative in northern and central New Jersey.
Route 4. Ending four straight years of improvements, the vacancy rate along the three-mile area between River Edge and Paramus escalated to 5.0% from 4.2% a year ago. Over the past 10 years, the corridor's vacancy rate has ranged from a low of 1.7% in 2003 to 10.6% in 2005.
The firm's 2012 study found 112,574 square feet of vacancies in the 2.23 million square feet reviewed. Eight of the highway's 46 properties had vacancies.
In Paramus, the long-vacant 20,000-square-foot former Levitz building remains the largest block of space on the market. An additional 18,700 square feet of space opened up over the past year through closings of various smaller stores, including a 12,000-square-foot Sixth Ave. store.
Route 10. After climbing to a 10-year high of 13.8% in 2011 following the closings of three Pathmark stores, the vacancy rate along the 20-mile Livingston to Ledgewood corridor fell to 13.1% in 2012. Unfilled big-box spaces in recent years have plagued a highway where the vacancy rate was low as 1.5% in 2005 and 1.6% in 2006.
R.J. Brunelli's 2012 study found 669,161 square feet of vacancies in the 5.12 million square feet studied, with availabilities in 37 of the 165 properties reviewed.
Big-box spaces accounted for over 48% of the corridor's vacancies, with closings of Einstein Moomjy and Stein Mart adding 42,000 square feet of space to the inventory. "With the exception of the Pathmark in Dover, none of the other big-box space that was available in our 2011 survey has been leased, including two other Pathmarks, an Office Depot in Livingston, as well as former Circuit City, Linens 'n Things and Borders stores at a totally empty power center in Livingston where a smaller Old Navy also closed," Mr. Brunelli noted. "The effects of the two newest big-box closures were offset by the one Pathmark absorption and openings of various smaller tenants, including such national chains as Cups Yogurt (two locations), Dunkin' Donuts, GameStop, Sleepy's (two locations), and Smash Burger.
Route 46/3. Sparked by three major big-box absorptions, the vacancy rate for the 21-mile corridor of Route 46 ranging from Dover to West Paterson and the adjoining section of Route 3 in Clifton plunged to 4.9% from a 10-year-high of 7.3% in 2011. Over the last 10 years, this corridor's vacancy factor was as low as 1.5% in 2003.
The firm's 2012 survey found 315,776 square feet of available space in the 6.42 million square feet analyzed, with vacancies in 33 of the 163 properties studied.
As previously noted, New York-based Fairway Market is continuing its push in New Jersey with the lease of the former 60,000-square-foot Pathmark in West Paterson, while off-price retailer Conway Stores took the 40,000-square-foot former Linens 'n Things in Totowa, and Planet Fitness absorbed the 30,000-square-foot Sixth Ave. location in Wayne. The only big boxes still available along the corridor are the 22,400-square-foot former Michaels store at the Morris Hills Shopping Center in Parsippany and the former 38,000-square-foot Electronics Expo in Wayne.
Route 23. After dropping to 3.5% in 2011, the vacancy rate along the 10-mile retail corridor between Wayne and Butler rose to a 10-year high of 4.9% in the most recent survey. The highway's vacancy factor has been below 2% in three of the last 10 years, with a low of 1.4% set in 2005.
R.J Brunelli's 2012 survey found 108,087 square feet of vacancies in 2.22 million square feet, with availabilities in 11 of the 62 properties reviewed.
The past year's increase was triggered by the closing of the 25,000-square-foot Borders at Riverside Exchange. "No other big boxes are available along the highway which, due to the absence of buildable retail land, has consistently had the least volatility of any northern New Jersey corridor," Mr. Brunelli said.
Route 22. With new big-box closings overcoming the benefit of several key absorptions, the vacancy rate along northern New Jersey's most heavily-retailed corridor jumped to a 10-year high of 9.7% from 8.0% in each of the prior two years. The corridor's rate had been under 3% in four of the last 10 years, hitting a low of 2.4% in 2007.
The firm's most recent study found 718,235 square feet of vacant space in the 7.41 million square feet reviewed along the 21-mile stretch of Route 22 from Union to Somerville, as well as nearby sites 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 43 of the 237 properties.
Big boxes drove 53.5% of the corridor's vacancies, down slightly from 54.5% in 2011. As previously noted, Dick's Sporting Goods, Harbor Freight and Sears Outlet respectively took over vacant Circuit City, Office Max and Office Depot spaces, taking 70,000 square feet off the market. However, those gains were countered by fresh vacancies aggregating 105,000 from closings of Sixth Ave. Electronics in Springfield, Borders in Watching, Ray's Sports in North Plainfield, and a Saturn dealership in Green Brook. These closings added to an existing inventory comprised of the former Pathmarks in Union and North Plainfield, a Circuit City in Union and the long-vacant 150,000-square-foot Home Depot Expo in Union.
The firm 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