Retail properties in Northern New Jersey continue to perform well, despite the effects of an economic downturn on retailer space demand. Retail sales are growing at a slower rate than a few quarters ago, and a modest pace of spending growth will persist in the months ahead. Reflecting the reduction in retail spending, overall vacancy has inched up in the past few quarters, although the rate remains tight in the mid-4 percent range. Within specific segments of the market, softening demand has lifted vacancy in smaller strip centers and at properties in Hudson County, where the housing market has become sluggish. On the supply side, deliveries of new space will increase to 3.5 million square feet this year. Most of the total is attributable to the Xanadu project, which will have a mix of traditional mall merchants and entertainment-oriented tenants. Although pre-leasing has been slow at Xanadu, other projects such as Center City Paterson and the Promenade Shops at Clifton lifestyle center have enjoyed relatively strong pre-leasing. Recent development announcements in the market include an 89,000-square foot lifestyle center addition at the Paramus Park mall.

By the numbers, a slowing regional economy will hinder job creation, leaving total employment unchanged in 2008. Last year, 11,500 new workers were hired, a 0.5 percent gain. Builders completed 1.1 million square feet of space in 2007 and will increase production to 3.5 million square feet this year. Most of the amount is attributable to the Xanadu project, which is slated to come online in the fourth quarter. Assuming reasonably strong pre-leasing at large projects and softening demand for existing properties, the marketwide vacancy rate is expected to climb 70 basis points this year to 4.9 percent. In 2007, the vacancy rate was unchanged. Rent growth will continue to slow in step with weaker space demand. In 2008, asking rents are forecast to rise 2.4 percent to $28.63 per square foot, while effective rents tack on 2 percent to $26.51 per square foot.

During the past 12 months, velocity in single-tenant assets has declined 58 percent, compared with a gain of 61 percent in the preceding period. Velocity has slowed to a trickle for all single-tenant property types, including drugstores and fast-food restaurants. In a limited number of fast-food deals, prices have ranged from $284 per square foot to $432 per square foot for a regional chain along a heavily traveled stretch of state Route 35. Generally, assets leased to highly rated national tenants can trade with cap rates in the mid- to high-6 percent range, extending to 8 percent or more for lesser tenants and locations. In 2008, lenders will continue to draw distinctions on credit quality, effectively limiting single-tenant activity to assets occupied by tenants with the best credit profiles.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join now!

  • Free unlimited access to's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including and

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2024 ALM Global, LLC. All Rights Reserved.