OLD BRIDGE, NJ—The retail vacancy rate in northern New Jersey's six major shopping corridors fell to 7.3% from 8.1% a year ago thanks to ongoing absorptions of empty 'big-box' stores—including some long-dormant spaces—according to R.J. Brunelli & Co.'s latest survey of the market.

With Routes 17 and 10 leading the way, conditions improved on all roadways with the exception of Route 4, as the region's vacancy factor reached its lowest level in five years.

The Old Bridge-based retail brokerage firm's 24th annual study of the six-county northern New Jersey market found 2.19 million square feet of vacancies in the 30.12 million square feet of space examined along the six corridors, with availabilities in 173 of the 915 properties reviewed. In the 2013 study, the firm found 2.4 million square feet of vacancies in 29.5 million square feet of space.

Brunelli's 2014 study, conducted during the third quarter, reviewed shopping centers and freestanding buildings exceeding 2,000 square feet along State Highways 4, 10, 17, 22, 23 and 46/3, and 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 in early- to mid- stages of redevelopment are excluded.

"The northern New Jersey retail real estate market still has a way to go before returning to the nationally envied 2% to 4% vacancy factors seen between 1999 and 2008, but with two straight years of decline from the 8.2% peak attained in 2012, the region is clearly battling back from the impact of the spate of retailer bankruptcies and downsizings that drove big-box closures between 2009 and 2012," says Richard J. Brunelli, president of the firm.

Underscoring the big-box recovery, spaces of 20,000 square feet and above accounted for 658,168 square feet, or 30.1%, of the region's vacancies in the 2014 study, down sharply from 1.06 million square feet, or 45.7%, a year ago. With that, the empty big boxes represented just 2.2% of the six corridors' total inventory of retail space, compared with 3.6% in 2013.

"What was encouraging about this year's crop of new big-box leases along the corridors was that they were spread across a range of uses, led by furniture, apparel, supermarkets/food, and health clubs," says Brunelli. "These included the first New Jersey locations for Cost Plus World Market on Route 10, and the PGA Tour Superstore and Mitchell Gold + Bob Williams Furniture on Route 17, as well as two all-new concepts: the Home & Kidz children's furniture superstore on Route 17 and Route 10's Farmtastic, a new upscale independent supermarket banner from the Allegiance Retail Services supermarket co-op."

But the strong progress in big-boxes was partially offset by rising vacancies in locations under 20,000 square feet. Across the six corridors, vacancies in those smaller spaces jumped 14.5% to 1.53 million square feet from 1.34 million square feet a year ago.

"In addition to the bankruptcies of Coldwater Creek and Dot's, and strategic downsizings by Radio Shack, Shoe Carnival, Game Stop and more, the increase in vacancies in smaller spaces continues to be fueled by mom & pops and small chains," says Brunelli senior vice president Ron DeLuca.

"Against a backdrop of still-sluggish consumer spending and high rents, many marginal operators elected to shut their doors as leases expire," says DeLuca. "What's more, although bank lending has loosened a bit from previous years, with the exceptions of established franchise operators with strong balance sheets, many small chains and mom & pops continue to have a tough time getting financing for additional locations or start-up ventures. And in the wake of heightened scrutiny from bank regulators, entrepreneurs that are getting funding often find that the process can drag on for months, delaying the leasing process. On top of that, many landlords have been reluctant to give measurable tenant improvement allowances to independents, unless they can show a significant net worth, often a minimum of $1 million or more."

Besides the absorption of big-box spaces, developers are ramping up new projects and redevelopments on and off the corridors, says Brunelli.

Notable new developments include RD Management's planned Whole Foods-anchored community center on a 26.6-acre site along Route 46 in Parsippany; a Wegman's-anchored center at the Mack-Cali business campus on Route 10 in Hanover; and, off the corridors, The S. Hekemian Group's planned The Shoppes at DePiero Farm in Montvale, which would also feature Wegman's. Also off the corridors, Whole Foods opened in a former A&P in downtown Morristown.

New projects with site work substantially completed or under way include The Shoppes at Randolph on Route 10, which has been approved for up to 90,000 square feet, on which Brunelli serves as exclusive leasing agent; and the Chimney Rock Crossing site on Route 22 in Bridgewater, which is being prepared to accommodate more than 214,000 square feet of new retail space.

Instant Insights /

Brunelli Survey: Northern NJ Retail Vacancy Falls To Five-Year Low

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