OLD BRIDGE, NJ—An improved picture in both 'big-box' and smaller store spaces combined to push the retail vacancy rate along central New Jersey's major shopping corridors to a six-year low of 7.6% from 9.8% in 2013, according to the latest study by R.J. Brunelli & Co., LLC. The 2014 figure compared with a high of 10.5% in 2011 and low of 3.4% in 2006.

Brunelli's 25^th annual study of the central New Jersey market found 2.33 million square feet of vacancies in the 30.94 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. The region's most heavily retailed road, Route 35, experienced the steepest decline in vacancies, followed by Routes 9 and 1, while Route 18 showed a slight increase.

The study found availabilities in 180 of the 815 sites visited throughout the region during this year's third quarter. As in the past, Brunelli'sstudy evaluates 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 in the early or mid-stages of major redevelopment are excluded.

Taken together with the year-over-year decline reported by Brunelli to GlobeSt.com last week in the vacancy factor for six northern New Jersey highways to 7.3% from 8.1%, the overall north/central vacancy rate for the 10 retail corridors surveyed by the firm fell to 7.4% in 2014 from 9.0% a year ago. Brunelli found a total of 4.52 million square feet of empty space in the 61.06 million square feet reviewed in the two regions, with big-box spaces (20,000 square feet and above) accounting for 1.45 million square feet, or 32.2%, of the vacancies.

The improvement in the two regions was triggered by a significant number of new leases that accounted for more than 3.4 million square feet during the past 12 months, according to the firm's research. Big-box chains doing multiple deals across the two regions' corridors included Nordstrom Rack (Routes 10, 1 and 35); Hobby Lobby (Routes 1, 9 and 46); and Big Lots (Routes 10, 1 and 35). Smaller-space operators with multiple deals along the corridors were led by Brunelli client Dollar Tree (five locations), followed by Jersey Mike's, Med Express and Tiger Shulman martial arts (each with four).

“While empty big-boxes continued to be absorbed in central New Jersey during 2014, one interesting development was the steeper reduction in smaller-store vacancies,” says Richard J. Brunelli, president of the firm.

Vacancies in big-boxes along the four corridors were trimmed by a net of 293,814 square feet, or 27%, to 796,053 square feet. Concurrently, the region's inventory of vacant smaller (sub-20,000 square feet) spaces was reduced by a net of 324,211 square feet, or 17.4%, to 1.54 million square feet.

“This contrasted sharply with what we saw in northern New Jersey, where a very strong reduction in big-box vacancies was partially offset by rising vacancies in smaller spaces,” he says. In all, the big-box share of total vacancies on the central corridors slipped to 34.1% from 36.9% in 2013.

Fueling the big drop in the central region's inventory of empty spaces below 20,000 square feet were multiple leases with some of the company-operated and franchised chains named above, as well as others like STS Tires, Turning Point, 7Eleven, Advanced Auto, and Pet Valu. Additionally, the central corridors saw a number of single-location leases in the 10,000- to 20,000-square-foot range with chains like AC Moore, Furniture King, Harbor Freight, Guitar Center, CVS, Mattress Factory, Party City, Smashburger, as well as a variety of local operators. “These deals offset the impact of closures from bankrupt chains like Coldwater Creek and Dots (the latter now being resurrected under new ownership), as well as strategic downsizings by such chains as Radio Shack, Game Stop and Shoe Carnival,” said Brunelli senior vice president Ron DeLuca.

Notably, no new big-box vacancies were seen along the central corridors since the firm's 2013 survey. Among the spaces absorbed over the past 12 months, the remaining 62,600-square feet in the long-vacant former Lowes building at Seaview Square on Route 35 in Ocean Township was subdivided between Big Lots and the Sky Zone trampoline park. Coupled with the aforementioned leases for AC Moore, Guitar Center and several smaller spaces, the vacancy rate in the once-struggling, approximately 800,000-square-foot outdoor center was lowered to just over 10%; the 65,000-square-foot former Value City building is the biggest single remaining space. Also on Route 35, indoor arcade Funtime America opened in a 27,000-square-foot Eatontown space vacated several years ago by Avalon Carpets.

Elsewhere in the region, big-box absorptions along Route 9 included two deals on the Freehold Raceway Mall ring road: Huffman Koos leased a 33,000-square-foot space that previously housed Marshall's, as the once-bankrupt furniture brand continues its expansion under new ownership, and Bob's Furniture opened in the 22,000-square-foot space once occupied by Office Depot. The two stores join fellow furniture retailer Raymour & Flanigan in the ring road strip. Additionally, Hobby Lobby opened its second location along the corridor at Friendship Plaza in Howell, taking the 20,700-square-foot former AC Moore space and approximately 50,000 square feet of adjoining vacancies. Hobby Lobby will soon be joined in the center by a World Class Shop-Rite, which took over the Pathmark supermarket and a portion of the Kmart store, both of which closed since the time of the 2013 survey. On Route 1 in North Brunswick, Crunch Fitness took the remaining 26,400 square feet of the long-vacant Office Depot in Commerce Center.

Besides the move of Shop-Rite into Friendship Plaza, other notable big-box leases involving new sites or spaces that were still occupied at the time of the firm's 2013 survey included the openings of a 136,000-square-foot Target and 152,000-square-foot Costco at the new North Brunswick Town Center on Route 1; the signing of Whole Foods at Allaire Plaza on Route 35 in Wall Township, where the chain will take an approximate 40,000-square-foot space created from the recently closed Brielle Sports Club and adjoining small-store vacancies; and Nordstrom Rack's deals for 35,000-square-foot spaces at Mercer Mall on Route 1 and the expanded Crossroads at Eatontown on Route 35 (anchored by Macy's Furniture).

CORRECTION, 11/13/2014, 10:11 p.m.: An earlier version of this story misidentified the tenant taking over the 33,000-square-foot space formerly occupied by Marshall's on the ring road of Freehold Raceway Mall. The space is now occupied by a Huffman Koos furniture store and did not represent an expansion of the adjoining Raymour & Flanigan store. The incorrect information was provided to GlobeSt.com by R.J. Brunelli.

Instant Insights /

Central NJ Retail Vacancy Slides in Brunelli Survey

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