OLD BRIDGE, NJ—An improved picture in both 'big-box' and smallerstore spaces combined to push the retail vacancy rate along centralNew 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 comparedwith a high of 10.5% in 2011 and low of 3.4% in 2006.

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Brunelli's 25th annual study of thecentral New Jersey market found 2.33 million square feet ofvacancies in the 30.94 million square feet of space reviewed alongState Highways 1, 9, 18 and 35 in Mercer, Middlesex and Monmouthcounties, and a small section of Ocean County. The region's mostheavily retailed road, Route 35, experienced the steepest declinein vacancies, followed by Routes 9 and 1, while Route 18 showed aslight increase.

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The study found availabilities in 180 of the 815 sites visitedthroughout the region during this year's third quarter. As in thepast, Brunelli'sstudy evaluates shopping centersand freestanding buildings exceeding 2,000 square feet—includingrestaurants, auto service facilities and vacant auto dealershipswhose location and configuration makes them viable for retail use.Regional malls and centers under construction or in the early ormid-stages of major redevelopment are excluded.

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

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The improvement in the two regions was triggered by asignificant number of new leases that accounted for more than 3.4million square feet during the past 12 months, according to thefirm's research. Big-box chains doing multiple deals across the tworegions' corridors included Nordstrom Rack (Routes10, 1 and 35); Hobby Lobby (Routes 1, 9 and 46);and Big Lots (Routes 10, 1 and 35). Smaller-spaceoperators with multiple deals along the corridors were led byBrunelli client Dollar Tree (fivelocations), followed by Jersey Mike's, MedExpress and Tiger Shulman martial arts(each with four).

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

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Vacancies in big-boxes along the four corridors were trimmed bya net of 293,814 square feet, or 27%, to 796,053 square feet.Concurrently, the region's inventory of vacant smaller (sub-20,000square feet) spaces was reduced by a net of 324,211 square feet, or17.4%, to 1.54 million square feet.

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

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Fueling the big drop in the central region's inventory of emptyspaces below 20,000 square feet were multiple leases with some ofthe company-operated and franchised chains named above, as well asothers like STS Tires, TurningPoint, 7Eleven, AdvancedAuto, and Pet Valu. Additionally, thecentral corridors saw a number of single-location leases in the10,000- to 20,000-square-foot range with chains like ACMoore, Furniture King, HarborFreight, Guitar Center,CVS, Mattress Factory,Party City, Smashburger, as wellas a variety of local operators. “These deals offset the impact ofclosures from bankrupt chains like Coldwater Creekand Dots (the latter now being resurrected undernew ownership), as well as strategic downsizings by such chains asRadio Shack, Game Stop andShoe Carnival,” said Brunellisenior vice president Ron DeLuca.

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Notably, no new big-box vacancies were seen along the centralcorridors since the firm's 2013 survey. Among the spacesabsorbed over the past 12 months, the remaining 62,600-square feetin the long-vacant former Lowes building atSeaview Square on Route 35 in Ocean Township wassubdivided between Big Lots and the SkyZone trampoline park. Coupled with the aforementionedleases for AC Moore, GuitarCenter and several smaller spaces, the vacancy rate in theonce-struggling, approximately 800,000-square-foot outdoor centerwas lowered to just over 10%; the 65,000-square-foot formerValue City building is the biggest singleremaining space. Also on Route 35, indoor arcade FuntimeAmerica opened in a 27,000-square-foot Eatontown spacevacated several years ago by Avalon Carpets.

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Elsewhere in the region, big-box absorptions along Route 9included two deals on the Freehold Raceway Mall ring road:Huffman Koos leased a 33,000-square-foot spacethat previously housed Marshall's, as theonce-bankrupt furniture brand continues its expansion under newownership, and Bob's Furniture opened in the22,000-square-foot space once occupied by OfficeDepot. The two stores join fellow furniture retailerRaymour & Flanigan in the ring road strip. Additionally,Hobby Lobby opened its second location along thecorridor at Friendship Plaza in Howell, taking the20,700-square-foot former AC Moore space andapproximately 50,000 square feet of adjoining vacancies. Hobby Lobby will soon be joined in the center by a WorldClass Shop-Rite, which took over thePathmark supermarket and a portion of theKmart store, both of which closed since the timeof the 2013 survey. On Route 1 in North Brunswick,Crunch Fitness tookthe remaining 26,400 square feet of the long-vacantOffice Depot in CommerceCenter.

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Besides the move of Shop-Rite intoFriendship Plaza, other notable big-box leasesinvolving new sites or spaces that were still occupied at the timeof the firm's 2013 survey included the openings of a136,000-square-foot Target and 152,000-square-footCostco at the new North Brunswick TownCenter on Route 1; the signing of WholeFoods at Allaire Plaza on Route 35 inWall Township, where the chain will take an approximate40,000-square-foot space created from the recently closedBrielle Sports Club and adjoining small-storevacancies; and Nordstrom Rack's deals for35,000-square-foot spaces at Mercer Mall onRoute 1 and the expanded Crossroads at Eatontownon Route 35 (anchored by Macy'sFurniture).

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CORRECTION, 11/13/2014, 10:11 p.m.: Anearlier version of this story misidentified the tenant taking overthe 33,000-square-foot space formerly occupied byMarshall's on the ring road of FreeholdRaceway Mall. The space is now occupied by aHuffman Koos furniture store and did not representan expansion of the adjoining Raymour &Flanigan store. The incorrect information was provided toGlobeSt.com by R.J. Brunelli.

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Steve Lubetkin

Steve Lubetkin is the New Jersey and Philadelphia editor for GlobeSt.com. He is currently filling in covering Chicago and Midwest markets until a new permanent editor is named. He previously filled in covering Atlanta. Steve’s journalism background includes print and broadcast reporting for NJ news organizations. His audio and video work for GlobeSt.com has been honored by the Garden State Journalists Association, and he has also been recognized for video by the New Jersey Chapter of the Society of Professional Journalists. He has produced audio podcasts on CRE topics for the NAR Commercial Division and the CCIM Institute. Steve has also served (from August 2017 to March 2018) as national broadcast news correspondent for CEOReport.com, a news website focused on practical advice for senior executives in small- and medium-sized companies. Steve also reports on-camera and covers conferences for NJSpotlight.com, a public policy news coverage website focused on New Jersey government and industry; and for clients of StateBroadcastNews.com, a division of The Lubetkin Media Companies LLC. Steve has been the computer columnist for the Jewish Community Voice of Southern New Jersey, since 1996. Steve is co-author, with Toronto-based podcasting pioneer Donna Papacosta, of the book, The Business of Podcasting: How to Take Your Podcasting Passion from the Personal to the Professional. You can email Steve at [email protected].