Retail Transformation Sends Vacancy Rate Up, Goldstein Survey Shows

PARAMUS, NJ—The retail vacancy rate has increased by almost 0.4% since last year, mainly because of large chain closures and efforts by landlords to adjust to the new normal, according to The Goldstein Group’s survey of 22 retail corridors in Northern and Central New Jersey.

The survey, the most extensive retail vacancy report for Northern/Central New Jersey, totals over 4,250 properties and over 100 million square feet of retail space.  The retail vacancy rate is now at 7.04%. Although retailers/restaurants continue to lease retail space, others are closing down locations including some big box tenants who have been part of the retail landscape for many years.  New Jersey is still doing better in filling retail spaces, compared to the rest of the United States, where vacancies still average closer to 9-10% nationwide.

“The increase in the vacancy rate mostly can be attributable to the Toys R Us/Babies R Us closures along with other retailers such as Kmart, Sears, Sports Authority and Mattress Firm that are closing down locations,” says Chuck Lanyard, president of The Goldstein Group. “There is a major transformation in retail today, as landlords and retailers are working through a process of the impact of downsizing the stores, internet sales, and the increasing effort on retailers to create that unique experience to still drive people into traditional brick-and-mortar stores. Additionally, interestingly enough, we are also seeing longtime catalog retailers and internet only retailers such as Lands End, Untuckit clothing and Casper Mattress opening bricks-and-mortar stores for the first time.”

In New Jersey, supermarket activity has been very strong, as new supermarkets are opening, and others are in the planning stages. Restaurants also have been very active, many expanding their units due to the success of their prior New Jersey locations. Urgent care facilities and other types of medical services continue to expand, and numerous types of furniture and home furnishings accessory stores are either expanding or coming to the New Jersey marketplace for the first time. Entertainment concepts, notably trampoline centers, indoor sky diving facilities, restaurant and entertainment facilities such as Dave & Buster’s, are coming to New Jersey in a big way, the report says.

Sky Zone has opened several locations. I Fly opened in Paramus, and there are gun and pistol ranges soon to open in Union, Wayne and Woodland Park. And of course, the ultimate in entertainment centers, the opening of the long-awaited Meadowlands American Dream complex, is now slated to open its doors in mid-2019.

Strongest & Weakest Submarkets

The strongest retail markets with the lowest availability rates include:  Route 3 – Clifton (1.33%); Route 17- Ramsey-Mahwah (3.51%); Route 22 – Union/Springfield (3.91%); Route 1 – Woodbridge/Edison (4.85%); Markets with the highest vacancy rates include: Route 18 – East Brunswick (15.82%); Toms River- Hooper Avenue (11.36%); Morris Plains/Ledgewood (9.45%); Route 70 – Brick (9.39%); Route 35 – Hazlet/Middletown (8.81%).

“There was a continued increase in leasing activity throughout 2018 with several markets having minimal space available in corridors such as Route 3 Clifton, Route 22 Union/Springfield, Route 1 Woodbridge/Edison, Route 17 Ramsey/Mahwah,” says Lanyard. “Both national and regional retailers that continue to expand in the state include LA Fitness, 24 Hour Fitness, Chipotle, Aldi, Costco, Dollar General, Jersey Mike’s, T-Mobile, Quick Chek, Panera Bread, and Wawa.”

Leasing velocity in this current report totaled more than 3.3 million square feet. More than one million square feet of space currently is being built, and other projects in the planning stages throughout various communities in New Jersey including Paramus, Rochelle Park/Rutherford, Totowa/Fairfield, Wayne/Butler, Livingston/East Hanover, Morris Plains/Ledgewood, Montville/Rockaway, Union/Springfield, Scotch Plains/Bridgewater, North Brunswick/Lawrence Township, East Brunswick, Sayreville/Howell, Shrewsbury/Ocean, and Brick.

The Goldstein Group Vacancy Survey Matrix

Although the retail market has substantially improved from the recession that hit in 2008 and 2009, there will be more vacant space due to closings of Toys R Us, Babies R Us, Kmart, Sears, Mattress Firm, Macaroni Grill, Payless, Ruby Tuesday, and Staples, the Goldstein survey indicates. Banks such as M&T Bank, Capital One, Wells Fargo, TD Bank, Bank of America and Valley National Bank have also announced closings of some branches.

Active Retailers in the Marketplace

Most leasing activity continues to be driven by retailers opening small stores in the under 5,000 square feet range, Goldstein Group says. However, there was a continued spike in big box retailers taking advantage of favorable market conditions and rental rates, especially those who have filled or are looking to fill some of the still vacant A&P and Pathmark supermarkets spaces, as well as the Sports Authority locations that closed in 2016.

Some of the past year’s bigger box deals include LA Fitness in Lodi, Brick, Howell, Clifton, Newark and Lawrence Township, Aldi in Flemington, Livingston and Wall, Bob’s Discount Furniture in Union, Burlington Coat Factory in East Brunswick, Clifton, Garfield, Paramus and Newark, Hmart in Paramus, Home Goods in Brick, Lidl in Hazlet, Eatontown and Union, Raymour & Flanigan in Paramus & West Windsor, Trader Joe’s in Hoboken and North Brunswick, Target in Parsippany and Closter, Wegmans in Hanover, Montvale, and Middletown, Whole Foods in Bridgewater, Closter, Metuchen, Wayne, Weehawken and  Newark.  Restoration Hardware in West Windsor, 99 Ranch in Hackensack and Edison, Dick’s Sporting Goods in West Long Branch, Shop Rite in Elmwood Park, Shrewsbury and Wyckoff, and Weis Markets in Randolph.

Retailers that have recently opened locations or will soon open include: 7-Eleven in East Rutherford, Paterson, Denville, Newark, North Bergen, Red Bank and South Amboy; CVS in Jersey City, Lodi, Metuchen, Middletown and Shewsbury, Planet Fitness in Middletown, Fairfield, Wayne, Rockaway, Wall and Woodbridge, Quick Chek in Butler, Hanover, Middlesex and Hackensack, Sherwin-Williams in East Windsor, North Brunswick and Bernardsville, and Wawa in Sayreville, Maplewood, Fairfield, Hackettstown, North Plainfield, Brick and Lakewood.

Retail & Restaurant Trends

New Jersey’s long list of restaurant choices and eating establishments continues to grow as new restaurant concepts and established ones have opened or announced planned openings, the report says.

Blaze Pizza in Bridgewater and Livingston; Chipotle in Bridgewater, Flemington, Hillsborough, Jersey City and Woodbridge; Buffalo Wild Wings in Wayne; Halal Guys in Union, New Brunswick, North Brunswick and Teterboro; IHOP in Hanover; Panera in Paramus and Toms River; Popeye’s in Jersey City, Newark and Rockaway; Playa Bowls in Toms River, East Brunswick, Rutherford, Pompton Plains, Red Bank and Ridgewood; Shake Shack in Wayne and Livingston, Starbucks in Hillsborough, New Brunswick, Paramus, Rochelle Park, Wall and South Brunswick; Taco Bell in Newark, Hackensack, Jersey City and Wharton; and Zin Burger in Edison, Bridgewater, Watchung and Jersey City.

The fast-casual dining segment, which includes restaurants such as Chipotle, B Good, Shake Shack, Habit Burger, Buffalo Wild Wings, Qdoba, Blaze Pizza, Smash Burger, Jersey Mikes, Wing Stop, Firehouse Subs, Aroogas and Chopt will continue to expand throughout the state. People enjoy the fast service along with the much higher food quality and healthier food choices that fast casual provides in comparison to fast food, and as a result, fast casual dining is flourishing.

Fast food operations are not taking all this competition lightly and just lying down, however. According to Goldstein Group, these operators are improving on the quality of their menus and more recently are making big efforts in reconfiguring their stores to make them more comfortable, user-friendly, and appealing to the younger crowd looking of millennials to eat quickly. As for desserts, the fruit/yogurt segment has exploded with Playa Bowls, Frutta Bowls and Sweetberry Bowls taking numerous locations.

Health and wellness industry retailers continue to flourish in the Garden State. LA Fitness in Lodi, Brick, Howell, Union, Newark and Lawrence Township; 24 Hour Fitness in Hanover; CKO Kickboxing in Allendale and Clark; Blink Fitness in Newark, East Orange, Irvington and Perth Amboy; Crunch Fitness in Franklin Township and Midland Park; Club Pilates in Livingston, Marlboro, Northvale, Denville and Bridgewater; Orange Theory Fitness in Shrewsbury, Jersey City and Hackensack; Max Challenge in Watchung, Fair Lawn, Pine Brook and Randolph; Fit 26 in Waldwick, Livingston and Midland Park; Cycle Bar in Livingston, Jersey City and Montclair; and Code Ninja in Midland Park, Denville and Middletown .

Medical storefronts continue to flourish. City MD, AFC Urgent Care, MedExpress, Kinder Pediatric Care, PM Pediatrics, Trinity Rehabilitation, Twin Boro Physical Therapy, Health Plus Management, Excel Physical Therapy and others continue to open new locations throughout New Jersey.

“New kids on the block” include numerous retailers and restaurants that have decided to come to New Jersey for the first time to get into its very lucrative marketplace. Chopt Creative Salads,. The Green Turtle Sports Bar and Grille, Homesense, Design Within Reach, Car Max, Fortunoff Mattress, Tempurpedic, Cava Restaurant, Mamouns Falafel, Flatbread Grill, Duluth Trading, Pie Five Pizza, Sierra Trading Post, Which Wich, Wok the Walk, Hurricane BTW, At Home, Zoup, Safesplash Swim School and Goldfish Swim School all have either opened or will soon open New Jersey locations.

In the supermarket sector, new operations like Uncle Giuseppe’s in Ramsey or the continuing expansion of HMart, which opened a Paramus store, Gourmanoff Supermarket opening in Paramus, and 99 Ranch which opened in Edison and Hackensack, are all taking advantage of the opportunities in northern and central New Jersey.