Demographics Should Keep Retail Steady

"Despite the well publicized struggles of many local and national retailers, Northern and Central New Jersey will experience moderate retail success this year," predicts David Thurston regional manager for Marcus & Millichap, which has its New Jersey office in Fort Lee. "Job creation will certainly be more moderate than usual in 2002, but the slight increase in businesses relocating to New Jersey will aid the recovery of the local economy."

The rise in relocations, of course, is primarily tied to the terrorist attacks of September 11 and the companies displaced by the tragedy. While the overall impact on the regional economy has been enormous and negative, certain suburban markets have and will indeed see an influx of businesses.

At the same time, retailers love New Jersey's demographics, which can be briefly described as a lot of people with a lot of money in a small area. "New properties continue to come online as retailers retain their attraction to the area," according to Thurston. "High median incomes, approaching $60,000, will continue to draw retailers to the local market."

As far as specifics, the report projects that starts will indeed slow somewhat "as financing becomes scarce for some projects and a general mood of caution prevails," says Thurston. Another factor: More than three million sf broke ground last year, which still has to be absorbed.

And all that new space "will cause the vacancy rate to rise slightly in the near term. Absorption has been strong in the past few years, but it will struggle to keep pace, especially in the current economic climate," he continues.

But rents will rise by about 1%, according to Marcus & Millichap projections, because much of the product that has come on the market is higher-priced space. Target, Kohl's and Lowe's Home Center are expected to remain the hot retailers.

Property values are anticipated to increase as well, by an estimated 2%. Overall, "strip centers, particularly those anchored by grocers and drugstores, have fared particularly well, with average sales prices per sf of nearly 5% above a year ago," Thurston concludes.