Consumers Keep Retail on Track

FAIRFIELD, NJ-Despite the Fed's raising interest rates 17 times since June 2004, ultimately translating into higher rates for consumers on their debts, the New Jersey retail market mirrored the national picture by running on all cylinders through the first half of 2006, according to a report by Grubb & Ellis. Further, a strengthening job market has encouraged consumers to continue spending, according to the report, authored by Steven Jenco, director of client services in G&E's New Jersey office here.

Still, while retail was on solid footing in mid-2006, the resilience of consumers to maintain spending habits is likely to be tested against the backdrop of rising energy prices. Several signs have emerged to indicate that higher energy prices could influence consumer behavior, according to Jenco.

Bankruptcy announcements and consolidations by well-known retailers have been making headlines in the competitive New Jersey market, according to the report. Earlier this year, Treasure Island filed for bankruptcy and closed all 16 stores, including 11 in New Jersey. OfficeMax also announced its intention to shutter 110 of its 950 US stores as part of a restructuring. Ten of OfficeMax's 14 Garden State stores are among those to be closed. Many of the stores closed by Treasure Island and OfficeMax range from 20,000 to 30,000 sf, creating limited opportunities for expanding retailers in this size range. And Toys 'R' Us will be closing 73 underperforming stores and converting an additional 12 to Babies 'R' Us stores, the G&E report points out.

The New Jersey supermarket arena is expected to remain active, as several chains pursue strategies to increase market share, the report says. Following several unsuccessful attempts, Mark's & Spencer agreed to sell the 26-store Kings Supermarkets chain to a trio of investors for $61.5 million. With the exception of one store in Garden City, NY, the remaining 25 stores are located in high-income areas of New Jersey.

And A&P is reorganizing its markets based on a dual-format operating concept consisting of service-oriented stores selling fresh, prepared and organic foods and discount stores similar to its current Food Basics division. A&P wants to convert 75% of its stores to one of the two formats by year-end 2008.

Low vacancies in the New Jersey retail market have prompted developers to pursue new projects, the report points out. Among them: in Paramus, Vornado Realty Trust is set for a $102-million renovation of Bergen Mall, which would be repositioned and renamed Bergen Town Center. Whole Foods has signed a lease for a 77,000 sf, and Century 21, Target and Lowe's are said to be interested.

In Fort Lee, groundwork is under way for a mixed-use project called Centuria, which will include a hotel and 126,000 sf of retail space. In Chester, construction is wrapping up on the Streets of Chester, where more than a dozen retailers including Banana Republic, four Gap brands and three Talbots brands have signed on at the lifestyle center. And construction is underway on Riverdale Crossing in Riverdale-Wal-Mart, Linens n' Things, the Sports Authority and Borders are among national retailers that have brought the 260,000-sf shopping center to full occupancy.