Retail Vacancy in Northern and Central NJ Rises

OLD BRIDGE, NJ—Retail vacancy rates in northern and central New Jersey during the latest quarter rose to a combined 8.4 percent from 7.4 percent last year, driven mainly by the bankruptcy of The Great Atlantic & Pacific Tea Co., according to R.J. Brunelli & Co.

Central Jersey retail vacancy rates rose to 8.8 percent from 7.5 percent in 2014, while the Northern New Jersey retail corridors studied rose to 7.9 percent in 2015 from 7.3 percent a year ago. Reductions in the vacancy factor along Routes 4, 22 and 46/3, were unable to compensate for increases on Routes 10, 17 and 23.

Despite the uptick, the region's 2015 vacancy factor remained a healthy distance from the 10.2 percent recorded in 2013 and the eight-year high of 10.5 percent set in 2011, but was well above the period's low point of 4.8 percent posted in 2008.

In its 26^th annual study of the central and northern New Jersey market, the Old Bridge-based Brunelli identified 2.87 million square feet of vacancies in the 32.58 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.  A slight reduction in the vacancy factor along Routes 1 was unable to compensate for A&P-induced increases on Routes 9, 18 and 35.

In the six-county northern New Jersey market, Brunelli found 2.36 million square feet of vacancies in the 29.77 million square feet of space reviewed along the six corridors, with availabilities seen in 187 of the 927 properties reviewed.  By contrast, the firm's 2014 survey uncovered 2.19 million square feet of vacancies in the 30.12 million square feet of space studied. Over the last eight years, the northern region's vacancy rate ranged from a low of 3.7 percent in 2008 to a high of 8.9 percent in 2013.

When combined with the year-over-year increase in the vacancy factor for six northern New Jersey highways to 7. 9 percent from 7.3 percent, the overall north/central vacancy rate for the 10 retail corridors surveyed by the firm rose to 8.4 percent from 7.4 percent a year ago.

"Clearly, the A&P bankruptcy was the big story for New Jersey retail real estate in 2015," says Ron DeLuca, R.J. Brunelli's CEO/principal, who directs the firm's annual survey. "Along the four central New Jersey corridors alone, recent closures of four A&P and two Pathmark locations that have yet to find new occupants threw approximately 322,000 square feet of space on the market. Indicative of the impact of the closings, had those stores remained occupied, the central region's vacancy factor would have ticked up 30 basis points from a year ago to 7.8 percent."

The A&P totals exclude a number of locations off the four Central NJ corridors that remain vacant, says DeLuca.

"A&P's bankruptcy exacerbated another difficult year for supermarkets in central New Jersey, compounding the effects of closures of a Stop & Shop on Route 9 in Manalapan and several Foodtowns off the corridors," he says.  "The closings point to heightened competition from the likes of volume-leader ShopRite, such higher-end players as Wegman's and Whole Foods, Aldi at the low end, as well as Walmart Supercenters, Costco and other warehouse clubs, and the growing web-based delivery services."

After experiencing a decline in the firm's 2014 survey, the amount of empty big-box spaces (20,000 square feet and above) along the central New Jersey corridors expanded once again in the wake of the A&P bankruptcy to 1.02 million square feet from 796,053 square feet a year ago. Big boxes accounted for 43.6 percent of all empty space, up from 34.1 percent a year ago.

In northern New Jersey, the A&P bankruptcy had less impact but big-box spaces (20,000 square feet and up) still drove the increased vacancy rate, says DeLuca. The inventory of empty big-box spaces along the six northern corridors rose 70.8 percent to 1.05 million square feet (or 47.8 percent of total vacancies) in 2015 from 613,168 square feet, or 26.2 percent, a year ago. The impact of that increase was blunted to some extent by a 16.4 percent plunge in vacancies in spaces below 20,000 square feet to 1.32 million square feet from 1.588 million square feet in 2014.