Sean Ryan is associate editor of Real Estate New Jersey, from which this article is excerpted.

New Jersey’s known for its retail–its dense, affluent population has made the Garden State desirable like no other state, although some retail formats still work better than others. RENJ associate editor Sean Ryan asked four of the top people in the market to “take its temperature.” Mario Dudzinski, vice president of real estate for Garden Commercial Properties in Short Hills; Matt Harding, president of Levin Management in North Plainfield; Beth Krinsky, senior vice president at Weichert Commercial in Iselin, and Chuck Lanyard, principal and director of brokerage services at The Goldstein Group in Glen Rock, offer their thoughts on how the market is doing, what retail products are hot and what are some of the problems facing retail.

RENJ: From your perspective, what’s the current condition of the shopping center/retail market in New Jersey?

Lanyard: “The best way to describe it is that New Jersey retail remains very strong. That’s despite some of the changes we’ve been going through with high gas prices and interest rates. New Jersey still has the best demographics in the country as to high incomes and density of population.

“Every year, we do our New Jersey vacancy reports. We take 17 key markets, stretches of highway where all the major retailers are located, and we do very accurate pinpointing of vacancies. In New Jersey, the vacancy level runs 3.9%. When people talk about the strong demos in New Jersey, it’s because of the population. It’s in those corridors where the retail has its strength. Nationally, there are many major markets where the vacancy is in the 7 to 12% range. New Jersey’s still very viable.”

Krinsky: “We’re at a very good place. Central Jersey is showing about a 4.3% vacancy, and that’s only because we’ve got a couple big boxes like empty Treasure Island stores. We’ve got a number of Acmes empty at this point. Other than that, there’s not a lot of space available. It’s very difficult to find small space for the mom-and-pops.

“Often, I’ve found that when the office market is down, the retail is up. That’s where we seem to be. The office market is quite low–there’s a lot of space around.”

RENJ: What about from the development side?

Harding: “I would say it’s very healthy, in terms of demand from tenants. There’s relatively limited new supply in terms of shopping centers, so I think demand is strong for quality and available space, and will continue to remain so.”

Dudzinski: “I think the challenge is in getting projects developed. The lead time has grown from a one- or two-year process to three or five years for an average strip mall, and something greater than that for a regional center.”

RENJ: How does that compare to what’s going on elsewhere in the country?

Dudzinski: “When you say ‘elsewhere in the country,’ anywhere you’ve got a large metropolitan area the challenges are probably very similar. I think rural areas, where there is a need for growth and a desire for ratables, are more accommodating to the developer. Any major metropolitan city will have the same challenge going forward.”

Harding: “I’d say it’s consistent with what’s going on elsewhere in the country in general. New Jersey’s retail market is in a stronger position because the density of population, barriers to entry for new construction and so forth. Also, our industry base is diversified, so we may not be subject to peaks and valleys that other parts of the country might be subject to.”

RENJ: What’s the most important issue facing retailers and developers right now?

Dudzinski: “The approval process has become an 800-pound gorilla. Between acquiring land, taking it through approvals, meeting all the outside conditions put on you by the DEP–there’s a myriad of agencies once you’ve got it through a planning board. In places like New Jersey, I think it’s out of control. In the more rural areas, where they’re looking for growth, perhaps it’s a little different–not to say a less stringent standard, but a standard that’s more streamlined.

Krinsky: “Because people’s perception of the economy is low at this point in time, with a lot of layoffs, marketing is going to be extremely important. Lord & Taylor and Macy’s have been doing it for a long time to meet the needs of this perception of the economy. Now the smaller retailers are saying, ‘Hey, we have to follow suit.’ Marketing is becoming a major factor again.”

Harding: “Retailers are looking to find different venues for their stores. Some traditional mall retailers are coming out into open-air centers, going into downtowns, trying to get closer to their customer. Their customer has less free time, so retailers are trying to be more comfortable with their customers.

“Getting back to development, on a forward basis there’s more of a look at mixed-use developments, and developers being more creative in their retail projects.”

RENJ: What’s the “hot” type of shopping center right now?

Harding: “The lifestyle center. It has somewhat varied definitions, but in our area it has some combination of upscale national retailers, like Banana Republic, Ann Taylor or Ann Taylor Loft, Jos. A. Bank and restaurants in a very nice shopping center. Built nicely, good architectural finishes, high-quality design, and close to the customer.

Lanyard: “You’re basically taking those quality, higher-end stores and bringing them to your neighborhood rather than your having to drive out to the malls. It cuts the customer off at the pass by bringing the retailers into the neighborhoods close to their customer base. Some of the projects in development or already built include the Shops at Denville, another project in Old Bridge, and the redevelopment around Bridgewater Commons. There’s also a new one going up in Clifton, on Route 3.”

Krinsky: “If an urban area is establishing an arena, retail growth is tremendous. Restaurants are coming in, people are spending money, offices are coming in again. More than that, apartments are coming in. I was in Downtown Brooklyn two weeks ago, the future home of the Nets. Many of the old office buildings are being converted into condos. It’s creating a residential neighborhood out of downtown, and that’s a wonderful development.

“I do some work in Newark [near the under-construction Prudential Arena]. People are a little hesitant. They’re just coming in now to look for retail. There’s still a number of empty stores in Newark, but that’s going to come around when the arena’s a little closer to completion.”

Lanyard: “Don’t lose sight of the other key development in New Jersey–mixed-use transit villages. You have retail on the first floor and three or four floors of residential on the upper floors. They’re going into numerous towns throughout New Jersey. Some of the towns it’s happening are Morristown, Rutherford, and the Harrison MetroCenter.”

Krinsky: Anything that creates a social environment–ice cream parlors, coffee stores. The major malls, the old ones, are renovating and creating sitting areas for people to just go and socialize. Part of that whole marketing plan is to move people into those centers on a social level. Whether it’s a strip mall or a lifestyle center, you’ve always got places to socialize. From Starbucks to Cold Stone Creamery, as long as there’s a place to sit down.”

RENJ: So, what are the “hot” tenant categories then?

Krinsky: “It’s really being driven by ethnic neighborhoods and ethnic groups. The video stores that we traditionally have had in our areas are now turning into Asian book and video stores. Bollywood has a tremendous influence in many of our neighborhoods, as well as eateries and fast foods for those communities. I’m getting a lot of calls on those.

“Now a lot of manufacturers are going into a lot of regional factors. You’re finding manufacturers of clothing or shoes are establishing their own stores. Women’s apparel growth has been in the lingerie division. Chico’s has their own signature brand, and that’s going into a lot of the outdoor centers that have opened up. Victoria’s Secret has expanded and is even doing childrens’ now. Lingerie and casual wear has tremendous economic growth at this point.

“The other big trend is anywhere we can put a health food supermarket. Whole Foods is very much on the rise.”

Lanyard: “Whole Foods is going to keep coming on strong, especially since they acquired Wild Oats. People have really been big on organic.

“Christmas Tree Shops is still going to be opening up shops in New Jersey. People love that store. It’s a discount variety store–they get all different qualities of merchandise. They’re really astute purchasers, and they do a great job up in New England.

“Furniture’s still strong. Raymour & Flanigan and Bob’s Stores are both strong. Another one is Ashley Furniture–they have four or five sites in New Jersey and they’re still looking for others. Ashley is a really big furniture discounter, and a manufacturer.”

Harding: “Restaurants are more and more popular to be drawn into shopping centers. They’re a great draw for a property. They bring people at different times of the day. They provide life and activity.”

RENJ: What kind of restaurants?

Harding: “Fast casual restaurants, which are somewhere between full-service and fast food. They can straddle the lunch business and the dinner business. Salad Works, Chipotle, Moe’s, Panera Bread. Starbucks is fairly aggressive in looking for new locations as well. I think they see opportunities in existing places, holes where they aren’t. They’re trying to fill out their coverage in the state. That can include new projects, but they aren’t a ton of new projects out there. Retailers need to look at both, and Starbucks and the fast casual restaurants are absolutely looking at existing properties as well.”

Lanyard: “You’re going to see wing restaurants come into New Jersey strong, primarily from the West Coast. We’re working with one now called Wow Wingery. There’s another one called Buffalo Wild Wings. I’ve been to quite a few of them in California, and they’re really cool. It’s more of a comfortable seating thing. It’s not exactly a sports bar, but they’ll have a lot of TVs around. The only real competition around here is Hooters, but these are family-friendly restaurants. It’s inexpensive food and families like going there, and they get some really good quality chicken.

“Burgers are still big. There are two key concepts. We work with Five Guys Burgers out of Washington, DC. It was voted the number one hamburger chain in DC. It’s kind of like Johnny Rockets. There’s also Fatburger coming into the area. They’re out of California, and it’s one of the best burgers you’ll ever have.

“Also, Chipotle’s going to be coming in strong to New Jersey. They do quite well.”

RENJ: Final thoughts?

Lanyard: “In general, the New Jersey marketplace is so hot, that when retailers fall aside like Treasure Island or CompUSA, there’s always tenants standing in line to gobble up those spaces. It isn’t like we end up with long-term vacancies. There are always tenants looking to enter this marketplace, or expand their stores because they’re doing so well. You’re going to see a lot of play come out of the CompUSA stores because those are in really good locations.”

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