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OLD BRIDGE, NJ-Ongoing troubles in the retail industry caused the vacancy rate along central New Jersey’s four largest shopping corridors to rise for the third straight year to 9% in 2008, up from 4.7% a year earlier, according to R.J. Brunelli & Co. Inc. With all four roadways seeing increased availabilities, the 2008 performance marked the region’s highest vacancy factor over the last 10 years and is more than double the decade’s low of 3.4% set in 2005.

The retail real estate brokerage’s 20th annual study of the central New Jersey market found 2.54 million square feet of vacancies in the 28.34 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. Availabilities were seen in 121 of the 516 properties reviewed. By contrast, the firm’s 2007 study reported 1.33 million square feet of vacancies in 28.11 million square feet.

This latest report follows last week’s issuance of the firm’s annual survey of the northern New Jersey market, where the vacancy rate grew to 6.6% from 3.6% in 2007, with 1.84 million square feet available in the 27.96 million square feet reviewed along six corridors. On a consolidated basis, the two regions saw their vacancy rate escalate to 7.8% in 2008 from 4.2% a year earlier, with 4.38 million square feet available in the 56.3 million square feet studied.

“Looking back over the last 17 years, the consolidated rate was exceeded only by the 8.2% set in 1992,” says Richard J. Brunelli, president of the firm. “At that time, it took six years for the rate to come down to a healthy level of 5.1% in 1998,” he says, adding that this marked the start of an extended strong period during which rates never exceeded 4.4% and dropped as low as 3.2% in 2005, before moving back to last year’s 7.8%.

“Based on current economic conditions, consolidation in the retail and restaurant industries and the vast amount of big box space now available, we expect that it will again take several years before the combined vacancy rate settles back down below the 5% factor that is considered nationally to be the standard for a healthy retail real estate market,” he says.

Much like the more mature northern New Jersey market, the central New Jersey region has also been inundated with an unprecedented number of big box spaces in the wake of bankruptcies and major or selective downsizings by various national chains. “Along the four corridors, chain-wide or selective closures of Circuit City, Linens ‘n Things, Levitz, Comp USA, Value City, Office Depot, Office Max, Sears’ Great Indoors and Home Depot locations accounted for 1.19 million square feet, or 47%, of the vacancies in our 2008 survey,” Brunelli says.

He adds that the effects of those big-box closures were exacerbated by the numerous smaller space vacancies stemming from bankruptcies or downsizings at such chains as Marty’s Shoes, Harvey Electronics, Fashion Bug, Domain, Hollywood Video, Bennigan’s, Steak & Ale and LoneStar, as well as closings of various independent furniture, flooring and other home products retailers that have been impacted by the depressed housing market.

Look for vacancies in central New Jersey to get pushed up further by the current wind-down of Fortunoff’s, whose operations in the region included two Outdoors stores along Routes 1 and 35, as well as a full-line location within Woodbridge Center mall.

“Our expectation is that most of the big box and smaller locations that have gone dark in central New Jersey will ultimately stay in the hands of retail, restaurant or personal service chains,” Brunelli says. “With the current market conditions, there’s probably never been a better time for expansion-minded chains to capitalize on extraordinary opportunities in well-located properties. We can expect national value-oriented chains like Wal-Mart, Marshall’s, T.J. Maxx and Kohl’s to take advantage of such opportunities to round out their market presence.”

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