ELMWOOD PARK, NJ-The old mantra of location, location, location couldn’t be more true, at least in terms of the New Jersey retail market, according to Marcus & Millichap’s third quarter update. Overall, the state is seeing improvement. Employment growth, particularly in the white-collar sector, has led to increased retail sales, which should encourage expansion. But concessions also are up, depressing rents.
“The New Jersey retail market will improve this year as renewed employment growth spurs retail sales, while elevated concessions attract national retailers to existing dark space,” says the report.
But the three sections of the state, North, Central and South, are telling somewhat different stories in terms of vacancy and rents. “It depends on where you are,” Michael Fasano, regional manager of Marcus & Millichap, Elmwood Park, NJ, tells GlobeSt.com. “If you’re in the north end of the state, things are improving significantly. Things were being leased up during the recession.”
In Northern New Jersey, region-wide vacancy rose 10 basis points to 6.8% in the first half. But some of that growth may be due to a rent drop. Operators cut asking rents 0.8% to $26.84 per square foot, while effective rents also dropped 0.8% to $23.61 per square foot.
The North Bergen submarket is seeing the benefit of white-collar growth, with a vacancy rate of just 2.3%, down 50 basis points from the previous year. “National retailers such as Whole Foods and Wegmans have expanded in prime shopping corridors near Paramus, where elevated household incomes will support retail sales,” the report says.
Passaic boasts a 5.7% rate (a 120-basis-point increase year-over-year), followed by North Morris (6.3%), South Bergen/West Bergen (6.8%), Essex (8.8%), Hudson (8.9%) and Union (9.0%, but down 110 basis points). “As you move south, vacancy increases, and you see much more concern about concessions,” Fasano says.
In Central New Jersey, the bankruptcy of Blockbuster and Great Atlantic & Pacific Co. significantly affected occupancy, even as new tenants, including Burlington Coat Factory and Ashley Furniture, move in. Vacancy overall was 8.7%, up 50 basis in the last six months. The North Middlesex market reported a 4.2% vacancy rate, up 50 basis points year over year. Ocean posted a 7.3% rate, followed by West Monmouth (7.4%), East Monmouth (up 7.6%), Southeast Middlesex (up 9.3%), Southwest Middlesex (10.5), Somerset (11.0%) and Mercer (14.6%). Only East Monmouth and Southeast Middlesex saw improvement, dropping 30 basis points and 40 basis points, respectively.
Demand was weakest in South Jersey, which posted a vacancy rate of 9.6%, up 60 basis points in the last six months. South Jersey’s Burlington County reported a 7.4% vacancy rate, down 10 basis points from last year. Gloucester County also saw an improvement, with 9.3% vacant, 50 basis points lower than last year. Camden County saw a 40 basis point increase in vacancy, to 12.5%.