OLD BRIDGE, N.J. (12/16/15)— Impacted by selective closures of several major big-box stores and the Great Atlantic & Pacific Tea Co. bankruptcy, the vacancy rate in retail properties along northern New Jersey’s six major shopping corridors escalated to 7.9% in 2015 from 7.3% a year ago, according to the latest survey by R.J. Brunelli & Co., LLC. Reductions in the vacancy factor along Routes 4, 22 and 46/3, were unable to compensate for increases on Routes 10, 17 and 23.
In all, the Old Bridge-based retail brokerage firm’s 26th annual study of the six-county northern New Jersey market 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% in 2008 to a high of 8.9% in 2013.
When combined with the increase in the vacancy factor for four central New Jersey highways to 8.8% from 7.5% in 2014, the overall north/central vacancy rate for the 10 retail corridors surveyed by the firm rose to 8.4% from 7.4% a year ago. R.J. Brunelli found a total of 5.23 million square feet of empty space in the 62.36 million square feet reviewed in the two regions, with big-box spaces (20,000 square feet and above) representing 2.07 million square feet, or 45.7%, of the vacancies—up sharply from 1.41 million, or 31.2%, in the 2014 study.
Conducted during the third and fourth quarters, R.J. Brunelli’s 2015 study reviewed shopping centers and freestanding buildings exceeding 2,000 square feet along State Highways 4, 10, 17, 22, 23 and 46/3, and certain intersecting arteries in Bergen, Essex, Morris, Passaic, Somerset and Union counties. Freestanding restaurants, auto service facilities and auto dealerships are also included, while enclosed regional malls and centers under construction or in early- to mid- stages of redevelopment are excluded.
“Although the A&P bankruptcy had far less of an impact on the northern corridors than what we saw in the central region, big-box spaces (20,000 square feet and up) were still the driving force behind the increased vacancy rate,” said R.J. Brunelli CEO/Principal Ron DeLuca, who directs the firm’s annual survey. Indeed, the inventory of empty big-box spaces along the six corridors surged 70.8% to 1.05 million square feet (or 47.8% of total vacancies) in 2015 from 613,168 square feet, or 26.2%, a year ago. The impact of that increase was blunted to some extent by a 16.4% plunge in vacancies in spaces below 20,000 square feet to 1.32 million square feet from 1.588 million square feet in 2014.
Notably, eight stores in excess of 50,000 square feet combined for over 597,000 square feet of the corridors’ new big box vacancies, led by the 135,420-square-foot Macy’s that closed at Ledgewood Mall on Route 10 (a property now undergoing redevelopment), and a 94,000-square-foot Kmart on Route 17 in Paramus as well as a similar-sized Kmart on Route 10 in Randolph. Five supermarkets accounted for the remaining 50,000-square-foot-plus closures, including two A&Ps and a Pathmark. Ten other spaces ranging from 20,000 square feet to just under 40,000 square feet accounted for another 282,000 square feet of the fresh big-box vacancies to crop up along the corridors this past year.
The blow of those closures was partially offset by some key absorptions of long-vacant space, led by Raymour & Flanigan’s lease of a 60,000-square-foot portion of the former Home Depot Expo space on Route 202 in Bridgewater, with 45,000 square feet remaining available for lease. Elsewhere on the Route 22 corridor, a self storage facility took over the 35,000-square-foot former 6th Ave. Electronics site in Springfield. Another former 6th Ave. location, this one in a 25,000-square-foot freestanding building on Route 17 in Paramus is now a Tesla showroom. Finally, in a rapid absorption, the former Costco building at Route 46’s Willowbrook Plaza that was vacated last year when the warehouse club moved to the neighboring Wayne Town Center, is now occupied by an 88,500-square-foot Floor & Décor (the chain’s first in New Jersey) and a new 62,100-square-foot Burlington Coat Factory. Additionally, an 85,000-square-foot self-storage facility moved into the second level of Willowbrook Plaza’s building housing existing Sports Authority and K&G Men’s Company stores, and a 30,000-square-foot Rockin’ Jump trampoline center opened on that building’s third level.
“As indicated by the quick turn of the Costco building at Willowbrook Plaza, the Wayne market is very hot,” said Danielle Brunelli-Albrecht, R.J. Brunelli President/Principal. “In addition to Costco, the Wayne Towne Center redevelopment has attracted the likes of Nordstrom Rack, Saks Off 5th, Dicks, DSW Shoes, and Ulta. Vacancies in surrounding centers along Routes 46 and 23 are minimal at best.”
Chains accelerating expansion along the region’s corridors during the past year included AT&T, Burlington Coat Factory, Carter’s, C2 Education, CKO Kickboxing, Jimmy Johns, Mavis Discount Tire (largely through its acquisition of STS), Osh Kosh, Smashburger, and Tuesday Morning.
While the A&P bankruptcy had a modest impact on the six northern New Jersey corridors, a number of A&P, Pathmark and Food Basics locations off the region’s corridors have yet to be claimed in the bankruptcy proceedings. “Still, a number of competing chains pounced on the opportunity to grab some of A&P’s prime real estate,” said Mr. DeLuca. “Acme was far and away the most aggressive bidder at the auctions, bolstering its presence in New Jersey by snapping up 35 sites statewide, including 25 in northern counties. These accounted for nearly half of the 72 locations the chain took in an area extending from Maryland to Connecticut.”
Stop & Shop, the second largest player in the A&P auction, took 24 locations in the metro New York area, including three in northern New Jersey. The eight other New Jersey locations acquired to date through the auctions—all but one in northern counties—were taken by smaller chains, including several focused on ethnic fare, as well as operators of Key Foods, Foodtown and Compare Foods stores.
The ethnic group includes California-based Tawa Supermarket Inc., which announced lease acquisitions of Pathmark locations in Jersey City and Edison, paving the way for a Garden State debut for the company which currently operates 39 Asian supermarkets under the 99 Ranch Market name in California, Washington, Nevada and Texas. “Tawa’s move is emblematic of ethnic grocers’ efforts to seize opportunities in areas whose demographics are appropriate for their offer,” noted Mr. DeLuca. “We suspect that some of A&P’s remaining locations throughout the state could go to ethnic operators. More conventional chains looking at sites include The Fresh Market, Best Market, Kings, and others. However, given the competitive climate, we believe that a fair number of locations will ultimately go to non-food and non-retail uses.”
Assessing the state of new development in northern New Jersey, Ms. Brunelli-Albrecht reported progress on several proposed supermarket-anchored projects along the corridors. “Just recently, Parsippany’s town council finally gave the green light to a delayed, scaled-down project on Route 46 that will create a 153,000-square-foot center anchored by Whole Foods, with no other stores to exceed 20,000 square feet,” she said. “Whole Foods is also set to anchor Chimney Rock Crossing, a planned 216,000-square-foot center off Route 22 in Bridgewater. Additionally, work began earlier this year on a center at the Mack-Cali business campus on Route 10 in Hanover that will bring the first Wegman’s to Morris County in 2017.”
Off the corridors, the 245,000-square-foot Clark Commons debuted in August in Union County, with Whole Foods joining L.A. Fitness, Home Goods, Michaels, Ulta and other prominent retail and restaurant tenants. Additionally, in September, ground was broken on The Shoppes at DePiero Farm, a 225,000-square-foot center in Montvale that will be anchored by Bergen County’s first Wegman’s.
“In the biggest development off the corridors, the American Dream project in the Meadowlands is finally progressing toward a 2017 debut,” Ms. Brunelli-Albrecht said. “Developer Triple Five has announced leases with Hudson Bay’s Lord & Taylor, Saks Fifth Ave., and Saks Off 5th brands; Toys ‘R’ Us, Hermes, Lululemon, and FAO Schwartz, as well as such entertainment venues as Cinemax, Lego Discovery Center and Sea Life Aquarium. If all goes as planned, this long-stalled project could emerge as a major destination for residents and tourists throughout the metro New York area.”
Results for the individual northern New Jersey roadways are as follows:
Route 17. After dropping to 6.2% in 2014, the vacancy rate along the 15-mile section extending from Paramus to Mahwah climbed back to 8.2%. The roadway’s vacancy over the past eight years has ranged from a low of 4.5% in 2008 to a high of 8.7% in 2010.
R.J. Brunelli’s latest study found 415,263 square feet of vacancies in the corridor’s 5.05 million square feet of space, with availabilities seen in 21 of the 152 properties reviewed. With the effects of the aforementioned closing of the Paramus Kmart as well as a Pathmark in Ramsey partly offset by several absorptions, big-boxes drove 44.3% of the vacancies, up from 43.3% in 2014. The only other big-box space available along the corridor is the long-vacant 40,000-square-foot Syms building in Paramus.
In addition to Tesla’s takeover of the of the 25,000-square-foot former 6th Ave. Electronics space in Paramus, this past year’s big-box absorptions included the revamping of former Loehmann’s and Golf Galaxy spaces at a Paramus strip center into a 40,000-square-foot Bob’s Furniture and 10,000-square-foot PM Pediatrics. Golf Galaxy had previously relocated to Paramus Towne Square.
This past year also saw a series of absorptions of 10,000- to 20,000-square-foot spaces, including Furniture City’s move into the former Staples in Paramus; the upcoming transformation of a site in Ramsey into a Wawa convenience store/fuel center; and Tuesday Morning’s move into the former Annie Sez space at Ramsey Square (Tuesday Morning also closed a smaller store in a Paramus strip center).
In big-box deals with no impact on the vacancy rate, Ramsey Square also quickly replaced its Marshall’s store with Sports Authority, while Cost Plus World Market signed a lease for 21,000 square feet at The Fashion Center, taking the lion’s share of the former Lord & Taylor Home store that went dark earlier this year. This will be the chain’s first location in Bergen County.
Route 4. The three-mile stretch between River Edge and Paramus saw its vacancy factor plunge to an eight-year low of 4.0% from 7.8% in 2014 thanks to a series of smaller-box absorptions. Over the last eight years, the corridor’s vacancy rate went as high as 10.1% in 2008.
A total of 85,449 square feet of vacancies was found in the 2.14 million square feet evaluated, with nine of the highway’s 47 properties offering availabilities. With the 42,185-square-foot former Daffy’s remaining the highway’s only empty large building, big-boxes represented 49.4% of the corridor’s vacancies, up from 25.9% in 2014.
Absorptions over the past year were led by Tuesday Morning’s lease of the former 15,000-square-foot Famous Footwear in the Kohl’s center. Other key newcomers included a Total Wine superstore in a new 50,000-square-foot building in Paramus.
Route 10. With its inventory of empty big-boxes climbing more than four-fold, the 20-mile Livingston-to-Ledgewood corridor had the highest vacancy rate of all 10 roadways surveyed by R.J. Brunelli, surging to an eight-year high of 15.9% from 11.6% in 2014. The roadway’s 2015 vacancy factor contrasts with the eight-year period’s low of 3.7% set in 2008.
All told, the most recent study found 858,001 square feet of vacancies in the 5.39 million square feet reviewed, with empty space in 40 of the 179 properties. Big-box spaces accounted for 455,699 square feet, or 53.1% of the roadway’s vacancies. This contrasted sharply with a big-box total of 107,738 square feet, or 17.1% of total vacancies, in 2014, when a series of deals drove the ratio down from 47.1% in 2013.
Led by the aforementioned Macy’s at Ledgewood Mall and Kmart in Randolph, eight big-boxes were shuttered during the past year, adding to the Morris Plains ShopRite that went dark in 2014.
Meanwhile, two big-boxes quickly went to new tenants during the past year: MJM Shoes to Burlington Coat Factory (a sister division store) in Hanover Commons and the East Hanover Thomasville Furniture to Jennifer Convertibles. Key newcomers in the 10,000- to 20,000-square-foot range included Tuesday Morning in the former Annie Sez space at Castle Ridge Plaza in East Hanover and Bassett Furniture in the former GolfSmith store in Livingston.
In addition to the aforementioned Wegman’s center, other new properties in the pipeline include The Corner at Livingston Circle. The Livingston project will reportedly redevelop a site formerly housing Houlihans and Margaritas restaurants into a 44,000-square-foot center featuring The Container Store, Shake Shack and Starbucks.
Route 46/3. The 21-mile corridor covering the Dover to West Paterson stretch of Route 46 and the adjoining section of Route 3 in Clifton saw vacancies drop for the second straight year, with the rate declining to 4.7% from 5.5% in 2014 and 6.7% in 2013. Over the last eight years, the corridor’s rate ranged from a low of 2.1% in 2008 to a high of 7.3% in 2011.
R.J. Brunelli’s most recent survey uncovered 341,388 square feet of vacancies in the 7.23 million square feet reviewed; availabilities were seen in 41 of the 214 sites visited.
Despite the closures of an A&P in Little Falls and an Acme in Clifton, the corridor’s available big-box inventory dropped to 119,370 square feet, or 35.0% of all vacancies, from 188,245 square feet, or 45.5%, a year ago. The two supermarkets were the only big-boxes available at the time of the survey. Big-box absorptions during the past year included the aforementioned moves of Floor & Décor, Burlington Coat Factory, Rockin’ Jump and a self-storage facility into vacant spaces at Willowbrook Plaza in Wayne, including the former Costco store.
In Totowa, ABILL Plaza was redeveloped to include a new TJ Maxx as well as Smashburger, joining such existing tenants as Jennifer Convertibles and Blinds to Go.
The corridor also saw a number of openings in the 10,000 to 20,000-square-foot range during the past year, including freestanding buildings housing Garden State Tile in Dover, Apex Tile in Parsippany, Brick 46 pizza in Rockaway, and European Chef restaurant equipment in Montville.
Route 23. The relocation of a Stop & Shop in Butler to the freshly vacated Pathmark space at Kinnelon Mall caused the vacancy rate along the 10-mile section between Wayne and Butler to spike to 6.9% from 4.6% in 2014. This was the highest rate for this well-leased stretch of highway over the past eight years—a period when the rate was below 4% for three years, including a low of 3.4% in 2009.
The 2015 survey reported 164,126 square feet of vacancies in the 2.38 million square feet studied, with availabilities in 22 of 81 properties. The 50,300-square-foot Stop & Shop accounted for all of the roadway’s big-box vacancies and 30.1% of total vacancies. In 2014, there were no empty big-boxes along Route 23.
With last year’s dearth of big-box space, the new Marshall’s at Butler’s Medtown Shopping Center was forged together from spaces vacated by Marty’s Shoes, Mandees and others.
Route 22. The Route 22 corridor saw its vacancy rate drop for the third second straight year to 6.6% from 7.4% in 2014, 8.8% in 2013 and the eight-year high of 9.7% in 2012. The vacancy rate along northern New Jersey’s most heavily-retailed corridor was at an eight-year low of 3.4% in 2008.
R.J. Brunelli’s 2015 survey found 499,790 square feet of vacancies in the 7.61 million square feet reviewed along the 21-mile stretch of Route 22 from Union to Somerville, as well as nearby properties along intersecting Route 202/206 from the Somerville traffic circle north into Bridgewater, plus the nearby Route 28/287 intersection in Bridgewater. Availabilities were seen in 54 of the 254 sites.
This past year’s improvement came despite an increase in big-box vacancies to 195,750 square feet, or 39.2%, of the corridor’s empty space, from 140,000 square feet, or 24.9%, a year ago. A total of 150,750 square feet of new vacancies came on the market following closings of five stores ranging in size from 20,750 to 35,000 square feet. Those availabilities were partially offset by aforementioned deals that saw Raymour & Flanigan take 60,000 square feet of the former Home Depot Expo building on Route 202 in Bridgewater (leaving 45,000 square feet available for lease) and a self-storage facility’s assumption of the former 6th Ave. Electronics site in Springfield.
Big-box openings of spaces that were occupied in the 2014 survey included Marshall’s in the former Conway Stores space at Union Plaza.
Newcomers taking spaces in the 10,000- to 20,000-square-foot range during the past year included Family Discount Furniture in North Plainfield, Farmer 22 Market in Union, Tuesday Morning at the Blue Star center in Watchung, the freestanding Killer Carz 2 auto dealership in North Plainfield
For copies of the firm’s northern or central New Jersey studies, contact R.J. Brunelli & Co., 400 Perrine Road, Suite 405, Old Bridge, N.J., 08857, or visit www.njretailrealty.com. Telephone is (732) 721-5800.