Retail vacancies on rise on central N.J. corridors
Rates still lower than northern areas, brokerage firm says

The vacancy rate in retail properties along central New Jersey's four largest shopping corridors edged up to 4.7 percent in 2007 from 4.3 percent a year, according to an Old Bridge-based retail real estate brokerage.

In its annual study of the markets along routes 1, 9, 18 and 35, R.J. Brunelli & Co. Inc. found the vacancy rate rising in part due to the bankruptcies of Levitz Furniture and The Rag Shops, and to the closings of Comp USA stores in all but a handful of Sunbelt markets. All told, the central New Jersey market had 1.33 million square feet of vacancies in the 28.11 million square feet of space reviewed along the four major corridors in Middlesex, Monmouth and Mercer counties, and a small section of Ocean County.

In its 2006 study, the firm found 1.19 million square feet of availabilities in 27.53 million square feet. The region's 2007 rate was just below the mid-point of a 10-year vacancy factor that ranged from a low of 3.4 percent in 2005 to a high of 6.4 percent in 1998. While Route 9 posted a lower vacancy rate during 2007, that improvement was countered by increases on routes 1, 18 and 35. Among the 517 properties reviewed along the four corridors, 96 had vacancies.

Conducted in January 2008, the latest study evaluated shopping centers and freestanding buildings exceeding 2,000 square feet, including restaurants and auto-service facilities. Regional malls and centers under construction or major redevelopment were excluded.

The 0.4-percent increase in the region's vacancy rate was not as sharp as the 0.7- point rise found in northern New Jersey. According to an R.J. Brunelli study released earlier this month, the vacancy factor along six major corridors in that region expanded to 3.6 percent in 2007 from 2.9 percent the previous year.

"Despite the increases experienced over the past year, northern and central New Jersey continue to post some of the lowest retail vacancy rates among major U.S. markets," said Richard Brunelli, president of the firm. "As in northern New Jersey, the departures of Levitz, The Rag Shops and Comp USA had a sizable impact on the central market. Excluding a Rag Shop space that was already released, the three Levitz, three Rag Shop and two Comp USA stores that closed created approximately 305,000 square feet of new vacancies along the four corridors. Add in another Levitz location on Route 35 in Wall that has remained empty since our 2006 survey, and these three chains accounted for nearly 375,000 square feet, or 28 percent of the central region's available space."

On the new development front, the past year was marked by openings of a pair of fully leased lifestyle centers by Stanbery Development on Route 9 in Old Bridge and Route 1 in North Brunswick, each with approximately 130,000 square feet, as well as Heritage Square, a 190,000-square-foot power center anchored by Target on Route 1 in South Brunswick, which is also 100 percentleased.

This year is expected to bring the debut of the first phase of Summerhill Square, a 170,000-square-foot center now under construction at the former Meyer's plaza on Route 18 in East Brunswick. R.J. Brunelli & Co., which is exclusive leasing agent for the property, has lined up a combination Toys "R" Us/Babies "R" Us, which hopes to open in time for the 2008 holiday season in 64,000 square feet, as well as a 60,000- square-foot, two-level Raymour & Flanigan furniture store.

"We are now in negotiations with over a dozen other prospects for the balance of the space," Brunelli said.

Other major new projects on the horizon in central New Jersey include Hartz Mountain Industries' transformation of the former Ford plant on Route 1 in Edison into a 1 million-square-foot, mixeduse center, as well as The Village at Manalapan, a planned 500,000-squarefoot center on Route 33, near the Route 9 corridor.

"Pre-leasing on The Village continues as we redesign the original site plan to accommodate the anticipated access point from [Route] 33," said Brunelli said, whose firm is the leasing and development agent for that project as well.

Looking ahead, Brunelli said the central part of the state has room for significant residential growth, which he expects will resume at some point, supporting the development of additional shopping centers, "assuming that municipalities accommodate commercial development and the tax relief it brings."

Route 9 faring well

• Route 9: The vacancy factor along the 35-mile Woodbridge-to-Lakewood corridor fell from 4.8 percent in 2006 to 3.6 percent, marking the highway's lowest rate over the last 10 years. During that period, the rate peaked at 10.8 percent in 2001. Vacancies in the new study receded to 290,004 square feet in the 8.16 million square feet reviewed from 380,800 square feet of vacancies in 8 million square feet a year ago. Availabilities were seen in 28 of the 160 properties surveyed.

The decline was driven chiefly by Kohl's absorption of the former Kmart in Old Bridge that had been empty since 2003, and Best Buy's takeover of a former 25,000-square-foot Frank's Nursery site in Howell. Apart from the debut of Stanbery's fully leased lifestyle center in Old Bridge, other positive developments included the addition of a Drug Fair at Pond Road Center in Freehold Township, and a Walgreens and Ruby Tuesday adjoining the Lanes Mill Marketplace in Howell.

The lift from these and other new deals was partially offset by closings of the Rag Shop at the Old Bridge center where Kohl's debuted; a pair of Old Country Buffets at Gateway Center in Old Bridge and Pond Road Center; a Party City at Manalapan Epicenter, the Odd Job Trading at the Bed, Bath & Beyond/ Best Buy-anchored center in Manalapan, and the Comp USA on the ring road of Freehold Raceway Mall. Nearby on the ring road, a former Marshall's remains vacant. Those ring road sites are across from an approximate 100,000- square-foot outdoor lifestyle center addition to the mall that is fully leased.

Also in Freehold Township, a 110,000- square-foot site that previously housed Pathmark and Staples is being redeveloped as Patriots Crossing. Some 70,000 square feet remains available at the site, where local chain Jason's Furniture recently took over the building long occupied by Steven's Furniture.

Elsewhere on the highway, Costco backed away from plans to build on a site at Route 9 and Texas Road in Marlboro that houses a Regal Cinema and an adjoining strip with several smaller tenants.

"The owners of those parcels continue to pursue redevelopment options for the site, which is just across Texas Road from Stanbery's lifestyle center," Brunelli noted.

"At the southern end of our study area, the opening of Best Buy represented a continuation of the trend that's seen the Howell-Jackson-Lakewood area add major national big-box retailers that were already in the Marlboro-Manalapan Freehold market," he said.