Sustained Improvement In Northern/Central NJ Retail Real Estate Markets | Vacancy Rate Continues To Decrease Below 8%
PARAMUS, N.J. (OCTOBER 1, 2012) “Slow and Steady” characterizes the sustained improvement of retail markets, according to the results of The Goldstein Group’s mid-year survey of 22 retail corridors in Northern and Central New Jersey, totaling over 4,250 properties and 100 million s.f. As of mid-year 2012, the State’s retail vacancy rate decreased to 7.69 percent, a decline from the year-end 2011 vacancy rate of 7.9 percent and the mid-year 2011 vacancy rate of 8 percent. Retailers – both existing and over 20 new retailers setting-up shop in the State for the first time – continue to absorb retail space at a strong pace.
“The Northern and Central New Jersey retail real estate market continues to improve but it is still a ‘tenants’ market,” noted President Chuck Lanyard of The Goldstein Group. “Opportunistic retailers are leasing at attractive rental rates and securing locations not available in years, taking advantage of market conditions.”
Strongest & Weakest Submarkets
The strongest retail markets with the lowest availability rates include: Route 4 – Paramus (6.3 percent); Route 17 – Ramsey-Mahwah (4.5 percent); Route 17 – Rochelle Park-Rutherford (2.3 percent); Route 23 – Wayne-Butler (6.3 percent); Route 3 – Clifton Area (1.6 percent); Route 46 – Parsippany-Rockaway (6.1 percent); Route 22 – Union/Springfield (5.2%); Route 1 – Woodbridge-Edison (4.1 percent); Route 1 – North Brunswick-Lawrence Township (5.7 percent); and Route 37 – Toms River (5.4 percent).
Markets with the highest vacancy rates include: Route 4 – Elmwood Park/Fair Lawn (10.2 percent); Route 17 – Paramus (10.9 percent); Route 10 – Livingston-East Hanover (11 percent); and Route 18 – East Brunswick (17.5 percent). Northern New Jersey markets historically continue to fare stronger in terms of demand and lower vacancy rates while several Central New Jersey markets continue to experience lackluster leasing velocity.
“The stronger submarkets saw a flurry of leasing activity in the first half of the year with several having little remaining space left such as the Paramus Route 4 and Clifton Area Route 3 markets. Certainly, larger blocks of space are virtually nonexistent in these markets,” said Lanyard. “Also, the mix of tenants is changing. With the opportunities that have come up in the various retail highway areas, new retailers such as Fairway Market, Harbor Freight, Uniglo, Millers Ale House, Hobby Lobby, and numerous others have opened, or will soon open new locations in New Jersey. Well established retailers that continue to expand in the state include Home Goods, Bed Bath & Beyond, Panera Bread, Planet Fitness, 7-Eleven, Smashburger, and Great Clips, which all opened up new locations. New Jersey has no shortage of retailers wanting to take advantage of its strong demographics, which is near the top nationally.”
Leasing velocity through midyear 2011 totaled more than 1.9 million s.f., putting it on track to surpass last year’s total of over 3 million s.f. Leasing has risen steadily since 2008 when leasing velocity totaled 2.5 million s.f. The decline in new construction since 2007 has kept in-check a glut of new space coming on the market. However, with market conditions improving and several markets leasing-up, a healthy amount of new retail space is underway – over 676,000 s.f. currently – with over million s.f. more on the drawing boards for approval and new development. New construction and redevelopment projects are moving forward currently in Mahwah, Toms River, Sayreville, New Milford, Randolph, Cedar Knolls, Montvale, Fort Lee, Parsippany, and Teterboro. Of course, available sites in New Jersey are limited and will continue to crimp an oversupply of new product.
The market is on the road to recovery from the most recent downturn, which hit retailers hard in 2008 and 2009, but several submarkets are still soft with high vacancy rates. In the recession’s wake were left large blocks of vacant space from such defunct retailers such as 6th Avenue Electronics, Einstein Moomjy, and Borders, with Daffy’s, Syms/Filene’s Basement, Strauss Auto, and others recently joining, that still plague many submarkets.
In some cases, landlords have found creative solutions by dividing spaces for gyms or repositioning space for medical or health uses. Several supermarkets, such as Pathmark and A&P, have vacated spaces which have caused large blocks of space to continue to be available on the market.
Active Retailers in the Marketplace
Leasing activity continues to be driven by average size retailers opening shops in the 1,000 to 5,000 s.f. range. But large box retailers such as Walmart, Target, Burlington Coat, Wegmans, Whole Foods, Hobby Lobby, Home Goods, as well as dearth of national gyms, amongst others, have opened or will open new stores within the next 12 months. Mid-size retailers such as furniture stores, dollar stores, and buffet restaurants were also actively leasing. Although A&P and Pathmark are closing excess stores, large box retailers and other grocers have capitalized on these new large box opportunities which are typically well-located in New Jersey. As an example, Fairway Market opened in a former Pathmark in Woodland Park, and DSW Shoes is taking over two former Borders Books locations in Ramsey and Bridgewater.
A host of new retailers entering the New Jersey market for the first time or opening additional locations includes such national and regional brands as:
Retail & Restaurant Trends
New Jersey’s long list of restaurant choices and eating establishments continued to grow longer as new restaurant concepts have opened, some with a new twist on old favorites. Diners’ appetites for wings, hamburgers and steaks have brought more choices with several new concepts such as Buffalo Wild Wings, expanding in Rockaway; Cheeburger Cheeburger, opening in Greenbrook; 25 Burgers in Fairfield and Flemington; Quaker Steak & Lube in Brick; and Steak N Shake in Paramus Park Mall. Although New Jersey is known for its many mom-and-pop pizzerias and Italian restaurants, an old concept making a new splash is coal-fired oven style pizza. Examples of such pizzeria restaurants opening include Anthony’s Coal Fired Pizza in Ramsey and Clifton; and Tommy’s Coal Fired Pizza in Paramus Park Mall. Self-service yogurt shops continue to be all the rage with multiple store openings by TCBY, Yogurtland, Twisted, Red Mango and CUPS.
Pei Wei, Noodles & Company, and Garbanzo represent the latest new comers in the trend of restaurants known as “fast casual,” which is growing rapidly as a segment. With more Americans being cautious in their spending habits, and becoming more selective, these restaurants boast a better quality than fast food restaurants but without the more expensive price of a full service, sit-down restaurant. Other well established fast casual restaurants include Panera, Chipotle, Five Guys Burgers, Qdoba, and Smashburger.
Tappas-style restaurants are also popping-up to capitalize on budget-conscious diners by serving less expense, smaller portions coupled with fine wine and/or micro-brewery style beer choices for drinks. Spuntino is the latest in tappas restaurants opening in Clifton recently. Choices for full service sit-down restaurants however are still growing with Shannon Rose Restaurant, a new Irish pub restaurant, with locations in Clifton, Woodbridge, and Ramsey, and Miller Ale House, a large sports bar restaurant in Paramus, opening recently. Other established restaurants which continue to expand, include Red Robyn, Oliver Garden, Joes’ Crabshack and Seasons 52.
Many gyms, health clubs, and other health conscience concepts also grew in number this year. LA Fitness opened in Randolph; Weight Watchers in Middletown; Planet Fitness expanded into Hoboken, Woodland Park and South Toms River; Hand & Stone opened in Aberdeen, Wayne, and Clark; and Massage Envy in Woodbridge.
“The recovery of the retail market in New Jersey is continuing at a slow, but steady pace with solid growth in leasing activity and decreasing vacancies,” noted Mr. Lanyard. “We expect this moderate pace of growth to continue into the balance of the year as much of the recession’s impact on the retail marketplace is appearing to be behind us. We are still dealing with pockets of vacancies that remain due to past retail bankruptcies but New Jersey’s attractiveness as a retail market has made it more resilient than most major markets in the US. Expect continued healthy growth in leasing and new construction as we go into 2013.”