Northern New Jersey Retail Suffers, Vacancy Jumps in 2008

While Northern New Jersey remains one of the most dynamic retail markets in the nation, the vacancy factor in retail properties along the region’s six major shopping corridors jumped to 6.6 percent during 2008 from 3.6 percent a year earlier, according to R.J. Brunelli & Co. With recent retailer bankruptcies and downsizings adding to an inventory, it could take several years for the vacancy factor to get back to its usual levels.             R.J. Brunelli, an Old Bridge, N.J.-based retail real estate brokerage, in January conducted its 19th annual study of the northern New Jersey market and found 1.9 million square feet of vacancies in the 28 million square feet of space studied along the six corridors, with availabilities seen in 118 of the 808 properties evaluated. Over the last 10 years, the region’s rate had stayed in a narrow range of 2.0 percent in 2002 to 3.6 percent in 2007.  “The market has been flooded with an unprecedented number of ‘big-box’ spaces following the bankruptcies or closures of the Circuit City, Linens ‘n Things, National Wholesale Liquidators, Levitz, Comp USA and Home Depot Expo chains, as well as downsizings by Office Depot and Office Max. For the most part, these are prime, well-located spaces,” said Richard Brunelli, president of the firm.  R.J. Brunelli’s research also noted that 17 of the 26 big box spaces closed by the aforementioned chains are in the 25,000 to 50,000 square foot range. “This presents a unique challenge for landlords, along with unprecedented opportunities for big box chains looking to establish a presence in the northern New Jersey market with a large enough cluster to justify the metro New York area’s high media costs,” Brunelli commented. “However, in the absence of moves by one or more big box operators to make that kind of splash, many of these spaces could remain empty for several years.”  In terms of new development, major questions spin around the opening of the region’s most aspiring project in years: the 2 million-square-foot Xanadu retail and entertainment center in East Rutherford. Additionally, in the latest development news, outdoor retailer Cabela’s announced that it expects to delay the opening of its 160,000-square-foot anchor store. Although the complex is reportedly 60 percent to 70 percent leased, Cabela’s delay and financial issues at another major anchor, Muvico, could push back the center’s opening from a tentative August 2009 date until later this year or 2010.   On a more positive note, the redevelopment of the former Bergen Mall site into Bergen Town Center is virtually complete, with first quarter 2009 openings of Target, Nordstrom Rack and Whole Foods enhancing a big box lineup that already included such names as Century 21, Marshall’s and Filene’s Basement. Other prominent newcomers include the region’s first Bobby Flay’s Burger Palace, to be followed later this year by Ulta.