Conducted in January 2009, the firm's 2008 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 and auto service facilities are also included, while enclosed regional malls and centers under construction or redevelopment are excluded. Stores running going-out-of-business sales earlier this year were accounted for as vacancies.
"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 J. Brunelli, president of the firm. "Combined, those retailers accounted for 1.84 million square feet, or 58%, of the vacant space along the six corridors. Added to that are the numerous smaller vacancies arising from bankruptcies or downsizings at such chains as Marty's Shoes, Harvey Electronics, Bennigan's and LoneStar, as well as closings by a number of independent furniture, flooring and other home products retailers who have been impacted by the depressed housing market."
The roadways' inventory will get another jolt in the months ahead as the region's three Fortunoff Outdoors stores wind-down their going-out-of-business sales in tandem with the closures of the chain's traditional locations at malls in Paramus and Wayne.
R.J. Brunelli's research further 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," Mr. 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. We've already seen this with a number of the Comp USA locations that have gone unclaimed after two years, as well as larger Levitz locations that have remained dark for a year or more.
"Given current difficulties in the retail industry, progressive landlords will be exploring creative alternative uses for these spaces that go beyond fitness centers or restaurant clusters that have been a panacea in recent years," he continued. "These options might include family entertainment centers, bowling alleys, ice skating or hockey rinks, or other athletic facilities. On Route 22 in Springfield, for example, we've already seen a former Comp USA building transformed into a dealership selling luxury cars."
In terms of new development, major questions swirl around the opening of the region's most ambitious project in years: the 2-million-square-foot Xanadu retail and entertainment center in East Rutherford. In the latest development, outdoor retailer Cabela's announced that it expects to delay the opening of its 160,000-square-foot anchor store until spring 2010. Although the complex is reportedly 60% to 70% 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 (a deal brokered by R.J. Brunelli). Elsewhere, work continues on the transformation of the 700,000-square-foot Wayne Towne Center, located at the junction of Routes 23 and 46, into an open-air center. "This project, however, could be complicated by the upcoming closure of the full-line Fortunoff's store, which has long co-anchored the property with JC Penney," Mr. Brunelli said. In the meantime, the center recently announced lease signings for approximately 110,000 square feet of space, including deals with Dick's Sporting Goods, DSW Shoes and four restaurants.
"In the final analysis, the northern New Jersey region's 6.4% vacancy factor is still not far off from the 5% rate that is considered the national barometer of a healthy retail real estate market," Mr. Brunelli observed. "Given the current climate, retailers, restaurants and other users that are in an expansion mode can capitalize on extraordinary opportunities for sites in well-located properties. We can expect national value-oriented chains like Wal-Mart, Marshall's, T.J. Maxx and Kohl's to take advantage of such opportunities to round out their market presence. At the same time, a number of smaller space users are actively or selectively seeking deals, including such R.J. Brunelli clients as Sixth Avenue Electronics, Ulta, Tuesday Morning, Houlihan's, Trader Joe's, Just Cabinets, Toys 'R' Us/Babies 'R' Us, Play & Trade video, Arby's, Sonic Drive-ins and Kona Grill."
