Low Rents, Good Demographics Set Stage For Retail Rebound in New Jersey
The New Jersey retail marketplace is finally showing signs of modest recovery for the first time since the recession. Retail is on somewhat stable ground, but not as solid as we would hope. We expect continued bumps caused by the harsh winter we have experienced, the closing of stores by some major national and regional retailers nationwide, and the fact that consumer confidence is still not in a fully stable position. Retail closings and bankruptcy filings continue to remind us that nothing is certain. For example, RadioShack recently announced it will close 1,100 stores nationwide; Pathmark and A&P supermarkets continue to close underperforming stores; and some other retailers such as Loehmann’s, and more recently, Dots women’s apparel chain have filed Chapter 11.
But all is not so bleak. There are some new trends in retail that show how the sector continues to reinvent itself in an effort to thrive in this new economy. We saw the economy start to come out its doldrums, especially this past year, with many furniture and home furnishing stores opening in New Jersey for the first time. Paramus — which is one of the strongest retail markets in the U.S. — had several out-of-state furniture stores open. Lazzoni Furniture from New York, Turkey and Italy; Fabio Italian Leather from California; world-renowned Timothy Oulton from London; and the new Mitchell Gold & Bob Williams gallery have all opened stores here this past year.
Restaurant competition in New Jersey is fierce and many restaurants continue to open locations in the state at a fast pace. In the fast casual dining category, Chipotle, Noodles & Company, Qdoba Mexican Grill, Moe’s Southwest Grill, Zoup!, BurgerFi, and Shake Shack all have opened restaurants recently. Family dining is still popular and Miller’s Ale House, Quaker Steak and Lube, Joe’s Crab Shack, Buffalo Wild Wings, and Anthony’s Coal Fired Pizza have opened and received strong followings already.
Medical store fronts have become the newest trend in retail. Skeptical landlords once felt medical tenants were not good for their tenant mix, but their attitudes have changed drastically. These tenants were willing to pay higher rents to get into retail locations. All types of medical tenants have opened in retail locations already or will open stores this year. These include emergency clinics such as Doctors Express, MedExpress, Quest Diagnostics, Dr. Dental, and CityMD; pediatric clinics, like PM Pediatrics; and vein clinics such as Vein Clinics of America and USA Vein Clinics. Many have opened multiple locations in New Jersey communities.
We are also seeing a trend in downsizing of stores, partially as a result of internet sales. Staples is a good example of this. The newer Staples stores opening in New Jersey are approximately 15,000 square feet, down from the larger 23,000-square-foot stores that opened in the past. Lowe’s Express, a 49,000-square-foot downsized version of the much larger home improvement giant store opened last year in Wall Township. Other retailers downsizing include Best Buy, OfficeMax, and FedEx Office stores.
Retailers always want to open locations in the state due to its strong demographics. As a result of the recession bringing about low rental rates, many national retailers are coming to New Jersey for the first time.
Hobby Lobby has opened three stores in New Jersey in the past few years, most recently in Marlboro and Lawrenceville, and there are two more soon-to-be announced locations for 2014. Firebirds Restaurant, Noodles & Company, Zounds Hearing Aid Centers, and The Counter Restaurant have staked a claim in New Jersey by opening stores. Also, Mighty Quinn’s Barbeque, which has four New York City locations, will open its first New Jersey location this spring in Clifton.
A good sign of things improving for New Jersey is the advent of new development of retail sites. O’Neill Properties’ Luxury Point at Sayreville will have a 1.8 million-square-foot retail component along with residential and office space. Luxury Point has started construction and will be anchored by New Jersey’s first Bass Pro Shops, along with a multi-screen digital movie theater, numerous waterfront restaurants, and other shops. In Fort Lee, the magnificent Shops at Hudson Lights, which is adjacent to the GW Bridge, is a mixed-use residential and retail project with more than 200,000 square feet of retail space available. In Montclair, the newly planned mixed-use project on Bloomfield Avenue and Valley Street has begun construction. More than 20,000 square feet of first-floor retail space is planned. In South Orange, The Gateway is a mixed-used project with 10,000 square feet of retail space available. In Mahwah, the Crossroads developer Garden Homes has recently been approved to build more than 600,000 square feet of retail space at the intersection of routes 17 and 287.
The best news on the horizon is the continued decline in vacancy rates for retail space in New Jersey in the past few years. The Goldstein Group has been compiling the most comprehensive retail vacancy survey for New Jersey’s retail real estate for the past 10 years. The survey, which is conducted twice a year, involves more than 98 million square feet of retail space, including more than 4,800 properties on 25 retail highways in northern and central New Jersey. It does not include regional malls. The most recent survey indicates vacancy rates are at a new low of 7.2 percent. This compares to vacancy rates of more than 9 percent posted during the height of the recession in 2009. And New Jersey fares better than the rest of the country, much of which is still experiencing 10 to 12 percent retail vacancies.
The best sign of the improvement in New Jersey’s retail leasing is exemplified by the new stores that have opened or are under construction. These include Costco in North Plainfield and North Brunswick; Big Lots in Woodbridge; 24 Hour Fitness in Ramsey; Ethan Allen Furniture in Marlboro; Walmart in East Brunswick and Old Bridge; Whole Foods in Marlboro, Newark and Morristown; Bob’s Furniture in Freehold; Blink Fitness in Union and Parsippany; Equinox Fitness in Paramus; Steinmart in Watchung; and Target in North Brunswick.
Fortunately, it looks like New Jersey’s retail landscape will continue to improve. The internet will continue to have its impact on bricks and mortar retail, but for New Jersey, the overall outlook for retail is promising.
— By Chuck Lanyard, President, The Goldstein Group. This article first appeared in the March/April 2014 issue of Northeast Real Estate Business magazine.