Business was brisk in 2016 for retail real estate brokers in Central and Northern New Jersey. As online shopping continued to impact which retailers fill brick and mortar spaces, several trends emerged at malls and along New Jersey’s highways.
The shrinking list of retail categories in which customers prefer or need to visit a store in person includes quick-serve and sit-down restaurants. Chick-fil-A opened new stores in Woodbridge and Jersey City; Chipotle in Holmdel; and Habit Burger in Eatontown, West Windsor, River Edge and Parsippany. Also on the list are gas stations, coffee shops, and convenience stores, including Street Corner, WaWa, Tim Horton’s, Quick Check, and 7-Eleven, which have all recently opened new locations, are under construction or are planning to open new stores throughout the state.
Nancy Erickson, Colliers International
Creative and art businesses also draw customers to brick and mortar locations. One River School of Art & Design, currently open in Englewood, is opening a second location in Allendale, and plans a roll-out nationally including a strong look at the Bell Works project in Holmdel. This art school for kids and adults and other creative concepts, such as the paint and sip retailers, remain very strong. School of Rock is another creative use that continues to grow as an alternative option for vacant retail space. Of course, beauty, health and fitness businesses remain strong tenants, including Amazing Lash, Waxing the City, Pure Barre and L.A. Fitness, which all expanded in the state last year.
In 2016 and into 2017, New Jersey’s residential market has remained robust, and we continue to see growing demand for recreation and entertainment where we shop. Along with these new and existing entertainment uses, medical tenants, urgent care and dental practices continue to absorb vacant retail spaces and big boxes, as well. Think former Blockbuster locations, end caps, and even mall entrances. Once viewed by landlords as out of place for retail, medical tenants now are very welcome as shopping center owners weigh their stability in balancing market lows. My related work includes leasing more than 140 Kool Smiles dental offices and a dozen urgent care locations — all into retail spaces.
At one-quarter of its 2015 totals, new retail development added just 250,000 square feet of new space to the New Jersey market last year. This decrease in deliveries helped maintain occupancy overall for Central and Northern New Jersey. Leasing velocity remained strong through the year keeping the overall vacancy rate around 7 percent, outperforming the national average of 10 percent.
However, as the phone becomes customers’ cash register, store-based retailers need to change their business plans to evolve and respond to the ever-changing shopper. Landlords, too, need to evaluate potential tenants in new ways, and not just pursue national chains. They are evaluating tenants in light of whether they will survive and maybe gain market share, or follow a strategy that has their doors closed in two or three years, replaced by online competitors. Does the tenant believe in and participate in social and mobile marketing? Does the customer need to go see the product or service or can they do this from their phones? These are questions landlords were asking in 2016. The retailers and owners that I work with constantly re-evaluate their development plans based on the internet, the new competition and other factors — even the election.
It seems retailers really like New Jersey as a test market because of its dense population and openness to trying new foods, products and services. This sales data can show trends in less costly New Jersey markets for brands that may be rent-conscious in the early years as they prepare to jump all in and open in New York City.
New Jersey has seen great retail growth with strong owners such as LCOR, owner of Valley & Bloom in Montclair and Hoboken Terminal; Somerset Development, with Bell Works and several other large developments; Atlantic Development, with two large new developments in Montgomery; Kushner with Pier Village in Long Branch; and Madison Marquette in Asbury Park and Montgomery. These developers have a similar way of thinking and succeeding: New Jersey is a place where rooftops keep going up, so the retail will follow along.
— By Nancy Erickson, Executive Managing Director, Retail Services, Colliers International. This article first appeared in the March/April 2017 issue of Northeast Real Estate Business magazine.