Retail vacancies on rise on central N.J. corridors
The vacancy rate in retail properties along central New Jersey's four largest shopping corridors edged up to 4.7 percent in 2007 from 4.3 percent a year, according to an Old Bridge-based retail real estate brokerage.

In its annual study of the markets along Routes 1, 9, 18 and 35, R.J. Brunelli & Co. Inc. found the vacancy rate rising in part due to the bankruptcies of Levitz Furniture and The Rag Shops, and the closings of Comp USA stores in all but a handful of Sunbelt markets. All told, the central New Jersey market had 1.33 million square feet of vacancies in the 28.11 million square feet of space reviewed along the four major corridors in Middlesex, Monmouth and Mercer counties, and a small section of Ocean County.

In its 2006 study, the firm found 1.19 million square feet of availabilities in 27.53 million square feet. The region's 2007 rate was just below the mid-point of a 10-year vacancy factor that ranged froma low of 3.4 percent in 2005 to a high of 6.4 percent in 1998.While Route 9 posted a lower vacancy rate during 2007, that improvement was countered by increases on Routes 1, 18 and 35. Among the 517 properties reviewed along the four corridors, 96 had vacancies.

Conducted in January, the latest study evaluated shopping centers and freestanding buildings exceeding 2,000 square feet, including restaurants and auto-service facilities. Regional malls and centers under construction or major redevelopment were excluded.

The 0.4-percent increase in the region's vacancy rate was not as sharp as the 0.7- point rise found in northern New Jersey. According to an R.J. Brunelli study released earlier this month, the vacancy factor along six major corridors in that region expanded to 3.6 percent in 2007 from 2.9 percent the previous year.

"Despite the increases experienced over the past year, northern and central New Jersey continue to post some of the lowest retail vacancy rates amongmajorU.S.markets," said Richard Brunelli, president of the firm. "As in northern New Jersey, the departures of Levitz, The Rag Shops and CompUSAhad a sizable impact on the central market. Excluding a Rag Shop space that was already re-leased, the three Levitz, three Rag Shop and two Comp USA [stores] that closed created approximately 305,000 square feet of new vacancies along the four corridors.Add in another Levitz location on Route 35 in Wall that has remained empty since our 2006 survey, and these three chains accounted for nearly 375,000 square feet, or 28 percent, of the central region's available space."

On the new development front, the past year was marked by openings of a pair of fully leased lifestyle centers by Stanbery Development on Route 9 in Old Bridge and Route 1 in North Brunswick, each with approximately 130,000 square feet, as well as Heritage Square, a 190,000-square-foot power center anchored by Target on Route 1 in South Brunswick.

This year is expected to bring the debut of the first phase of Summerhill Square, a 170,000-square-foot center now under construction at the former Meyer's plaza on Route 18 in East Brunswick. R.J. Brunelli& Co., which is the exclusive leasing agent for the property, has lined up a 64,000-squarefoot Toys "R"Us/Babies "R"Us and a 60,000- square-foot Raymour & Flanigan.

"We are now in negotiations with over a dozen other prospects for the balance of the space," Brunelli said.

Other major projects on the horizon include HartzMountain Industries' transformation of the former Ford plant on Route 1 in Edison into a 1 million-square-foot, mixed-use center. Brunelli's firm is also the leasing and development agent for The Village at Manalapan, a 500,000-square-foot center on Route 33, near the Route 9 corridor.

Looking ahead, Brunelli said the central part of the state has room for significant residential growth, which he expects will resume at some point, supporting the development of additional shopping centers, "assuming that municipalities accommodate commercial development and the tax relief it brings."

Route 18 vacancies on rise

• Route 18: Propelled by the closure of a freestanding Levitz, the vacancy rate escalated to a 10-year high of 7.3 percent in 2007 from 5.2 percent a year earlier along the five-mile East Brunswick corridor. Over the past 10 years, the highway's vacancy rate has been as low as 2.8 percent in 2001. The firm's 2007 study found 177,200 square feet of vacancies in 2.42 million square feet of space, up from 124,000 square feet in 2.37 million square feet the prior year. Eleven of the corridor's 63 properties had vacancies.

"If you factor out the impact of the 49,500-square-foot Levitz building, the vacancy rate for Route 18 would have remained stable at 5.2 percent," Brunelli noted.

Other closings driving up the 2007 rate included Rag Shops and Tuesday Morning stores at Loehmann's Plaza, Borders at Mid-State Mall, and The Gap and several smaller stores at 18 Central.

Notable additions to the Route 18mix in East Brunswick included Golf Smith in the former 20,000-square-foot Seaman Furniture building and Bonefish Grill and Carrabba's restaurants on the pad of the power center co-anchored by Kohl's, TJ Maxx, Dick's and Circuit City.

Elsewhere, the owner of the 88,000- square-foot Miracle Mall has obtained approvals to add 30,000 square feet in connection with a renovation of the center.

"Taken together with adjoining expiring leases, this gives them the ability to assemble a single space of approximately 64,000 square feet, which would be the largest block available in East Brunswick today," said Brunelli, whose firm is brokering the site. "We are currently in negotiations with prospective tenants."

The development of Summerhill Square "will add new life to a highly visible parcel where the long-vacant Meyer's center had been a blight on Route 18 for many years," Brunelli said. Developer Pagano Realty, he noted, "patiently and diligently steered its way through an unusually arduous process to gain title to the property." Brunelli credited East Brunswick officials for their cooperation to accommodate the need of Toys "R" Us to open in time for the 2008 holiday season. Toys "R" Us will relocate to the site fromLoehmann's Plaza, where it operates a smaller store.