Improvement in leasing activity in northern and central New Jersey's retail real estate market was slow and steady in the first half of the year, according to brokerage firm Goldstein Group. But a state retail expert said he expects vacancy rates to further decline if consumer spending and traffic picks up in the holiday season.
Paramus-based Goldstein this week reported a slight dip in vacancy rates along 22 major retail corridors in the past six months, as more than 20 new retailers like Hobby Lobby, Uniqlo and Harbor Freight set up shop in New Jersey for the first time, and established retailers absorbed vacant space as they expanded in the state.
According to Goldstein President Chuck Lanyard, the majority of leasing activity was targeted in historically desirable highway corridors, like Route 4 in Paramus and Route 46 in Parsippany, where further drops in vacancy have spurred new construction projects after years of stagnant retail development. But Lanyard said several submarkets are still plagued with high vacancy rates, as significant amounts of space once occupied by defunct retailers — like Daffy’s, Strauss Auto, Borders, Einstein Moomjy and Sixth Avenue Electronics — remain dark.
“We are still dealing with pockets of vacancies that remain, due to past retail bankruptcies, but New Jersey’s attractiveness as a retail market has made it more resilient than most major markets in the U.S.,” Lanyard said. “Some new retailers are coming into New Jersey because they’re seeing better rent deals than before the recession, but even with reduced rental rates, we still have strong numbers compared to rest of country, so most retailers are ending up in New Jersey because of the high traffic count and strong demographics.”
Lanyard said leasing activity continues to be driven by midsized retailers like restaurants, fitness chains, and furniture and clothing stores opening in spaces measuring less than 5,000 square feet, though large retailers and grocers also have capitalized on big-box vacancies, as Fairway Market opened in a former Pathmark in Woodland Park, and DSW Shoes took over two former Borders locations, in Ramsey and Bridgewater.
Though retailers were previously concerned about the success of opening stores in downtown areas, Lanyard said they are more readily looking at areas with mixed-use property developments near train stations — such as Bloomfield, Harrison and South Orange — in light of the shrinking pool of available space along highways
That improved leasing activity has also blocked several seasonal stores from popping up before the holidays, Lanyard said.
“Landlords with empty space would welcome pop-up stores to get a few months of rent, but now that there’s more long-term leasing activity, there’s less available space for those stores, especially the Halloween ones that were all over the place in past years,” Lanyard said. “There are still some spaces available, though, and I think we’ll continue to see retailers like Toys R Us pursue locations to take advantage of the holiday season traffic bump.”
With those retailers hiring more seasonal employees than last year and showing more confidence for holiday sales, New Jersey Retail Merchants Association President John Holub said “it’s a safe assumption that retail space is becoming more of a hot commodity in New Jersey’s real estate market.”
“We’re still not at our pre-recession levels, but the improved leasing activity lends to what we’re seeing from retailers’ level of confidence going into the holidays,” Holub said. “If things continue in the positive direction they’ve been going in the last few months, I think there’s certainly a possibility — and one that we hope for — of more retailers entering the market.”