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Lower-end tenants claiming prime N.J. locations amid market shift

Value-based chains draw interest from shoppers preparing for pay tax hike

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Rick Rizzuto near a section of retail properties along the Morristown Green he represented. Space is opening up in historically strong markets like nearby Hanover, he says, and gas stations and pharmacies will be future tenants.
Rick Rizzuto near a section of retail properties along the Morristown Green he represented. Space is opening up in historically strong markets like nearby Hanover, he says, and gas stations and pharmacies will be future tenants. - (AARON HOUSTON)

Retailers are not the only ones paying attention to trends in how consumers spend their money — the real estate industry is watching closely, as well.

Matthew Harding, president of Levin Management, said the company's retailers have yet to see the decrease in spending because of the payroll tax hike, but that doesn't mean changes in spending habits haven't affected the properties.

Harding said many of the properties the company manages did major leasing activity in the past year with value retailers. In early March, Levin signed a lease with Dollar Tree for a 13,800-square-foot store in a Ewing shopping plaza, one of several contracts with the chain in the state.

“If you look at it, from Dollar Tree to DD's to TJX to Home Goods, it really spans a pretty wide variety of demographics,” Harding said. “We see that from across the spectrum.”

There's a good reason for retail property owners to be focused on value-based chains — according to the National Retail Foundation's monthly consumer survey, nearly 23 percent of shoppers indicated in February they will be focusing on shopping at value stores more often.

This shift in the industry is also causing new names to pop up in unexpected locations.

“There are more Dollar Generals opening than there are Louis Vuitton stores,” said Rick Rizzuto, vice president of the commercial real estate firm Transwestern, in Parsippany. “The trend is going to be, what was considered at one point low-end retailers are going to be the new norm of acceptable quality retail.”

Properties that would have been impossible to get into 10 years ago are now opening up, and are even being sold by long-time owners, according to Rizzuto.

“We're seeing a lot of quality retail on the market for purchase. For example, up and down the Route 10 corridor, there were probably 10 years where if you wanted to buy something, it was impossible, unless you wanted to pay four or five times what it was worth,” he said. “Now, things are becoming available, prime corners and whatnot, in the heart of Route 10 in East Hanover and Whippany.”

Rizzuto said these prime properties most likely are going to be snapped up by retailers that are less affected by consumer sentiment: gas stations and pharmacies, which “can support what's happening in the economy, because they're needed,” he said.

Both Rizzuto and Harding said bigger spaces are being adjusted for smaller-sized tenants, and that grocers are still active in the New Jersey market.

“There aren't going to be any 30- to 40,000-square-foot users, aside from select gyms and certain grocery stores,” Rizzuto said.

E-mail to: melindac@njbiz.com
On Twitter: @mcaliendo33

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