>Empty stores in region on rise
Thursday, December 4, 2008
THE RECORD
BY ANDREW TANGEL
STAFF WRITER
The number of vacant stores along major corridors in North Jersey increased to 5.7 percent in November, from 3.6 percent earlier this year, according to a recent survey, another sign of the steep drop in consumer spending.
The vacancy rate along a 15-mile stretch of Route 17 experienced the most dramatic increase in North Jersey. In a survey of 141 properties, |R.J. Brunelli & Co., a real estate brokerage in Old Bridge, found a vacancy rate of 7.3 percent in November, up from 4.5 percent in the weeks following New Year’s 2007. It was the highest vacancy rate found in the survey for Route 17 since at least 1999.
The survey also found the vacancy rate along Route 4 was 10 percent, a 0.1 percent drop from early this year. The retail hub has been hard hit by closures of stores specializing in home furnishings, said Richard Brunelli, the firm’s president.
Increased retail vacancies are further evidence of a recession and do not bode well for the holiday shopping season, when consumer spending – which accounts for 70 percent of the American economy — is highest.
Brunelli expects vacancy rates to increase a percentage point early next year, as more stores go bankrupt because of sales shortfalls. Typically, he said, stores have filed for bankruptcy in January and vacated properties in February and March.
He said Routes 4 and 17 may be hit particularly hard because of their high concentration of stores selling home furnishings and decorations. Those stores, he predicted, will fold because of the downturn in the housing market.
“I hate to be the bearer of projected bad news, but I think Routes 4 and 17 may feel a disproportionate amount of pain that we’re going to feel in 2009,” he said.
While the increase in vacancies may be bad news for landlords and their mortgage lenders, they will likely be a boon to businesses that can afford to expand. An increased supply of space will likely push down already depressed rental rates. In February, the average rent for retail space at shopping centers in northern New Jersey was $21 to $22 a square foot, according to a report by NAI Global, a commercial real estate services firm. (The figure excludes malls and downtowns.)
“They’re going to make some great deals in the next six months,” he said. “Landlords are just caving in and making deals they never would have made before.”
North Jersey has fared better than central Jersey, according to Brunelli’s survey, and better than the national average. The vacancy rate for retail space in central Jersey ticked up to 6.6 percent in November, from 4.7 percent earlier this year. The survey does not include enclosed malls.
A national report in September by Marcus & Millichap, a real estate brokerage and investment firm based in California, said the average retail vacancy rate for 2008 nationwide is expected to be 11.1 percent.