Retail Real Estate Market
While much of the New Jersey real estate market is looking set to perform sluggishly amid increased foreclosure rates and poor economic statistics, the retail real estate market sector is catching fire. With vacancies at six-year lows and Manhattan’s high commercial rents spilling over into North Jersey, retail real estate is proving to be a solid investment.
A study released last month by R.J. Brunelli & Co., LLC found that the retail vacancy rate in central New Jersey had fallen to 7.6 percent – the lowest figure in six years. The recovery of this sector was marked by improvements for both ‘big box’ stores and smaller spaces. This is down significantly from the 9.8 percent vacancy rate seen in 2013.
Over the last 10 years, the retail vacancy rate in this area has varied wildly due to the Great Recession. In 2011, the vacancy rate for central New Jersey hit a high of 10.5 percent, according to the study. This was more than three times the 2006 figure of 3.4 percent.
“While empty big-boxes continued to be absorbed in central New Jersey during 2014, one interesting development was the steeper reduction in smaller-store vacancies,” said Richard J. Brunelli, president of the eponymous firm. “This contrasted sharply with what we saw in northern New Jersey, where a very strong reduction in big-box vacancies was partially offset by rising vacancies in smaller spaces.”
While there was a more dramatic decline in empty square feet of big box store space as a percentage of the whole – the figure fell by a net 293,814 square feet to 796,053 square feet for a 27 percent drop – small spaces cut more empty space overall. These latter spaces – those that are below 20,000 square feet – experienced a net drop in vacant square feet of 324,211 square feet to 1.54 million square feet, marking a 17.4 percent drop. In all, the share of total retail vacancies along the central corridors of New Jersey represented by big box stores fell to 34.1 percent from 36.9 percent in 2013.
North Jersey Market Participants Excited
The sky-high rents on Fifth Avenue in midtown Manhattan – $3,500 per square foot – are spilling over into North Jersey and the rest of the region, Gene Spiegelman, vice chairman of retail services for Cushman & Wakefield, said at the International Council of Shopping Centers’ “Deal-Making” convention, according to The Record.
Understandably, this has confidence soaring among the 8,500 landlords, real estate brokers and retail executives gathered at the meeting, the news source reported. They came to make deals with each other for spaces in downtown commercial areas, in shopping malls and along highways, and the number of attendees is expected to be up 12 percent from last year.
“Business has been on fire,” Chuck Lanyard, president of The Goldstein Group, told The Record. “I hired four more brokers in the past month, with a fifth one coming on in January. The market’s been that strong.”
Lanyard went on to explain that the level of interest in leasing retail space in the area is higher than anything that he has seen over the past five years, according to the news source. Curtis Nassau, a Ripco Real Estate Corp. broker, echoed the statement, explaining that he had twice as many meetings lined up regarding deals as in previous years. While retailers are still cautious about signing contracts, they are aggressively looking for spaces that will serve them well.
With this in mind, real estate investors should consider ways to get into the retail market in New Jersey and how a stronger retail market may affect other sectors of the market. Feel free to contact us if you are interested in discussing this further or would like to explore options on how to invest into New Jersey Real Estate.