Northern & Central New Jersey Retail Market

Owners of open-air shopping centers and freestanding retail buildings along Northern and Central New Jersey’s primary retail corridors headed into the 2004 holiday season in a strong position, experiencing minimal shifts in vacancy rates from those posted at the onset of the year.

A fall update of the annual study conducted by R.J. Brunelli & Co. each January found the vacancy factor along the six major retail highways in Northern New Jersey decreased to 3.0 percent from the 3.2 percent reported in our 2003 study, which was conducted in January 2004. Vacancies along the four Central New Jersey corridors surveyed were unchanged at 3.8 percent.

These findings point to the resiliency of the Northern and Central regions. It’s an environment in which availabilities triggered by chain bankruptcies or downsizings are rapidly absorbed by newcomers, seeking to establish a presence in these demographically appealing regions, or by existing chains, desiring to bolster their market share.

In Northern New Jersey, Route 17 saw vacancies in its 4.49 million square feet of space rise to 4.4 percent in September 2004 from 3.7 percent in January 2004. Along Route 4, the rate was unchanged at 1.8 percent in 1.05 million square feet. On Route 23, vacancies in the 1.71 million square feet reviewed grew to 2.3 percent from 1.6 percent. Route 46 saw vacancies in the 6.0 million square feet studied dip to 3.3 percent from 3.4 percent. Along Route 10, vacancies in the 4.68 million square feet studied fell to 1.5 percent from 2.4 percent. Route 22, with 7.89 million square feet of inventory, saw its rate recede to 3.3 percent from 3.7 percent.

In Central New Jersey, vacancies on Route 35 fell from 4.7 percent to 4.0 percent in the 7.95 million-square-foot market. Progress was also seen on Route 9, where the rate dropped to 4.2 percent from 5.4 percent in 7.08 million square feet. On Route 18, the rate increased to 5.1 percent from 4.9 percent in the 2.22 million square feet studied; Route 1 saw its factor rise to 2.7 percent from 2.5 percent in the 7.52 million-square-foot market.

While a dearth of developable sites has kept new development to a minimum — especially in the more densely populated Northern region — several major projects have been given the green light or are on the horizon, underscored by Mills Corp./Mack Cali’s huge Xanadu multi-use project at the Meadowlands sports complex in East Rutherford. In Central New Jersey, activity will be highlighted by Hartz Mountain’s redevelopment of a former Ford plant in Edison into a mixed-used project, and Manalapan Retail Realty Partners’ plans for the Village at Manalapan, a town center on 135 acres with an anticipated grand opening in fall 2006.

— Richard J. Brunelli is president of R.J. Brunelli & Company Inc. in Old Bridge, N.J.

Northern New Jersey Office Market

In Northern New Jersey’s office market, the state’s strong economic conditions are resulting in an overall increase in activity. Current conditions, such as the drop in New Jersey’s unemployment rate and the addition of many new jobs to the marketplace, are creating demand for office space from multiple market sectors. As there is not significant office development currently underway, the available space in Northern New Jersey’s submarkets is being leased at a rapid pace.

Many significant deals were consummated in the region in the second half of 2004, especially in the Route 24 and I-78 corridor submarkets, including leases on behalf of BASF, Wyeth, and Citigroup, in addition to several transactions at the prestigious Giralda Farms campus.

The Route 24 submarket continues to outpace other submarkets in the state and has many development capabilities. Although there is available space in this market, there are several new construction opportunities for some of the state’s big developers, such as The Gale Company, Advance Realty Group and M. Alfieri Co. Inc.

In 2004, there were several occurrences where multiple tenants were chasing a single block of space in prime property. The strongest demand has been in the highest quality properties such as Giralda Farms, Park Place and Warren Corporate Center. In most markets, the excess of sublease space continues to drop, although it still remains at levels above historical averages. Despite these factors, rental rates have not been increasing, though concession packages are frequently becoming less generous.

The economy is experiencing a steady growth pattern and the state has made up all the jobs lost during the recession. There have been a number of new companies coming into the market. As companies continue to invest and cultivate their businesses, the market will reflect further improvement. This breeds confidence that these trends will continue and provide a strong market in years to come, eventually returning to levels seen prior to the recession.

— Leo Paytas is with Trammell Crow Company.

New Jersey Industrial Market

The industrial market in New Jersey is thriving with new development, drastically changing the landscape of industrial product in the state. By far the greatest trend in the market is new product being built in close proximity to Port Newark/Elizabeth, which has until now been dominated by older buildings with lower ceiling heights and limited trailer parking. Over the next 2 years, however, major submarkets as close to the ports as Exits 13A, 15W, 14 and 12 on the New Jersey Turnpike are experiencing an inundation of new development consisting of millions of square feet of modern distribution and warehousing centers. These facilities are increasingly boasting 36-foot clear ceilings, precast concrete walls, and as many doors and trailer parking spaces as possible.

This trend points fixedly toward infill development on a large scale and specifically catering to the expected growth the ports will experience in the next 15 years as the Port begins to accept larger vessels and more freight. These are significant projects, including Catellus’ 1 million-square-foot, three-building complex at Exit 13A, and, already underway, its Port Reading Business Park at Exit 12, a 3 million-square-foot development on 290 acres. The first building, totaling 360,000 square feet, will come online as early as April 2005. At the revamped Exit 12 interchange, another national developer, Panattoni Development, is developing I-Port 12, a 140-acre, 3 million-square-foot complex. Further south, its I-Port 440 will comprise 2 million square feet. New development at Exit 13A could possibly see rental rates in the range of $7 to $8 per square foot, which is unprecedented for this market. However, with vacancy rates hovering at 7.6 percent in this submarket and newer facilities drawing attention, numbers such as these might become more commonplace in 2005 and through 2007. In addition to these mammoth projects, Morris Companies, Adler Development, Russo Development and others have proposed developments in the expanded Port area.

The impact of these developments is indisputable. They will create a sharp increase of Class A industrial product, serving more of Northern New Jersey than before and thus enticing certain companies to remain close to the ports instead of moving to Central New Jersey in search of quality facilities. As of December, the Carteret market alone experienced a 2.78 percent vacancy rate, more than justifying new development. However, the development of large regional distribution centers in Central New Jersey is a trend that will continue as long as there is land available between Exit 8A and Exit 7. Companies such as Rockefeller Group, ProLogis, Matrix, Forsgate, Opus East and Greenfield Builders continue to develop throughout that market. With rental rates between $4.25 and $4.75 per square foot, Exit 8A is highly competitive, even with the 15 percent increase in rental rates for existing facilities over the past year.

Regional distribution areas of Exit 8A, Exit 7A and the extended Port Area offer key strategic advantages for moving goods in and out of the country and throughout the corridor between Boston and Washington, D.C. New Jersey continues to stand next to Southern California and the Chicago area as one of the premier industrial markets in the country.

— Robert Kossar, SIOR, is an executive vice president with Binswanger/Klatskin.

©2005 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.

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