NORTHEAST SNAPSHOT, MARCH 2008
Northern New Jersey Retail Market
The maturity of the Northern New Jersey market leaves few opportunities for new retail developments. And while a small portion of the northern part of the state does have available land, the population in those areas is not yet dense enough to support any major retail developments. Therefore, many retail developers are turning their attention to brownfields sites and other industrial adaptive re-use projects to get the most value out of the limited development opportunities in the more populous area.
Edgewater Square in Edgewater is a great example of the use of a brownfields site. Situated along New Jersey’s popular Gold Coast area, the new mixed-use development, which originally housed a Unilever research facility, combines the town’s new Municipal Complex with residential and retail/restaurant components. Some of the original Unilever structures are being converted into high-end lofts that offer incredible views of the Hudson River and Manhattan. The Gold Coast, with excellent access to New York by train, ferry and auto, has attracted many wealthy New Yorkers. Residential sales have been very strong for several years and should continue to be strong even in a time of economic retrenchment.
Xanadu in the Meadowlands is another unique retail and entertainment project currently under construction on a remediated site. Set to open this fall, the project will include 4.8 million square feet of entertainment, sports, retail and office space along with a hotel complex. Since Xanadu is primarily an entertainment venue and its retail roster is not yet set, the full impact on the Northern New Jersey retail sector will not become clear until it opens.
Other examples of large scale re-use of industrial properties are the former Ford plant in Edison, the former Johnson & Johnson campus on US 1 in North Brunswick and the 400-acre former National Lead facility in Sayreville.
Despite the growing popularity of re-use, it should be noted that there is little government financial support available, even for brownfields redevelopment, and that it comes with strings attached: developers taking government money must agree to pay “prevailing wage,” which is equivalent to union wages.
The majority of the retail development taking place across Northern New Jersey has been mixed-use because it offers retailers a built-in base of shoppers. And because of the wealth of Northern New Jersey overall, as well as the cost of development, more lifestyle centers are being created than traditional centers. Columbus, Ohio-based Stanbery Development has been one of the most active lifestyle developers in the state. The firm already has properties in Denville, Old Bridge and North Brunswick, and the company is currently constructing a 149,203-square-foot project in Flemington and has received approvals for a 150,108-square-foot center in Hamilton with another in Gloucester.
Due to the maturity of the market, there are few retailers that have not already set up shop in Northern New Jersey. However, fast casual restaurants, such as Chipotle and Panera Bread, are spreading throughout the area. With minimal kitchen venting requirements, these dining establishments can use existing space. In addition, Cabela’s, known as the “World’s Foremost Outfitter,” will be establishing its first presence in New Jersey when it opens at Xanadu.
Average vacancy rates in the market are hovering between 5 percent to 7 percent, up slightly from a year ago. Average rental rates have remained stable with small shop space ranging from $30 to $40 per square foot and junior anchor space in Class A centers ranging from $20 to $25 per square foot. Overall, the Northern New Jersey market remains strong.
The gentrification of the Gold Coast is expected to continue, which will bring New Yorkers seeking lower taxes as well as wealthy New Jersey suburbanites who want a more cosmopolitan lifestyle to the area. The fundamentals of this mature market indicate steady activity, but it is imperative to keep a watchful eye on bankruptcies and on population growth, which can impact both vacancy and rental rates. James Hughes of Rutgers University notes a dramatic reduction in population growth, which is already approaching zero, and he also has indicated the possibility of a population decline statewide.
— Matthew Harding is president and COO, Bob Carson is executive vice president, Dale Mulartrick is director of leasing, and David Silver is the corporate director of marketing for Levin Management
©2008 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.