FEATURE ARTICLE, SEPTEMBER 2004

GROWING RETAIL IN THE GARDEN STATE
It’s no secret that developing retail in New Jersey can be difficult. Here’s how many enterprising companies are making the big deals happen.
Katie Foxworth

Tough barriers to entry are both a help and a hindrance to developers and retailers in New Jersey. As is the case in much of the Northeast, it’s tough to get new projects approved and built due to high barriers to entry and scarce developable land. However, once the centers are finally delivered, those same barriers to entry keep much of the competition at bay. The moral of the story? If a developer can persevere and make a project happen, the center should be able to do business — relatively uninterrupted by competition — happily ever after.

“New Jersey [is] attractive because the barriers to entry are great and land and approvals are difficult to obtain,” says Robert Ambrosi, president of Clifton, New Jersey-based ARC Properties. “It makes competition very hard, but once a project is built, it is protected and has good value.”

Jon Kushner, a partner with Conshohocken, Pennsylvania-based Fameco Real Estate, says that while New Jersey has historically been viewed in a positive light by developers — and consumers have outspent their counterparts in other demographically similar areas of the country — it’s tough for developers to work within the tight zoning parameters.

“Widespread shopping center development in New Jersey has recently led to more stringent zoning restrictions,” Kushner says. “As a result, proposed developments not yet approved will limit new construction in the coming years.” Consequently, he says, many category leaders have sought to recycle the real estate ‘remains’ of now-defunct retailers. Casualties of such consolidation are evidenced by the recent bulk purchases, via bankruptcy court disposition, of the real estate ‘remains’ of former Drug Emporium, Kids ‘R’ Us, Zany Brainy and Today’s Man stores.

No matter what the economic ups and downs may be, one factor always remains strong in New Jersey: demographics. “Population density, continued growth and strong relative affluence make this an attractive area for retailers and developers,” says Ray Brunt, a leasing agent for Columbus, Ohio-based Stanbery Development. “These strong demographics and high sales volume projections are contributing to the retailers’ interest in these markets. And retail real estate developers are, of course, attracted to these areas because the retailers are.”

Both Brunt and Matthew Harding, president of North Plainfield, New Jersey-based Levin Management, have noticed retailers doing whatever it takes to locate in desirable areas. “We hear of retailers developing smaller stores in order to be able to fit in to a market,” Harding says. “For instance, either Target or Wal-Mart is developing a 99,000-square-foot store to get under the 100,000-square-foot-and-above restrictions that towns are instituting.”

New Jersey Activity

Good demographics and healthy fundamentals indicate that 2004 will be a strong year for retail investment in northern New Jersey, according to Marcus & Millichap’s 2004 National Retail Report. The $1.3 billion Xanadu project in the Meadowlands by The Mills Corporation will include 595,000 square feet of retail space, while a recent commitment by professional hockey’s New Jersey Devils to play in Newark in 2007 has spurred downtown into bustling development mode. The $1 billion mixed-use project will include 500,000 square feet of retail space.

“New Jersey is the most densely populated [state] in the country and has one of the highest per capita incomes anywhere,” says Arthur E. Weiss, a vice president in the Parsippany, New Jersey, office of CB Richard Ellis. “Retailers like those two facts. If you factor out the secondary and tertiary retail space that is available today, we believe we are looking at under a 3 percent vacancy rate in northern and central New Jersey. That in itself is proof of how attractive the market is to the retail community.”

Key barriers to entry, Weiss says, are the state’s low vacancy rate and the scarcity of new development opportunities. Also, quite simply, it’s difficult to get deals done in New Jersey — even if you can find the land.

“Although the entitlement process in New Jersey can be difficult, New Jersey still boasts some of the most densely populated residential and business regions with some of the highest incomes in the nation, which of course drives the interest for retailers,” says Steven Winters, director of the retail division of Woodbridge, New Jersey-based The Schultz Organization/TCN Worldwide, which is currently involved in several New Jersey development projects between 150,000 and 750,000 square feet. “From a retailer’s perspective, because of the lack of undeveloped sites [in New Jersey], there is a lot of competition between similar-type retailers for anchor positions in new developments.”

In addition to the lack of undeveloped sites in central and northern New Jersey, Winters also credits New Jersey Governor James E. McGreevey’s smart growth initiatives for shifting the focus more toward redevelopment and revitalization of the downtown trade zones. CB Richard Ellis’ Arthur Weiss also has noticed developers finding increased success in the transit villages and redevelopment of downtown parcels.

“Due to the McGreevey administration’s efforts to curb sprawl and push development back into the cities, some of the urban areas are seeing a significant renewed interest from developers,” says Arthur Weiss. “One example would be the project that Roseland Properties is doing in downtown Livingston [a $60 million town center under development]. Town centers seem to be another trend taking shape in the state. Unfortunately, at this point, many of the municipalities that are pushing for town center designations do not have a clear understanding of what a town center should be, nor what is feasible or not. So, this area of development is on the upside of the learning curve.”

“Additionally, there is still the traditional interest in finding and developing land for grocery-anchored centers in new areas of residential growth,” Winters adds. “Certain new retail hubs or corridors are being created because of new residential development.”

Winters says one New Jersey market experiencing exciting retail growth is the Route 66 corridor south of the Garden State Parkway in Monmouth County. This section of Route 66 travels through Neptune Township, Ocean Township and Tinton Falls.

“In the last couple of years, the defunct Seaview Square Mall was de-malled and redeveloped to house Target, Costco, Sears, Applebee’s, Baja Fresh and Starbucks,” Winters says. “Up the street, a new Wal-Mart and Home Depot opened. Next to the Home Depot, a Marriott Courtyard plus additional retail and a restaurant pad have recently received approvals.”

Winters lists activity all over the area. Chelsea Partners is planning a 350,000-square-foot upscale outlet center along Route 66 at the Garden State Parkway, while Wegmans, Staples and Stein Mart are under construction along Route 35 near the Seaview Square project. Directly opposite Seaview Square is The Neptune Shopping Plaza, a 225,000-square-foot center represented by The Schultz Organization. An 85,000-square-foot Shop Rite and a newly expanded 40,000-square-foot Marshalls anchor the center. Satellite tenants include Commerce Bank, Fleet Bank, IHOP, Dunkin Donuts and Sally Beauty Supply.

“Retailers that once believed their Eatontown and Shrewsbury stores serviced this area now realize Route 66 as a new source of revenue,” Winters says.

In nearby Asbury Park, Asbury Partners’ boardwalk reconstruction is almost complete. The boardwalk is part of a larger 56-acre Oceanfront Asbury redevelopment. Retailers — some of which opened in July — include a sports bar, a surf shop, an arcade, an ice cream parlor, and a souvenir/sundries shop. New Jersey-based S&W General Contracting Inc. served as general contractor for the demolition, and Asbury Park, New Jersey-based Vaccaro Enterprises LLC was project manager for the demolition. Cranford, New Jersey-based Simpson & Brown served as general contractor for the boardwalk reconstruction.

Applied Development Company is developing Pier Village, a new $95 million mixed-use community along the waterfront in Long Branch, New Jersey.

In the oceanfront town of Long Branch, nearly half of the 100,000 square feet of retail space has been leased at Applied Development Company’s Pier Village, a new mixed-use community along the waterfront. Nine retailers have joined the $95 million project, which will also include 420 luxury residences. New tenants include McLoone’s Riverside Dining, Stewart’s Root Beer, Rocky Mountain Chocolate Factory, Island Trading Co., It’s Greek To Me, Kidegories, The Turning Point and News Café.

In Voorhees, Wal-Mart Stores Inc. will build a 147,550-square-foot store at Pennsylvania Real Estate Investment Trust’s Echelon Mall, a 1.1 million-square-foot mall that is being redeveloped. Wal-Mart, which will occupy an outparcel formerly home to JC Penney, marks the beginning of the mall’s redevelopment. The redevelopment plan also involves re-merchandising the former Sears store and creating a new food court and mall entrance at the eastern end of the mall facing Echelon Road. Wal-Mart, which will open in spring 2006, joins existing anchors Strawbridges and Boscov’s. Also in Voorhees, Fameco is busy with Cedar Hill Shopping Center, a 373,244-square-foot center opening this year. The BJ’s Wholesale Club-anchored center is located on Route 73 and Cooper Road.

In the growing retail hub of Delran, ARC Properties has begun the final expansion phase on Delran Center, a 450,000-square-foot center anchored by Lowe’s Home Improvement Warehouse and Shop Rite. The 40,000-square-foot expansion is expected to be complete by March 2005. Also in Delran, Fameco is developing a 65,000-square-foot retail development that will open in 2006.

In South Brunswick, Fameco is adding a state-of-the-art, 70,000-square-foot supermarket to Heritage Square Shopping Center, a 190,000-square-foot center opening in 2006 along Route 1 and Stoudts Lane.

In Old Bridge, Stanbery Development is underway on The Shoppes at Old Bridge, a 93,000-square-foot center with leases and letters of intent under negotiation with many major national clothing retailers. The projected date of opening is spring 2006.

In Edison, north of Old Bridge, The Shops at Colonial Village was recently renovated by Weiss Realty. The 70,000-square-foot center is occupied by LouCas Italian Restaurant, Meemah’s Chinese/Malaysian Cuisine, Starbucks, Alan’s Fine Footwear, Lingerie by Susan, Bernstein Fashions, Bella Floral Florist, Lamp Cleaners, Ace Shoe Repair and Alina’s Custom Tailor Shoppe.

“An interesting trend has developed at The Shops at Colonial Village,” says owner Jaime Weiss. “Those merchants whose goods and services complement each other have seen great opportunities in leasing space at the same center.”

In other words, says Jaime Weiss, “This is truly a one-stop shopping destination.”

Colonial Village is located in Edison Township, on the border with Metuchen, in Middlesex County, which has been named one of the most desirable places to live in New Jersey.

“We believe that the Metuchen/Edison retail market continues to be one of the hottest retail attractions in northern New Jersey,” Jaime Weiss says. “It offers a great location between New York City and Philadelphia, moderate-priced housing of all types, good local schools and higher learning facilities, strong employment possibilities with a number of top corporations headquartered in the area, a wide choice of restaurants, major public transportation and a network of highways, close proximity to Newark Liberty International Airport, shopping that’s second to none and, in general, an ideal residential and commercial environment.”

In South Plainfield, north of Edison, construction has begun on Hadley Shopping Center II, a 242,000-square-foot development of Purchase, New York-based National Realty & Development Corp. (NRDC). Anchored by Target and Marshalls, the tenant lineup complements NRDC’s successful Hadley Shopping Center I, which is adjacent to the new property. Anchors at Hadley I include Kohl’s, Pathmark and Regal Cinemas. Hadley II is scheduled for a fall 2005 opening. Also in South Plainfield, ARC Properties is busy developing an 80,000-square-foot center that is scheduled to deliver in April 2005. Signed tenants include LA Fitness and Baja Fresh.

In North Plainfield, Levin Management recently finished converting an old Acme supermarket along the Route 22 retail corridor into a CVS/Pharmacy. “This is indicative of the continuing trend for supermarkets to close smaller stores that cannot be expanded to come up to today’s standards,” says Matthew Harding of Levin Management, which is also based in North Plainfield. “In this market, there are a large number of the smaller supermarkets on leases that are nearing the end of their term and options. I believe that the average supermarket is now 40,000 square feet, and many are larger. The Shop Rite in our newly renovated St. Georges Crossing in Woodbridge, New Jersey, went from 36,000 square feet to 91,000 square feet.”

Farther north, in Livingston, Livingston Town Center is under development at the intersection of Livingston and East Mt. Pleasant avenues. The $60 million planned urban lifestyle/suburban environment is a joint venture between Livingston, New Jersey-based Eastman Management Corp.; Short Hills, New Jersey-based Roseland Property Co. and Clifton, New Jersey-based Jacobs Enterprises Inc. It will feature 50,000 square feet of ground-level stores, 20,000 square feet of second-floor office space and a 228-space parking garage. Carillon at Livingston Town Center, a neighborhood of single-family village homes, will be constructed behind it. Occupancy of both the commercial and residential components is expected to begin in 2005.

In Sussex County, the Parsippany, New Jersey, office of CB Richard Ellis is in the process of finalizing the re-tenanting of a closed 60,000-square-foot Ames store at Hampton Plaza Shopping Center. “We brought Bed Bath & Beyond and Modell’s to the project,” says Arthur Weiss. “This was their first foray into the county.” CBRE also completed leases with the Rag Shop and Hobby Town at the center.

Southern and central New Jersey are also bustling with new retail activity, especially in southern New Jersey markets like Cape May County, Gloucester County and in select pockets south of Turnersville. Carving out its own niche and identity, central New Jersey is coming into its own as a prime retail hub.

“Central New Jersey, until recently, could be described as a ‘tweener’ area,” says Jon Kushner of Fameco. “Not certain whether to appeal to the perhaps more sophisticated taste of New York or the more conservative tastes of the southern New Jersey consumer, counties such as Middlesex, Monmouth and Ocean were underserved by the national chains, unsure how to capture these audiences.”

Kushner says this market also had been problematic from a media standpoint, simply due to its geographic position. “[Central New Jersey was] stuck between the two major advertising markets of New York Metro and the Philadelphia metropolitan statistical area,” he says. “Now, with improved advertising campaigns and more refined demographic data, these markets are seeing an increase in interest from many national retailers.”

Another growing trend in the area is the redevelopment of under-utilized or outdated industrial and office facilities into retail or mixed-use projects. “We represented an owner of a major industrial facility on Route 1 in Middlesex County in the sale of its property to a very strong local developer,” says Arthur Weiss of CB Richard Ellis. “Plans are in the works for a major mixed-use project, the bulk of which would be retail.”

In Toms River, in Ocean County, Lakewood, New Jersey-based Paramount Realty Services recently developed Tri-City Plaza, a 115,000-square-foot center anchored by Super Stop N Shop.

In Somers Point, near Atlantic City, Plymouth Meeting, Pennsylvania-based Kramont Realty Trust has inked a deal with Staples for an 18,338-square-foot store in its Ocean Heights Shopping Center, which opens this fall. Staples and Super Shop Rite will anchor the 180,000-square-foot center. Ocean Heights is located on U.S. Highway 9 near the Garden State Parkway.

In Mays Landing, New Jersey, AMC Delancey Partners’ Festival at Hamilton is a 177,000-square-foot center that has retailers lining up for space. The center is anchored by Acme Markets, Pier 1 Imports and Jo-Ann Fabrics.

In Mays Landing, Metro Commercial Real Estate is witnessing an interesting situation at AMC Delancey Partners’ Festival at Hamilton, a 177,000-square-foot center that has retailers queued up on a wait list to get in. Likewise, when existing tenants want to expand, they will wait (sometimes years) until space becomes available rather than move out of the center. Boater’s World, a Festival at Hamilton tenant since 1989, more than doubled its size to 12,000 square feet at the center last year. Another tenant, Ultimate Martial Arts, waited 4 years to get the space it wanted at Festival at Hamilton. The center is anchored by Acme Markets, Pier 1 Imports and Jo-Ann Fabrics. A key to the center’s appeal, according to Metro Commercial, is that it is located in the only major regional retail area in Atlantic and Cape May counties.

Outside Philadelphia, along Route 73 in Marlton, New Jersey, Paramount Realty Services is under development on Marlton Shoppes, which is part of the second phase of an existing lifestyle center.

In nearby Cherry Hill, Fameco Real Estate is involved with Garden State Park, a 500,000-square-foot Wegmans-anchored center located at Route 70 and Haddonfield Road. The center is expected to open in 2005.


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