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14A — April 25 - May 15, 2014 — Spring Preview — M id A tlantic
Real Estate Journal
R etail T rends
By Rick Rizzuto, Northeast Region, Transwestern Retailers change direction with space in New Jersey
click away. It’s the na- ture in which we find our- selves in al- most every aspect of our lives. Even in our business of commercial W
e live in a day and age when anything you want is just a
find available space simply by logging onto a number of online databases, entering in geographic parameters and, with just a few clicks, all the available space and/or appropri- ate tenant contact information is right at the fingertips. So how has this wave of in- formation changed the way retailers and retail brokers are doing business and how is it im- pacting the real estate market in New Jersey? Well, it’s no surprise that the Garden State’s retail real estate market in the past few years has taken a dramatic shift in
direction. New Jersey has long been famous for its strip centers and its retail corridors off of major highways, all anchored by large big box retailers like a Target, Home Depot or a Wal- mart. However, during the last couple of years, major New Jersey retailers have begun downsizing their actual store space as the shopping habits of consumers gravitate to online purchases with same or next day delivery. Because of the financial rocky road retailers have experienced for the past five years, gone are the days of leasing excess space
in anticipation of inevitable growth. Before the recession, retailers would lease a few thou- sand square feet of extra space, in addition to their current space, to accommodate future expansion within the store. Now, larger retailers are focused on increasing their bottom line by reducing their commercial real estate liability, leasing only what they need in the present, and in some cases, even less than they really need. Should the demand increase, there will be discussions about expansion in the future, but for now, less seems to be more.
However, despite the rising sales of online retail, there is still an inherent desire to keep brick-and-mortar stores open to the public. Even though retail- ers, like Best Buy, have fully embraced the online shopping experience as one of the most preferred methods of acquiring goods and services in the digital age, they haven’t forgotten the consumers desire to see, touch and feel a product they want to purchase. Therefore, we will always see a demand for some sort of major retailer to have a local physical presence so customers can do their “window shopping” before returning home and scouring the Internet for the best deal on a particular product. While this trend might not always translate into in-store sales, re- tailers are still seeing the value in continuing to have a physical presence, albeit smaller one, to showcase their products. On the flip side, smaller re- tailers and franchise concepts like trendy, and sometimes seasonal, shops are on the look- out for micro spaces; small and ultra-manageable storefront spaces from which they can maximize profits but also ex- pand into thriving New Jersey suburban downtowns like Mor- ristown and Somerville. Find- ing retail space next to mass transportation that generates heavy foot traffic is top of mind for some of these smaller, niche retailers while keeping their costs down as much as possible. Towns are also capitalizing on this trend and are exploring ways to create more retail space in their downtowns. In fact, the township of Dover just an- nounced an ambitious redevel- opment plan for its downtown that will include significant ground floor retail space. And because of this new fo- cus to local downtown centers, strip malls are now seeing an influx of medical walk-in care facilities who seem to appreci- ate the business value a strip center location and foot traffic can create. For building owners, medical tenants are inherently positive. They typically take longer term leases because they have equip- ment that is not easilymoved so they can set up their shop and stay there for a while, creating a stable rent stream. They are what we call “necessity ten- ants,” meaning the public will usually always need them at continued on page 16A
Rick Rizzuto
real estate, technology is mak- ing it consistently easier to lo- cate leasing space on themarket with just a click of the mouse. Real estate professionals can
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