Flight to Quality is Seen in Major Retail Corridors in the Northeast
Heading into the heart of 2015, the Northeast retail real estate market looks robust. Tenants wanting to establish or expand their footprint here have turned aggressive in leasing, absorbing much of the prime retail space. What remains is commanding higher prices.
The result? An emerging supply/demand imbalance for Class A space that is beginning to create some barriers to entry for retailers, while spurring expansion of existing shopping center properties. For these new projects, flight-to-quality is a common theme, with developers focused on opportunities in established retail corridors, especially those offering the strength and stability of a grocery anchor.
Levin’s Construction Management Services See Strong Demand
Examples of this retail real estate trend can be found in Levin’s own leasing and management portfolio. Our construction management team recently began an expansion of St. Georges Crossing, a fully leased, 317,000-square-foot property in Woodbridge, N.J. After arranging a long-term lease with T.J.Maxx, we broke ground on a 23,000-square-foot building for the fashion retailer, which will occupy a newly acquired parcel of adjacent land. Similarly, at Mid-Town Plaza in Middletown, Pa., we orchestrated the purchase of an adjacent parcel to accommodate the construction of a 7,380-square-foot AutoZone.
Additionally, at the 80,000-square-foot Clifton Plaza in Clifton, N.J., we leased and delivered a 15,000-square-foot, newly constructed building for Blink Fitness. And in Flemington, N.J., we orchestrated a lease with HomeGoods at The Shoppes at Flemington and then oversaw approvals, contractor sourcing and construction of a 22,000-square-foot, free-standing addition.
Flight to Quality Drives Expansion Projects in Key New Jersey Retail Areas
Reflecting the flight-to-quality play, Stafford Park, a thriving, 650,000-square-foot shopping center in Manahawkin, N.J., has been approved for an additional 195,000 square feet – including several prime pad sites. The retail portion of Stafford Park includes anchor tenants Costco and Target, plus PetSmart, Dick’s Sporting Goods, Best Buy, Ulta and Olive Garden.
In Southern New Jersey’s Burlington County, the ShopRite-anchored Bordentown Plaza provides a great example of shopping center redevelopment driven by the need for competitive positioning in an established retail corridor. ShopRite is slated for a complete renovation and expansion, and the entire, 179,000-square-foot center itself will be updated and repositioned. As the property’s retail leasing advisors, Levin is marketing more than 100,000 square feet of existing space, plus proposed pad sites.
Outlook for Retail Real Estate in the Northeast: Increased Stability
The success of recently completed ground-up and renovation projects are bright spots in our region. And while we will continue to see quality inventory added to meet growing demand, the maturity of the market, combined with lengthy approval and building processes, will keep expansion in check. In other words, oversupply should not be a concern anytime in the near future. We expect the market’s stability to build steadily over the next couple of years. A continued low interest rate environment bodes well for the positive construction and investment activity we are seeing.
As always, well-located shopping centers with a strong tenant mix and curb appeal continue to draw retailers, consumers and investors. At the same time, we see some strengthening in the demand for properties in secondary positions. Landlords are becoming more creative in their approach to leasing in these spaces and are working hard to establish their properties as attractive alternatives to the scarce Class A’s.
The outlook for Northeast retail real estate remains nothing but positive through the balance of 2015 and beyond. Demand from national, local and franchise companies in active categories – including grocers, affordable fitness chains, off-price retailers and fast-casual restaurants, among others – will continue to drive vacancies down and rental rates up. And the level of development activity – both for new projects and expansions/renovations – speaks to growing confidence in the future of the retail sector in our area.