ATLANTIC CITY-Marcus and Millichap researchers say there will be overall modest improvement in New Jersey’s retail market, as smaller tenants from New York City move to take advantage of lowered rents in Jersey City and the waterfront area and the new Revel casino/resort generates new receipts in Atlantic City.
The investment service firm predicted a continued sagging in the central part of the state’s retail market, though. “Operators may find it difficult to refill vacated space in less-desirable areas,” California-based M & M said in a new forecast of activity through the end of the year. It noted the continued hesitancy of banks to finance expansion by local retailers.
Statewide, the firm said, retail property vacancy should decline on average, to 7.6 %. The firm predicted landlords will lift asking rents slightly to $23.04 per square foot, with the average effective rent rising to $20.28.
Other M & M forecast predictions include:
- Investment sales of retail properties continuing at a steady pace, as owners try to beat anticipated future increases in interest rates and capital gains taxes.
- Shopping centers anchored by national retailers in more affluent pockets of the state will draw intense competitive bidding from large investors. “First-year returns will remain tight,” said M & M, “averaging in the low- to mid-7 percent depending on tenant lineup and location.”
- Buyer interest in drug stores remains very high, and cap rates will average in the low-6 percent range.
In Jersey City, the report noted that restaurant row zoning has recently been expanded, and that a new class of entertainment license was introduced this year allowing restaurants to host live music, which could entice more restaurateurs from Manhattan. “Rising rents across the Hudson may encourage mom-and-pop tenants to consider locations along the waterfront, where favorable leasing terms will lower expenses,” said the forecast.
In South Jersey, the Memorial Day opening of the Revel casino and resort brought 5,500 new jobs to the region and should mean a sizeable jump in retail traffic, M & M noted.
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