ELMWOOD PARK, NJ-A rising tide of home foreclosures in some New Jersey’s suburbs is making banks too nervous about market instability to loosen purse strings for small retailers trying to expand, says Marcus & Millichap in its third-quarter market assessment.

“Despite the improving jobs picture, headwinds in the housing market and capital constraints will postpone the retail recovery across New Jersey in the near term,” says the new report. The national investment group M & M is headed in New Jersey by Michael Fasano, whose office is in Elmwood Park.

“Retail centers located in suburban neighborhoods with elevated home foreclosure activity will underperform until the housing market stabilizes,” according to M & M’s Q3 analysis.

Foreclosure filings were up 65% in New Jersey in August compared to the year before, according to the data aggregator RealtyTrac. The surge followed the lifting of judicial restraints in the state while a review of bank practices was conducted.

The reverberation in the retail market means all but the largest chains are finding high barriers to acquisition of loan capital, says M & M’s analysis. Its research indicates that operators of older strip centers are subsequently being forced to reduce rents or offer free upgrades to backfill space.

On the other hand, M & M noted several positive factors:

• Employment is expected to grow at the fastest pace since 2000 this year, which is enticing national and regional tenants to introduce new store concepts.
• To reduce operating costs, businesses that have operated in free-standing locales, including medical offices, are turning to strip centers.
• New York City retail investors are being driven across the Hudson to capture higher returns at lower price points.

Asking and effective rents ticked up slightly to $23.01 per square foot and $20.19 per square foot, respectively.

Still, the vacancy rate for retail real estate hit a peak level of 8.2 %, according to the recent statistics. In northern New Jersey, vacancy was up, to 7.4 %. In Central New Jersey, the rate fell slightly to 8.8, and in southern New Jersey it also fell, to 9.4.