“Even as a still-too-high big-box inventory continues to shrink, that positive trend is being countered by growing numbers of smaller-store vacancies up and down the region's corridors,” he said.

The survey covers 30.2 million square feet of retail space along state Routes 1, 9, 18 and 35 in Mercer, Middlesex and Monmouth counties, and a small section of Ocean County.

The firm found improvement in the vacancy rate on Routes 1 and 18, but those were countered by rising vacancies along Routes 9 and 35. Over the last 10 years, the four retail corridors had their strongest performance in 2006, when the combined vacancy stood at just 3.4%.

Both shopping centers and freestanding buildings exceeding 2,000 square feet are surveyed - including restaurants, auto service facilities and vacant auto dealerships that are viable for retail use. Regional malls are excluded.

Previously, Brunelli reported a slight year-over-year decline in vacancy for six northern New Jersey highway corridors, to 8.1% from 8.2%. Putting northern and central Jersey together, the vacancy rate for all 10 retail corridors increased to 9.0% from 8.7% in 2012.

In central NJ, as in northern NJ, Brunelli said, “Much of the small-space woes can be attributed to a combination of unprofitable or marginally profitable tenants shutting their doors as leases expire and the inability of small chains, mom & pops and franchisees to take advantage of those vacancies because financing for new ventures or business expansion remains so difficult to get.”

About 1.09 million square feet of big-box space is vacant in central NJ – with nearly three-quarters of that having been on the market for three years or more. Along Route 1, all of the available big-box space has been on the market for at least three years.

The good news:

• Two of the region's four Pathmark sites were taken, with Hobby Lobby opening in the 61,400-square-foot space at Marlboro Plaza on Route 9 and Lowes Express going into 49,500 square feet on Route 35 in Wall Township.
• Two former Border's spaces were leased, with DSW Shoes taking the space on Route 35 in Eatontown and Buy Buy Baby leasing the store in Nassau Park on Route 1 in the Princeton area.

Also, overall vacancies along the 30-mile stretch of Route 1 stretching from Woodbridge to Trenton declined for the fifth straight year. The rate dipped to 6.7%.

Furthermore, the vacancy rate along the five-mile length of Route 18 in East Brunswick dropped for the third consecutive year, to 11.4%. In 2011, retail vacancy was at a record high along the corridor, 22.1%.