Jones Lang LaSalle

Few sites for new retailers in Morris

Some small parcels remain, but big-box stores are out of luck as land is vanishing

BY TIM O'REILEY DAILY RECORD

Hard-core shoppers who plan their calendars around new store openings had better make the most of the coming year.

Once a handful of projects mapped out or under construction are finished, industry leaders say it will be time to hang a "no vacancy" sign at the county line.

Although a few parcels remain that could support small strip malls, larger projects with big-box anchors have become virtually out of the question.

"With the Highlands Act, that takes a good chunk of real estate right off the table, and it's going to make new development almost impossible," said Michael Halibej of Halibej Realty & Associates in Morris Plains.

Even before that, town councils heeding voters' complaints about increased traffic often took a hard line against new projects, said Art Weiss, a broker with the Parsippany office of CB Richard Ellis.

"I don't see any new development of raw land of any significance for a long time," he said.
Escalating house prices have given developers more leeway than just a couple of years ago to win bidding battles with commercial builders for raw land.

"It used to be that if a residential guy offered $1 million, I could offer $1.5 million to $2 million," said Howard Wein, who represents retail clients as a vice president at Jeffery Realty in North Plainfield. "But within the last 12 months, residential has been able to pay the commercial prices or more."

As open land disappeared from the market, it has become more common to redevelop obsolete factories and other commercial buildings -- or even dumps -- the types of properties that would be ignored in many other parts of the country.

In fact, almost everything that opened in 2005 or is scheduled for completion this year -- with the exception of additions along the periphery of Rockaway Townsquare mall -- fits in this category.

"Municipalities are not terribly eager for new, ground-up projects but are thrilled to see old, dying industrial property put back to use," said Scott T. Loventhal, director of development at Garden Commercial Properties in Millburn. "Developers are going to have to be creative in rehabbing and redeveloping."

Garden Commercial expects to finish construction in October of the 260,000-square-foot Riverdale Crossing, located on an abandoned rock quarry at the juncture of Routes 23 and 287.
Just a mile to the west, Lowe's opened a store in the summer on the site of an old scrap rubber dump that many developers had shunned for years.

On the congested Route 10 corridor in East Hanover, side-by-side Babies 'R' Us and Thomasville Furniture stores replaced an industrial building that had sat empty for more than a decade, partly because of environmental concerns.

In Morristown, Woodmont Properties expects to go ahead with demolition of the old Epstein's department store and some neighboring buildings to make way for a new mixed-use project that will include a total of 90,000 square feet for shops.

Perhaps the biggest potential prize, according to Weiss, is the former Hercules Gunpowder plant in Roxbury, covering 1,200 acres between Routes 46 and 80.

Still, proposals dressed up as redevelopment encounter the same objections as their greenfield counterparts.

In the Flanders section of Mount Olive, Armstrong Capital of Valley Stream, N.Y., ran into a storm of complaints a year ago when it sought to build a 128,000-square-foot Target at the Sutton Plaza shopping center it owns, replacing an old Ames store about half that size that has been vacant for four years.

Company executives did not return calls regarding Target's status, but town officials said Armstrong had quietly withdrawn the building application and had not submitted anything new.
In late 2004, an attempt to build a Wegmans supermarket and senior-citizen housing on the 37-acre site of an industrial building that has sat empty for more than a decade ran into a similar fate after neighbors raised hackles about increased traffic.

While cars often dominate the debate, Halibej said that may change eventually.

"With the tax pressures on every municipality, people are going to have to be more flexible to build up commercial ratables," he said.

In addition to redevelopment, industry experts hold out hope that lifestyle centers will receive a warmer reception from town officials and residents.

The latest fad in shopping centers, now that such previous hot items as outlet centers and power centers have reached maturity, lifestyle centers are loosely defined as covering 100,000 to 500,000 square feet. The stores are laid out on a line like neighborhood strip malls but are populated by many of the same national specialty chains that go into regional malls.

Big-box anchors, favorite targets of controlled-growth advocates, are never invited in.
So far, the 88,000-square-foot Shoppes at Union Hill in Denville is the only lifestyle center in Morris County. Almost full when it opened in mid-2003, owner Stanbery Development recently signed the clothing shop J. Jill to a lease that filled the last of the 23 spaces.

By autumn, The Streets of Chester, just off the town's Main Street, will become the second lifestyle center in the county.

Chuck Lanyard, director of brokerage at the Goldstein Group in Glen Rock, said he was working on securing two sites in the county for lifestyle centers, but he declined to give specifics.
"The great demographics and economy in Morris County make it a great place for lifestyle centers," he said.

And the smaller traffic counts make it easier to secure permits than with larger shopping centers.

Still, Union Hill ran into many of the same complaints as its larger counterparts when it went through the hearing process in 2001, including objections about traffic and overdeveloping the neighborhood.

Even after construction started, some argued that Stanbery had cut down too many trees.
With the debate long over, Stanbery gets calls every week from retailers wanting in, only to be told that the center is full for the foreseeable future.

Despite the strong performance, Stanbery has no projects even in the planning stage.
"The barriers to entry in Morris County are very high," said Ray Brunt, head of the company's New Jersey office in Manasquan. "We have looked for other locations, but at this point, we haven't been able to find anything."

In this environment, the tiny vacancy rates that have prevailed for several years are expected to continue through 2006 and beyond.

The Old Bridge brokerage R.J. Brunelli & Co., in its most recent survey one year ago, found a 2.7 percent vacancy on the Route 46 corridor and just 1.5 percent on Route 10.

Most of the retail openings along Route 46 were east of the county line.

On Route 10, only 70,000 square feet -- or the size of one newest-generation supermarket -- is vacant in the entire 21-mile stretch from Roxbury to Livingston.

For the most part, the lack of space forces retailers seeking new storefronts in Morris County to take a number and get in line.

"I recently had a national electronics retailer tell us they were ready to take 25,000 to 35,000 square feet, but all I could tell them was that we appreciated their interest," said Scott McGee, who directs the leasing effort at the ITC Crossing in Mount Olive.

Developer AIG Baker, based in Birmingham, Ala., is finishing a PetSmart store and has signed Applebee's to a lease for another pad there.

After that, the 743,000-square-foot center, expected by many in the industry to be the last of its size built in Morris County, will be finished, except for a couple of small parcels that are difficult to market because of their configuration or limited parking, McGee said.

The 149,000-square-foot addition to Rockaway Town Plaza, where some tenants have moved in, was entirely leased two years ago, said Michael Hauser, general manager of Rockaway Townsquare mall. Both are owned by Simon Property Group.

The mall is full, and plans are being drawn up for an interior makeover, although no schedule has been laid out.

Likewise, a new wing to the mall that has been talked about for several years has not received a go-ahead, although the ring road around the mall was realigned last year partly to make room for it.

Included in the Town Plaza will be the second Morris County location of Dick's Sporting Goods store.

Industry experts said Dick's scouted locations for several years, finally succeeding by taking over and rebuilding a store that Pathmark vacated in East Hanover last year.

In addition to individual changes, retailers wait for competitors to close in bankruptcy, as happened last year with Seaman's Furniture, to find expansion space.

Many other retail openings are relatively small, including:

• Marketplace at Rockaway, which opened in 2004 with Wal-Mart and DSW Shoes as anchors, is down to the last 5,800 square feet available of 258,000 square feet.
• Boonton Plaza, with a 23,000-square-foot addition under construction across the parking lot from Wal-Mart.
• Shops at Rockaway Plaza, with five spaces totaling 15,500 square feet.
• The Streets of Chester, a 105,000-square-foot lifestyle center that will open in September, 15 years after receiving its first permits.