New Retail Life In The Northeast
New Jersey and Pennsylvania continues to see a growth in the retail market, especially with the lifestyle center trend.
Amy Bigley

Traditionally dense and competitive markets, the retail markets of New Jersey and Pennsylvania are continuing to grow as the area becomes more and more attractive to upscale retailers, restaurants and entertainment destinations. With population on the rise and consumers looking for high-end shopping and restaurant options, developers are exploring the national trend of lifestyle centers in an effort to revitalize and update some of the nation’s oldest retail markets.

New Jersey

Garden Commercial Properties is developing Raritan Town Square, a 510,000-square-foot lifestyle center in Raritan Township, New Jersey. Lowe’s Home Improvement Warehouse and Wal-Mart, which is slated to open in summer 2008.

Short Hills, New Jersey-based Garden Commercial Properties is tapping into the national trend of lifestyle centers with its development of Raritan Town Square, a 510,000-square-foot lifestyle center in Raritan Township. With Lowe’s Home Improvement Warehouse and Wal-Mart as anchor tenants, the center combines elements of a power retail center, community retail center, entertainment/civic center and office park into a pedestrian friendly downtown atmosphere. Raritan Town Square is expected to open in summer 2008.

The center is situated in the Flemington corridor of Hunterdon County, which has become a hot area for both commercial and retail development, says Scott Loventhal, director of development with Garden Commercial. “The quaint atmosphere and relatively low cost of living has fueled an influx of new residents over the past years,” he says.

The strong retailer interest in mixed-use developments is exemplified in National RE/Sources’ Edgewater Square, a mixed-use project located in Edgewater. Situated along the Hudson River and offering views of Manhattan, the project will comprise the town’s new municipal building, luxury residential lofts and 70,000 square feet of retail and restaurant space. North Plainfield-based Levin Management Corp. has been named exclusive retail leasing agent for the project, which is scheduled for completion in late 2008.

In addition to an interest in mixed-use projects, Matthew Harding, president of Levin Management, notes that health clubs and good quality restaurants are emerging as a new type of retail anchor. An example is the 60,000-square-foot CAN DO Fitness, which is anchoring Princeton Forrestal Village in Princeton.

“The fitness club expects to have between 6,000 to 8,000 members, who are anticipated to visit 1.8 times per week — this figure matches up well against a grocery anchor where customers visit 2.2 times per week,” explains David Silver, Levin’s corporate director of marketing.

“As long as people eat, grocery-anchored shopping centers will remain strong,” says Dale Mulartrick, director of leasing at Levin. “Additionally, lifestyle center are an increasingly favored development and shopping venue in upscale market.” Columbus, Ohio-based Stanbery Development continues to create lifestyle properties in the northeast, including Shoppes at North Brunswick and the Shoppes at Old Bridge, both of which are located in New Jersey.

One of the largest projects in the state — and the nation — Meadowlands Xanadu, is under construction in East Rutherford. The greatest challenge for New Jersey developers is the limited growth policies that have been established at the state and local levels.

North Plainfield-based Levin Properties has had first hand experience with the challenges of local limited growth policies during the development of Klockner Corners, a 200,000-square-foot retail center in Hamilton. Development of the center, which is slated to open in late 2008, was slowed for 2 or more years by litigation with the town, even though the development plan was in full conformity with local zoning regulations, explains Harding.

In spite of the restrictions, the Garden State has seen tremendous growth from big box retailers over the past 17 years, even though the big box product opportunity has slowed down in recent years, notes Loventhal.

R.J. Brunelli & Co. is leasing the 500,000-square-foot Village at Manalapan town center project in Manalapan. The preliminary site plan has been approved for the 135-acre project. Along Route 3 in Clifton, R.J. Brunelli brokered the land deal for Poag & McEwen’s Shoppes at Clifton lifestyle center, currently under development. R.J. Brunelli has recently picked up for new tenants expanding in central and northern New Jersey, including Sonic and Kudo Beans. R.J. Brunelli’s annual vacancy survey reports retail vacancy at a tight 2 to 5 percent in central and northern New Jersey.

Due to limited site availability in northern and central New Jersey, Harding notes that the state may be a better candidate for extensive redevelopment than for new development, and many centers, which were built decades ago, need a revitalization and upgrade. Although development sites may be scarce, the state boasts a high population density and high incomes that makes it attractive to developers.

As for the de-malling trend, which is hitting the nation, Loventhal believes that most of the major enclosed regional malls will not convert completely to open air centers as seen in other parts of the country; however, the malls will likely add more restaurant and entertainment elements to create a more aesthetically pleasing shopping experience.

Mulartrick explains that de-malling is occurring in areas where the existing mall is obsolete, and the highest and best use of the property is a conversion into a power center such as Seaview Square in Ocean Township, which recently added a PetSmart on a pad site.

“Malls have to be nimble to maintain relevance as shopping destinations, as shoppers have less and less time to shop,” says Silver of Levin Management.

Because of the speed-shopper trend, some enclosed malls are adding outdoor lifestyle components to meet the needs of the speedy shopper, while others are adding anchors to reposition the mall its market. A repositioning example is Quakerbridge Mall, which is located in Lawrenceville, and its addition of 600,000 square feet of space to accommodate Neiman Marcus and Nordstrom, as well as additional shops. Other malls are adding destination entertainment and restaurant components to enhance customer traffic and tenant mix.

Additionally, Garden Commercial is developing Riverdale Crossing, a two-story power center in Riverside. With exposure to Interstate 287 and State Highway 23, the center is poised to become a retail destination in the Route 23 corridor. Tenants of the new center include Wal-Mart, The Sports Authority, Borders Books & Music, Linens ‘n Things, Pier 1 Imports and Chili’s Grill & Bar.

Retail will follow rooftops in the Route 23 corridor in the northeast Morris/Passaic County market, which continues to see a steady growth in multifamily and single-family development. Additionally, the completion of I-287 has made this area one of the busiest in northern New Jersey.

Pennsylvania

Retailers and developers continue to concentrate on the Pennsylvania market because the area’s success has been proven time and time again. Southeast Pennsylvania, Center City Philadelphia, Suburban Square in Ardmore, as well as King of Prussia are proven strong markets, and it makes sense for retailers to have strong market penetration so they can capitalize on brand awareness, notes David Grasso, president and CEO of Philadelphia-based Grasso Holdings.

Being developed by Grasso Holdings, Valley Square in Warrington, Pennsylvania, will feature more than 400,000 square feet of high-end fashion retailers, lifestyle retailers and office space.

Grasso Holdings is utilizing the need for brand awareness by tapping upscale retailers for its new lifestyle development Valley Square in Warrington. The more than 400,000-square-foot center features approximately 300,000 square feet of high-end fashion and lifestyle retailers and 125,000 square feet of professional office space. Due to open next month, the center will offer a wide array of retailers in a Main Street atmosphere, complete with wireless Internet access.

Already signed tenants include Wegmans Food Market, Banana Republic, J. Jill, Eastern Mountain Sports, Ann Taylor Loft, Panera Bread, Borders Books & Music, P.F. Chang China Bistro, Victoria’s Secret, Bath and Body Works, White House|Black Market, Starbucks Coffee, Olily, American Eagle Outfitters, JE Caldwell & Co., Sunglass Hut, Aveda, Chico’s, LensCrafters and Planet Ten.

“To complete a true lifestyle center in this market, where the barrier to entry is so high, is a monumental task to pull off,” says Grasso. Additionally, some malls are expanding their gross leaseable area by taking back pads or buying grounds around the mall and creating lifestyle expansions. This type of expansion is taking place in Plymouth Meeting, Willow Grove and the Lehigh Valley, states Grasso.

Another high-end center underway in the Philadelphia area is O’Neill Properties’ Worthington in Malvern. The upscale mixed-use center will contain 750,000 square feet of retail. Wegmans, Muvico, Borders Books and several other retailers have reached agreements to locate at the center.

Northwestern Mutual and Realen Properties are developing the 1 million-square-foot Village of Valley Forge in King of Prussia. Virginia Beach, Virginia-based Divaris Real Estate is in charge of leasing the 850,000 square feet of retail at the project. Sundance Cinemas is one of the first tenants to be announced.

Cathy Pritchard, manager for corporate communications of WP Realty, echoes the Keystone State’s retail market success and notes that grocery-anchored centers and major malls are still very vibrant in the state, but weaker, smaller malls are losing ground to the lifestyle center trend. “Consumers look for convenience, and open air centers offer an attractive environment that is more accessible and easier to navigate,” says Pritchard. Additionally, the state is seeing an emergence of hybrid centers, where developers add an open-air strip/lifestyle center to the existing mall.

Bryn Mawr-based WP Realty is currently redeveloping West Side Mall in Edwardsville. Since acquiring the 281,629-square-foot mall in 2005, the company has expanded the property to 423,712 square feet.

The redevelopment expansion included a 169,000-square-foot Lowe’s Home Improvement Warehouse with a garden center, an additional 15,000 square feet of new retail tenant space, a 3,000-square-foot pad and a major façade renovation. WP Realty also acquired an adjacent two-story office/retail building, which was added to the West Side Mall property.

Major tenants of the mall include Lowe’s, which opened in January, Price Chopper, Jo-Ann Fabrics & Crafts, Dollar Tree Stores and Superpetz.

“Pennsylvania retail has transitioned into the form of open-air malls — both lifestyle and grocery-anchor centers,” says Chad Stine, vice president/retail specialist at York-based Coldwell Banker Commercial Bennett Williams. “The traditional malls have been adding retail on the perimeter of the once deep retail suites, which were accessible from inside, to create an outside component that allows for more diverse shopping as well as shorting the bay depth for the interior tenants.”

Philadelphia-based PREIT is also tapping into the redevelopment trend in Pennsylvania with a 142,000-square-foot Plymouth Meeting Mall, which is slated to open in spring 2008, and a 77,000-square-foot additon at North Hanover Mall, which will also open in 2008.

A successful de-malling venture is WP Realty’s acquisition and redevelopment of Delco Plaza in York. The company acquired the enclosed mall in 2004 and began redevelopment in the fall of 2005. The renovation included demolishing most of the existing property and constructing a strip-style center to house feature tenants such as Lowe’s Home Improvement Centers, Giant Food, Ross Dress for Less, OfficeMax and T.J. Maxx. A small portion of the former mall was renovated and WP Realty acquired an additional 7 acres of land to accommodate the project.

Another significant retail development in the Keystone state is Brechbill & Helman’s Gateway Center, a 140,000-square-foot shopping center in Chambersburg. The center, which is slated to open this month, will feature a Harmon’s Furniture, Moe’s Southwest Grill, Quiznos Subs and Fuddruckers.

PREIT is also developing Monroe Marketplace, a 717,000-square-foot retail power center slated to open in 2008, and New Garden Town Center, a 715,000-square-foot mixed-use center, which is expected to open in 2008.

Commercial ground continues to be developed at a steady pace. “The limited availability of additional ground will prove to be profitable for developers that took the opportunity while the ground was still available,” notes Stine.

Also, with close proximity to New York, Washington D.C. and New Jersey, the Keystone state has a very strong demographic reach, explains Grasso.

“Pennsylvania enjoys remarkably strong demographics rivaled by only a few other markets nationwide,” notes Mario Ventresca, senior vice president of asset management with PREIT. “The high population density along the Interstate 95 corridor support above average incomes and a lower cost of living when compared to similar mature markets like New York.”

Stine echoes this demographic reach. “With a housing growth explosion in Maryland, New York and Washington, D.C., retailers are beginning to identify Pennsylvania as a quality market to enter — although it is not retailer saturated at this point,” he says.

Up and coming retail submarkets include Central Pennsylvania, in particular the Pocono Mountains, which has seen tremendous growth over the past few years that resulted in an explosion of shopping center development. Shrewsbury, Hanover and Chambersburg are also hot spots right now because of the transition of workers from Baltimore, Frederick and Hagerstown, Maryland, moving north into Pennsylvania to take advantage of state taxes and housing availability.


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