A&P Bankruptcy Ups N.J. Retail Corridor Vacancies
Following on the heels of the Great Atlantic & Pacific Tea Co.’s bankruptcy and store closures, the combined vacancy rate along central and northern New Jersey’s 10 major retail corridors rose to 8.3 percent from the previous year’s 7.4 percent, according to a survey by real estate brokerage R.J. Brunelli & Co. LLC.
The 26th annual survey of the two regions’ retail real estate market found a total of 5.18 million square feet of vacancies in the 62.36 million square feet evaluated during 2015’s third quarter, compared with last year’s 4.38 million square feet of empty space in 61.23 million square feet evaluated. During the past eight years, the combined vacancy rate varied from a low of 4.2 percent in 2008 to the high of 9.5 percent in 2013. A&P was a major contributor to the big-box vacancy surge along the central region’s corridors in particular.
“Clearly, the A&P bankruptcy was the big story for New Jersey retail real estate in 2015,” asserted R.J. Brunelli CEO/Principal Ron DeLuca, director of the firm’s survey. “While the bankruptcy process is still being played out, along the 10 central and northern retail corridors alone, recent closures of five A&P and three Pathmark locations that remain unclaimed placed more than 438,000 square feet of space on the market. Indicative of the impact of the closings, had those stores remained occupied, the aggregate vacancy factor for the two regions would have edged up 20 basis points to 7.6 percent.”
DeLuca added that the survey’s totals don’t include various A&P, Pathmark and Food Basics locations off the corridors that haven’t yet garnered approved bids in bankruptcy court. “Still, a number of supermarket companies pounced on the opportunities presented through A&P’s demise to expand their New Jersey footprint, most notably Acme, which took 35 sites, including 25 in northern counties, five in the central region and another five in the southern Shore region,” he said. “These sites, most of which were located outside the 10 corridors, accounted for nearly half of the 72 locations the chain took in an area extending from Maryland to Connecticut.”
Stop & Shop, the second-largest player in the A&P auction, purchased 25 locations in the metropolitan New York area, among them three in northern New Jersey. The eight other New Jersey locations acquired so far through the auctions — all except one in northern counties — went to smaller grocers, including several carrying ethnic cuisine, such as Tawa Supermarket Inc., which acquired leases for Pathmark locations in Edison and Jersey City. These stores are the first in New Jersey for Buena Park, Calif.-based Tawa, which currently operates 39 Asian supermarkets under the 99 Ranch Market banner in California, Washington, Nevada and Texas.
“Tawa’s move is emblematic of ethnic grocers’ efforts to seize opportunities in areas whose demographics are appropriate for their offer,” observed DeLuca. “We suspect that some of A&P’s remaining locations throughout the state could go to ethnic operators in the months ahead. More conventional chains looking at former A&P sites include The Fresh Market, Best Market [and] Kings. However, given the competitive climate, we believe that a fair number of locations will ultimately go to nonfood uses."
“In the final analysis, the A&P situation put a dent in the strong progress that was achieved in 2014, when we saw a 210-basis-point drop in the aggregate vacancy rate for the central and northern regions behind multiple deals from a number of big-box, midsize and small-space retailers, restaurants and service businesses looking to increase their footprint in New Jersey,” noted Richard J. Brunelli, the firm’s chairman/principal.