NJ retail, office space vacancy continues to grow as COVID drags on
Many businesses were forced by the government to either shut down completely or severely limit transactions when the coronavirus pandemic took hold of New Jersey in March 2020.
In the months since, after attempting to bounce back from the pandemic's impact, many of those same businesses closed their doors once again, but for good this time because they could not stay afloat financially.
Vacancy of commercial real estate has been on the rise and continues to increase in the Garden State. But the current numbers don't tell the entire bleak story, as industry observers brace for even more vacant space in the near future.
According to Otteau Valuation Group, based in Matawan, retail space vacancy (including restaurants) in New Jersey is up by 4 million square feet compared to the beginning of 2020. The same goes for office space throughout the state.
That square footage jumps even more when you count tenants that are still occupying their space but plan to move out at lease expiration, president Jeffrey Otteau noted.
"We've never seen demand for commercial real estate drop as quickly as it did (during the pandemic)," Otteau said. "But the level of distress in commercial real estate is going to take some time to play out because landlords are not anxious to evict their tenants during a time when there's not any demand from new occupiers."
Gov. Phil Murphy's moratorium on evictions does not apply to commercial tenants.
"The ones that are suffering the most in terms of store closures and challenges with the pandemic — small mom-and-pop retailers," said Ron DeLuca, CEO at RJ Brunelli & Co. in Old Bridge.
The retail real estate company is taking longer to put deals together, DeLuca said. There's too much uncertainty among retailers and restaurateurs, and it may take widespread distribution of a coronavirus vaccine to alleviate fears.
DeLuca said grocery stores, discount stores and convenience stores are thriving during this crisis. There are opportunistic retailers, such as Lidl and Burlington Coat Factory, looking to expand during these uncertain times, he said.
"Your sweet spot in terms of square-footage — 10 to 15,000 square feet," DeLuca added. "Small stores, there's a lot of vacancies, they're not easy to fill. And big-boxes are not easy to fill."