Retail Vacancies Spike in South Jersey as Prospective Tenants Remain Skittish on New Leases
Retail vacancies are rising across South Jersey as ripple effects of Covid-19 continue to grow nearly a year after the pandemic first hit the region.
A new report from Wolf Commercial Real Estate on the South Jersey market found that Burlington County’s retail vacancy rate jumped to 10% in the fourth quarter, up from 7.6% in the prior three-month period. The increase marks the largest consecutive quarter-to-quarter jump in the past three years.
At the same time, Camden County hit 10.5% retail vacancy, up from 9.7% in the third quarter. It started 2020 at about a 6% retail vacancy rate.
In Gloucester County, the rate is up to 13.7%, from 11.7% at the start of last year.
The rising number of vacancies in the region reflect the financial hardships many businesses, especially independently owned restaurants, faced earlier in 2020, said Jason Wolf, managing principal of Wolf Commercial in Marlton.
“We’re finally starting to see the true numbers come to light,” he said.
While South Jersey saw an impact from big-name retail store closures, Wolf said it’s the closure of small “mom and pop” operators driving the vacancy increase.
Throughout 2020, South Jersey lost independent restaurants like Collingswood staple El Sitio Grill & Cafe, Haddonfield’s Villa Rosa pizzeria and Vitarelli’s Italian restaurant in Cherry Hill. The Smith restaurant group, which operates five concepts across New Jersey and Pennsylvania, permanently closed its Brickwall Tavern in Burlington City. Charlie Brown’s last two South Jersey locations also shut down in Woodbury and Westampton.
“My heart bleeds right now for these restaurant operators,” Wolf said, adding the ones still holding on are struggling to survive. “These people all had thriving business and they’re all on the verge of going out of business, battling revenues being down 50%, 60%.”
Clothing stores have also suffered. One operator of a men’s clothing store told Wolf that “suits are the new tuxedo,” as demand for professional attire sank during Covid-19.
When retail vacancies are filled, Wolf said it’s often with an alternative usage like a health care office. Empty big-box stores are being used for warehouse and distribution space. While not filling a vacancy, the Moorestown Mall’s owner, Pennsylvania Real Estate Investment Trust, also recently secured approvals to build more than 1,000 apartments and a hotel at the shopping center.
“I think you’re going to see these retailers evolve into a more diverse strategy,” he said.
Wolf is cautiously optimistic about what 2021 has in store for the South Jersey commercial real estate market, especially later in the year when there’s more clarity into the future of the pandemic. People are calling, he said, but they’re just not ready to make a move just yet.
“The demand is there, we just have to get people through making decisions,” he said. “There’s a lot of tire-kicking going on.”
On the retail side, he said quality retail locations in high-visibility areas will come out fine on the other side. Mom and pop retail fronts in peripheral areas Wolf believes may face more of a challenge.
“I worry, yes,” he said.
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