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Brick-and-mortar retail 2.0

Shopping centers and malls face up to online challenge

Coffee shop in part of the massive Bell Works retail conversion.-(PETER DANT)

It’s not a pretty picture for many outdoor malls.

The rise of online shopping has battered brick-and-mortar retailers, and the fallout for operators of malls and shopping centers worsened when Wayne-based Toys“R”Us announced plans to shut down recently. Things are so bad at Echelon Mall in Voorhees there’s even been talk of condemnation.

Can things be turned around for traditional retail?

“Some retailers are able to create an engaging experience with superior customer service or an experiential situation that you can’t duplicate online,” said Justin Korinis, senior vice president of Sabre Real Estate Group. “[Gyms], entertainment centers and restaurants are all thriving, because you can’t eat or go to a gym online.”

Korinis points to several new ground-floor retail leases at Bell Works, a 2 million-square-foot outdoor mall being developed in the former Bell Laboratories in Holmdel. Among the new tenants: Hummus & Pita, a chain restaurant specializing in Middle Eastern and Mediterranean fare; Alchemist Jewelers, which can print jewelry designs in 3-D, allowing customers to see prospective purchases before they’re manufactured; and Booskerdoo, a coffee microroaster and bakery.

Retail broker Colliers International closed those deals, but Sabre is now the broker for Bell Works, where it may create a “retail incubator” for startup retailers.

“Retailers continue to flock to New Jersey because of the state’s demographics — a dense population that’s also well-educated with a high income,” Korinis said.

Meantime, some say financial management is also behind the demise of traditional retail.

“Toys”R”Us didn’t go bankrupt because kids don’t want toys, or just because they’re buying online,” Procida Funding & Advisors President Billy Procida said. “When the company was taken private [in 2005] the buyers loaded up on debt because they thought they could run the company better. But when they go bankrupt they blame ‘market circumstances.’ … Walk by an Apple Store, and it’s packed. Cut kids loose in Nordstrom, or Urban Outfitters or Forever 21, and they’ll buy them out.”

Nordstrom offers “customer service, good brands and a mom-daughter shopping experience,” said Lauryn Donnelly, Procida Funding’s 24-year-old head of marketing. “Urban Outfitters is trendy, while Forever 21 is less expensive and offers ‘need in the moment’ things.”

Elsewhere, Advance Realty brought the trendy grocer Trader Joe’s to Harlow, its luxury mixed-use development in Hoboken, and it’s now seeking fitness, food courts and other lifestyle retailers as it redevelops the former Ledgewood Mall in Roxbury into The Shops at Ledgewood Commons.

“The mall is still anchored by tenants like Walmart, Marshalls, Ashley Furniture, and Barnes & Noble,” said Advance Realty’s Director of Asset Management, Jared Minatelli.

Vacancies = opportunity

In late 2016, Barnes & Noble vacated a 25,000-square-foot anchor space at North Village Shopping Center in North Brunswick.

“We recognized that carving out a portion of the Barnes & Noble space to accommodate a specialty grocer would better serve the needs of the surrounding community than would refilling the space with a like replacement,” said Matthew Harding, president of the real estate-services firm Levin Management. “We secured a 13,250-square-foot commitment with Trader Joe’s.”

The food store opened there in October 2017 and openings of Ulta Beauty and Sport Clips followed soon after. “North Village Shopping Center’s reinvention demonstrates how a strategic and creative approach can bolster a property’s competitive position,” Harding said.

Walkable downtown areas where consumers can shop and eat “are doing well,” said Frank Romeo Jr., regional president at Partner Engineering, a consulting and design firm.

“Grocery-anchored retail — specifically, high-end grocery-anchored retail — seems to be a bright spot,” Romeo added. “I have spoken with clients who will only lend on retail with a high-end grocery anchor. [And] many of the new developments we see are a mixture of office, residential and retail.”

The mixed-use concept is part of a late-March legal settlement between upscale Moorestown Township and Fair Share Housing Center, a Cherry Hill-based nonprofit. Moorestown has committed to rezoning Moorestown Mall, Lenola Shopping Center and a former Kmart shopping center for mixed-use development.

Over in Glassboro a $425 million development on Rowan Boulevard development is partially completed. It features 144,000 square feet of retail space and will incorporate housing for students of nearby Rowan University and a 129-room hotel.

“We’re creating a walkable downtown environment that didn’t exist in Glassboro,” said Nexus Properties’ Marketing Vice President Ronda Abbruzzese. “It’s attractive to consumers and to retailers like Domino’s Pizza, HFM Investment Advisors and Tech-Zone.”

Consumers are also attracted to bargains, with T.J. Maxx, Marshalls, HomeGoods, Homesense, and Sierra Trading Post doing well, along with the Dollar Tree chain, said Ron DeLuca, CEO of R.J. Brunelli & Co. The firm has represented 14 Dollar Tree openings in Union, Fairfield, Passaic, Wildwood, Pennsauken and elsewhere during the past year.

Summarized Stuart Nussbaum of accounting and consulting firm Mazars USA: “Brick-and-mortar retailers have to provide a customized experience, where consumers can interact with the staff and products — maybe have VIP events where a product creator makes an appearance. The advantage of brick-and-mortar retailers is that you get instant gratification. Buy the product and you can use it right away. Even Amazon Prime shipping can take two days.”