Northern NJ retail market maintains steady performance.

Marcus & Millichap Real Estate Investment Brokerage Company recently released its National Retail Research Report for 2006, which forecasts another steady year of healthy retailer demand and property performance for the Northern New Jersey area.

Also included in the report is the firm's annual National Retail Index (NRI), a snapshot analysis that ranks 42 retail markets based on a series of 12-month forward-looking supply and demand indicators. Northern New Jersey climbs two spots this year to No. 16.

"Retailers are supported by the area's large high-income population and its high household income growth," says Michael J. Fasano, regional manager of the firm's New Jersey office. "Strong demand for space is fueling positive absorption, which will help lower vacancies in 2006."

Following are some of the most significant aspects of the Northern New Jersey Retail Research Report:

* The local employment base is forecast to expand by 0.4 percent, or 8,200 jobs, in 2006.

Educational and health services employers will create 4,800 positions, a 1.8 percent gain.

* After delivering 1.1 million square feet of retail space last year, developers are slated to complete 1.4 million square feet in 2006.

One of the area's major projects, the 260,000-square foot Riverdale Crossing in Morris County, is scheduled for completion later this year.

* A 10 basis point reduction will lower the overall market vacancy rate to 4.6 percent.

New supply in Morris County will push up vacancy 30 basis points to 4.8 percent this year.

* Low vacancy and consistent tenant demand will allow owners to boost rents.

Asking rents are forecast to increase 3 percent to $26.68 per square foot.

* Transaction velocity and price appreciation have slowed in early 2006 after a torrid pace last year.

The median price for multi-tenant properties jumped 16 percent last year to $191 per square foot.

The 2006 edition of the National Retail Index displays some of the most dramatic shifts in market positions we have seen in several years. The reason for this is two-fold. The nation's economic recovery cycle has been bifurcated, with those areas quick to recover now falling into a more sustainable growth pattern, and markets that lagged the recovery are experiencing accelerated economic growth over the forecast horizon.

Secondly, the red-hot housing market has begun to cool, leaving those areas that have recorded a large discrepancy between home price appreciation and income growth exposed to a greater risk of a market correction, which would adversely affect consumer spending.

San Diego and Orange County (Calif.) maintained their 1-2 rankings in the NRI from last year due to strong retail market fundamentals. Oakland (Calif.) jumped seven places to No. 3, while New York City-Manhattan and Phoenix round out the index's top five MSAs.