Report: retail spending to remain healthy in 2003.

Marcus & Millichap Real Estate Investment Brokerage Company, the nation's largest real estate investment brokerage firm, recently released its retail research report for the Northern New Jersey market, which finds that retail spending will remain healthy during 2003 as the local economy begins to rebound.

"The retail environment in New Jersey was positive in 2002 and should remain so in 2003 as the economy begins to improve," comments Gary R. Lucas, senior vice president and regional manager of the firm's Fort Lee office. "Retail spending levels were maintained despite the recession and the aftermath of the terrorist attacks across the Hudson River. Cash-out mortgage refinancing in the housing market, fueled by record low interest rates, has also allowed consumers to sustain bull market consumption patterns."

Following are some of the most significant aspects of the report:

* Retail construction levels in the market will be moderate in 2003. In 2002, 2.1 million SF of new space was delivered. Northern New Jersey gained 2.1 million SF of new retail space in 2002, but will see a smaller amount of completions in 2003 due to fewer projects in the pipeline. This is due in part to the national recession and the cautious stance taken by many national retailers.

* Overall vacancy for the Northern New Jersey market is estimated to reach 7.1% at the end of 2002. Northern New Jersey was one of the strongest retail markets in the Northeast. North Morris County has the lowest vacancy rate as of second quarter 2002, at 4.2%, while Hudson County was the highest at 9.5%, although that is an improvement from the 13.5% vacancy experienced at the end of 2001.

* Rents will remain stable in the region, as retail-spending levels are maintained and the economy begins to rebound. Hudson County also saw its rents dip at the end of 2001, but rents have now rebounded to pre-attack rent levels of $21.08 per SF. South Bergen/West Bergen County had strong rent growth, expected to reach 3.2% by the end of 2002, with rents at $22.75 per SF.

* Cap rates are lower than in previous years due to investor preference for real estate over stocks, a trend that will continue in 2003. For transactions reported through third quarter 2002, the median sales price was $143.52 per SF. Cap rates have declined from 10.2% in 2001, to 9.8% in 2002, as a result of capital flowing out of the stock market and into real estate investments, allowing sellers to hold prices firm. Investors should expect cap rates to remain at similar levels through 2003.

For a copy of the complete Northern New Jersey Retail Market Research Report, as well as reports on 24 other markets nationwide, visit our website at www.marcusmillichap.com.