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Wall Street Journal / Biz - Money

New Jersey Riverfront Development Jettisons Mall Concept

The venture behind the $2.5 billion Sayreville development has brought in a new partner, slashed the amount of retail space and nixed the mall concept in favor of a downtown-like retail village that mixes shops, restaurants, offices and apartments.


Keiko Morris

Plans for one of New Jersey’s largest mixed-use developments once called for a massive “fortress mall,” a 2.2 million-square-foot building clad with giant digital screens rivaling Las Vegas and Times Square, according to a 2012 marketing video.

Fast-forward five years: The venture behind the $2.5 billion Sayreville development has brought in a new partner, slashed the amount of retail space and jettisoned the mall concept in favor of a downtown-like retail village that mixes shops, restaurants, offices and apartments.

“Retail used to stand alone, but now in many cases, it’s not able to stand alone,” said Mark Toro, a managing partner at North American Properties, which recently joined the development venture. “Here you will have, as on a city street, storefronts one after another and a pedestrian experience that has much more appeal than the sidewalk of a shopping center or the interior of a mall.”

The new plans and new partner of this 418-acre project in central New Jersey, now called “Riverton,” reflect the upheaval in the retail industry across the country, as both merchants and landlords adjust to changing shopping habits and growing e-commerce.

As many large traditional mall chains cut store locations, mall owners have been adding dining and entertainment venues, fitness centers, medical offices and in some cases supermarkets to boost customer visits. Owners also have incorporated apartments and office space near or on their properties as a way to build in regular customer traffic.

“The enclosed mall is still viable, however the United States has been over-stored and over-malled for years with almost four times the [retail] density of other developed countries,” said Michael Brown, a partner in the retail practice of A.T. Kearney, a strategy and management consulting firm. “We don’t need more of them.”

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Nationally new retail construction has fallen over the years, dropping to 92 million square feet of stores and shopping center construction starts expected this year from 118 million square feet in 2014, according to Dodge Data & Analytics, a construction industry research and software firm.

The updated Sayreville project calls for about 1 million square feet of retail space, roughly half the amount of retail space anticipated in a prior version. The development also will include 1 million square feet of office space and about 2,000 residential units of both apartment and single-family homes—the same amount included in prior plans. The site, located on the Raritan River and along several highways, will include a marina and two hotels.

While apartments, single-family housing and office space have made up a significant portion of the development’s plans since its early stages, these elements had been separate, surrounding a traditional mall and big-box stores and accompanied by a sea of parking.

PGIM Real Estate , the real-estate business of Prudential Financial Inc., has been an investor in the site since 2008 and had formed the previous joint venture with O’Neill Properties Group. It won support from local and state officials and invested millions of dollars to clean up the site, once owned by a paint manufacturer. The previous venture signed a lease with Bass Pro Shops, an outdoor-sporting-goods retailer, but it isn’t clear whether the chain will open a shop under the new plans. Bass Pro Shops didn’t return a phone call and an email requesting comment.

In March, PGIM reached an agreement to acquire O’Neill Properties’ stake in the development for an undisclosed amount. North American Properties was tapped as a new partner because of its record developing suburban mixed-use communities with an urban vibe and pedestrian-friendly streetscape, Mr. Toro said.

Last year, PGIM bought an 82-acre residential, retail and office community that North American Properties developed with this approach in Alpharetta, Ga., a suburb outside of Atlanta.

North American Properties has taken its cue largely from the entertainment and hospitality industry, hosting hundreds of events a year at its properties, including 5-K runs for 10,000 participants, concerts, regular comedy shows and yoga sessions, Mr. Toro said. The designs of these developments aim to create a visually appealing and stimulating walking experience with parks and open space, he said.

In the North American Properties development in Alphareta, there are public spaces with bocce courts, living-room settings with fire pits and soft seating as well as a plaza with an amphitheater. The company paid a lot of attention to details such as the pavement, light posts and trash cans in the development, completed in 2017.

“We’ve got to be able to provide an experience for our guests to get them to come to the property,” Mr. Toro said. “We can no longer just lease space to retailers who just sell stuff. They will fail and we will fail.”

The Sayreville development’s previous plan received approvals as well as a $223 million Environmental Redevelopment & Growth Grant from the New Jersey Economic Development Authority. The new venture, due to be completed in 2021, will have to get approvals from local and state agencies for the amended plan and, afterward, will begin the process of securing financing. It already has the support of Sayreville Mayor Kennedy O’Brien.

Mr. O’Brien, now in his fifth term, began working toward redeveloping the former industrial property almost two decades ago with county officials. He is hopeful the residents will soon have a vibrant Main Street, the sort of shopping thoroughfares that were wiped out in the 1960s, 1970s and 1980s when suburban malls and shopping centers were on the rise.

“All things go in a circle,” Mr. O’Brien said. “For me, Main Street is something that is very comfortable and familiar to me, but for some of my kids it’s going to be a new experience.”

Write to Keiko Morris at Keiko.Morris@wsj.com