Commercial real estate broker Jerry Fennelly has released his second-quarter report on the Princeton-area market, and he believes that the biopharma R&D sector — long the heart of the Route 1 Corridor economy — is once again at the forefront of expansion. Companies like Novo Nordisk, Bristol-Myers Squibb, Janssen Pharmaceuticals, Integra Life Sciences, Solvay, Taiho, Sandoz, and Otsuka form the core of a thriving biotech sector.
He also credited Princeton University with boosting startups using technology developed by its faculty, further spurring investment in high-tech research.
“The research comes looking for the greatest minds and best laboratories supported by an inflow of large pharma capital expanding into an open science platform,” Fennelly wrote. “Large companies tap into a vast ecosystem of innovators.”
“Princeton University’s commitment to the research and development business is expanding to incubate start-up technologies that are created by their own research and from other pharmaceutical (oncology/neuroscience), laser, electrical engineering (implantable and wearable medical devices) companies that will want to collaborate on research and the related economics.”
Fennelly wrote that nearly half of all real estate growth in the first half of the year was due to biopharma expansion, with other business sectors falling behind. He said many companies were “densifying” their headquarters by packing more employees into a smaller space and using telecommuting to reduce their real estate footprints. Further driving a downward trend was a 3.6 percent downturn in corporate profits in the first half of the year, and a reduction in long term business investment since 2015.
Biopharma was a bright spot amid this gloomy picture. “Princeton is the melting pot of the world and the center of some of the most dynamic research and scientific minds in the country. The economy for Princeton is moving into an expansion period fueled by pharmaceutical and other sciences, attracting scientists both nationally and globally looking to create innovation that will change the world,” he wrote.
“Evenus, Liposene, Luye Pharma, Acadia Pharmaceuticals, Sun Pharma, Oncobiologics, Advaxis and Premier Technology led the expansion during good times to raise money in the private equity, venture capital and public markets. Sun Pharma bought 2 Independence Way, a 112,000 square foot office building in South Brunswick; Fardoz Pharmaceuticals purchased 69 Princeton Hightstown Road, a 50,000 square foot facility; Aurobindo is building a new 750,000 square foot office/lab, with their purchase of 279 Princeton Hightstown Road (40,000 square feet) and another 75 acres next door. Ownership in this category is coming from China and India.”
Fennelly predicted Princeton would enjoy an average growth of 900,000 square feet of office expansion per year, offset by 200,000 square feet of consolidation, as some companies relocate to cities.
Other companies expanding include Cenlar Bank, which leased 29,000 square feet at the former Merrill Lynch campus in Hopewell. He wrote that insurance and financial services companies are expanding because of an increase of insurable people under Obamacare and that the financial sector was benefitting from serving retiring baby boomers. However, he said companies catering to younger workers might “disrupt” the market by offering more online services with a smaller office space footprint.
The medical sector grew by 43,787 square feet, with Saint Francis Life opening a facility on Route 130, Phoenix Behavioral Health opening a facility in Ewing, and Princeton Aftercare taking a 3,000-square-foot office in Kingston.
Education, government, and nonprofit groups lagged behind as educational institutions emphasized online classes to reduce infrastructure costs. “Government has been staying stagnant, but recent change in immigration law could create future office expansion,” Fennelly wrote.
Fennelly predicted the vacancy rate would remain about the same at around 20 percent next year, with losses due to consolidation made up for by growth in the pharma sector. “The greater Princeton area is increasing its global brand in pharmaceutical, fusion research, electronics research and drug manufacturing. With the continued weakening of much of the European economy, the exit of Great Britain from the European Union, and the now stronger U.S. dollar, a scenario has been created that will either reduce European demand for U.S. investments or create a flight of money into safe U.S. brand name commercial real estate.”
NAI Fennelly Inc., 200A Whitehead Road, Suite 222, Hamilton 08619. 609-520-0061. Gerard J. Fennelly, president. www.fennelly.com.