Princeton is more than just a pretty place to visit. As NAI Fennelly’s Jerry Fennelly writes in his latest commercial office space report, Princeton is a “research knowledge center competing with Cambridge, Massachusetts; Silicon Valley; San Diego; and Shenzhen, China, for research talent. Princeton has a high concentration of physicists, neuroscientists, electro-material researchers, electronic research, molecular biologists, photonic researchers, and computer science researchers servicing the private and public sectors. Recently Princeton University announced collaborations with Google and Microsoft in the artificial intelligence field. This has resulted in a three-year average demand of 525,000 square feet of office, medical, and lab space (taking out for failure, outbound migration, and consolidation).”
Fennelly cites these transactions from the second half of 2018:
The average office lease/sale size was 20 percent larger than the year before. The bio sector represented 50 percent of the growth, medical growth was 20 percent, while education represented 11 percent of the growth, business represented 22 percent, and IT 3.35 percent of the office demand in 2018.
The greater Princeton area experienced more than 840,167 square feet of growth in 2018.
Notable growth in the second half was Princeton University leasing 67,000 square feet at 100 Overlook Center, Eperic taking 45,000 square feet of Class B space at 2 Clarke Drive, Cranbury, for a drug manufacturing operation, and Shishido leasing 25,000 square feet at Windsor Corporate Center. Capital Health started Team Campus North with 78,000 square feet of new medical space on Route 130 in Bordentown. Penn Medicine purchased 60 acres in Robbinsville to develop a campus directly across from Washington Town Center.
Service/Business/Legal/Finance. Reed Smith leased 32,000 square feet at 502 Carnegie Center, rightsizing from 48,000 square feet. Edgestream expanded to 21,000 square feet at 902 Carnegie, Northwestern Mutual leased 15,000 square feet at 202 Carnegie Center, and Rockefeller Capital leased 9,000 square feet at 1394 Yardville Hamilton Square Road, relocating from North Jersey. Total growth in this category is 184,000 square feet for the year.
Biopharma/Pharmaceutical/Chemical. Pharmceutical/bio companies represented 50 percent of the growth for 2018. Integra Life Sciences leased 167,000 square feet on Campus Road, expanding from its 300,000 square foot research campus two miles away. Acadia Pharmaceuticals expanded into 25,000 square feet at 502 Carnegie Center, Smithers Avanza Bioanalytical leased 18,000 square feet of existing lab space at the Ewing Commerce Center. This category will enjoy a long scientific expansion period servicing the aging population.
Pharmaceutical companies reinvest 21.5 percent of their research and development. The potential capping of pharmaceutical prices may lower this investment number. Princeton University announced a collaboration with Microsoft to have molecular biological researchers utilize artificial intelligence and robotics to discover new compounds and increase speed for analytics, which will lead to more discovery at a faster rate.
Medical. Growth in the medical industry showed good results with the changing need for certain types of facilities. Medical continues to go into new retail-like locations with signage creating 169,000 square feet of growth. Penn Medicine is building a 60-acre medical campus in Robbinsville, servicing a growing population area. Simultaneously, Capital Health has committed to Team Campus North in Bordentown located on Route 130. Rothman Institute leased 13,500 square feet of rehab medical space at 4301 Route 1, turning an office building into a medical building.
Internet/Software/Electronics and Fiber. This category experienced 27,940 square feet of growth. New Jersey is ranked No. 7 in robotics education. There is still room for significant growth.
In conclusion, Fennelly writes:
“Princeton’s new collaboration with Microsoft and Google could help make this area become the center for artificial intelligence, similar to Toronto. Office real estate is changing based on the technology curve. I have clients moving to different parts of the country — Florida, Hawaii, and the Carolinas — working from a house and simultaneously taking care of a parent. Companies are more mobile, flexible, and will require less office space. New technologies and new companies will require space, though, and the real trick will be to continue to attract, recruit, and retain a population of highly skilled bio scientists, molecular scientists, or computational researchers.
“Over 150,000 square feet of new medical space is to be delivered near the intersection of Route 195 and Route 130 over the next 18 months. Capital Health, Penn Medicine, and RWJ are the occupiers of these new buildings.
“The greater Princeton area will have vacancies of 18 percent or greater for the next 12 months. Expansion is occurring in the medical, pharmaceutical, and education fields in the greater Princeton market. We anticipate demand in the first half of 2019 to be approximately 450,000 square feet of office growth.
“The future is strong for the greater Princeton office market due to the 75-year history of being the research power center for laser, photonics, biology, and electronic engineering for many of the world’s largest global brands.”
NAI Fennelly, 200A Whitehead Road, Suite 222, Hamilton 08619. 609-520-0061. Gerard J. Fennelly, president. www.fennelly.com.
Top Ten in Class A
In his report Jerry Fennelly included statistics on office space occupancy in the greater Princeton area. The 10 companies with the highest net absorption of Class A office space in the second half of 2018 were.
Capital Health, 78,000 square feet at Team Campus North, Bordentown.
Princeton University, 67,000 square feet at 100 Overlook Center, West Windsor.
Shisheido, 25,000 square feet at 50 Millstone Road, East Windsor.
Rockefeller Capital, 9,000 square feet at 1394 Yardville-Hamilton Square Road, Hamilton.
EdgeStream, 7,650 square feet at 902 Carnegie Center, West Windsor.
Northwestern Mutual Life, 7,000 square feet at 202 Carnegie Center, West Windsor.
Cybergrants, 3,800 square feet at 50 Millstone Road, East Windsor.
Octane, 3,500 square feet at 2 Research Way, Plainsboro.
Epstein Becker and Freyer, with 3,000 square feet at 150 College Road West, Plainsboro; and Professional Physical Therapy, also with 3,000 square feet at 281 Witherspoon Street, Princeton.