Probably no commercial building in the Princeton market has come with quite the side order of mystery as University Square. Large, pink, and a post-modern amalgam of granite and glass, the five-story office building hovered over the corner of Route 1 and Alexander Road like a lonely sentinel for almost three years until Japan-based biotech Otsuka Pharmaceuticals signed the first tenant lease in the summer of 2009.
Otsuka, which at the time had its U.S. headquarters in Maryland and occupied 18,500 square feet at 100 Overlook, signed a 67,531-square-foot lease for the entire top floor of University Square last August. Five months later Axis Insurance, another Maryland-based firm, signed the building’s second lease, taking 26,614 square feet on the second floor. Both companies were expected to take occupancy in late spring.
The move-ins were slightly delayed because the companies were building their interior spaces at University Square. Axis moved in in May, but Otsuka did not relocate until July. The lack of employee cars in the building’s spacious, wrap-around parking lot and the fact that Otsuka and Axis are extremely guarded when it comes to the press only allowed the questions to fester as the building sat seemingly unoccupied. For a long time, those outside the tight, need-to-know circle of the transaction wondered if anyone really was moving in at all.
When the third lessee at University Square turned out to be the equally press-shy financial giant Blackrock, which signed a 141,000-square-foot lease for two-and-a-half floors in July, it seemed only fitting that it would move into a building cloaked with such mystery. Blackrock, after all, has kept the entire state of New Jersey guessing for years about whether it would stay after its lease at 800 Scudders Mill Road expires next autumn.
But all the rumors can officially stop. A little more than a year after Otsuka signed onto University Square the building is indeed brimming. So far only Otsuka and Axis occupy the building, but the interior buildout for Blackrock and the 800-plus employees it will station here is expected to get underway in January. Plus, according to Tom Romano and Steve Tolkach of Newmark Knight Frank at 301 Carnegie Center, Marsh McLennan (currently operating its Marsh Financial division at 212 Carnegie Center) has just signed on for 36,000 square feet on half of the first floor.
No official dates for either Blackrock or Marsh McLennan to move in have been set, but they are indeed coming. And there are people working at University Square — about 220 now, with a total of 1,500 or so expected to be in place in a year.
So how, after three years as an empty question mark, did University Square get to almost-fully leased in 15 months? Well, a lot of it has to do with its size. Each of University Square’s five floors measures about 67,000 square feet, and such monster floor spaces were not designed for startups. Tolkach admits that he at first was not sure who would move in, but he expected one giant and a few comparatively smaller companies. Whatever the case, the space was not built to be broken down into the standard 8,000-square-foot spaces that dominate the office market, he says.
That market, by the way, scoffed. Tolkach says that more than one insider questioned the size of the commitment it takes to become a tenant at University Square. The minimum lease is 10 years, the asking rents are about $35 per square foot, and the space is enormous. But the major reason the space is filling fast is that Newmark sought out companies that it wanted to see here — companies the size of Blackrock and Otsuka, which are worth billions — rather than waiting for renters to come to it.
There was a rather prominent “Space Available” banner flown for some time facing Route 1, but Newmark largely avoided the kind of print advertising that seeks to lure renters to unpopulated corporate parks — a remarkable feat of restraint considering the history the Princeton market has when it comes to empty office buildings.
Back in the early 1990s Princeton was lots of promise and little market. Developers expecting to cash in on the growing business sector built scores of new office spaces that no one moved into. The resulting glut left the market in a tailspin that took much of the rest of the decade to halt.
So when in 2000 developers from Robbinsville-based Matrix Development announced that they wanted to build a speculative office that would be more than twice the size of most Carnegie Center buildings, a third larger than 100 College Road West (currently occupied by diabetes pharma giant Novo Nordisk), and 25 percent larger than the biggest building in College Park at the Forrestal Center, 600 College Road, brows all around the area furrowed at what would become of 330,000 square feet of what-if.
Matrix developed the site and sold the property to Reckson, now RXR, a commercial developer headquartered in New York with an office in Short Hills, for about $13 million. The sale included three existing buildings and 18 acres of adjacent land for $5 million. The five-story centerpiece was supposed to have been finished by the fall of 2001 but environmental contamination from Hayden Chemical, which made penicillin during World War II, was found. Ground finally broke in 2005 and construction ended in 2007.
But then not much happened. As time ticked on memories of Princeton’s disastrous foray into speculative office space the decade prior seeped into the public consciousness. And since no one was moving in to do business at University Square, some in West Windsor suggested other uses for so much empty space. One suggestion that got a lot of play in the press was that the vacant space could be used as overflow parking for Princeton Junction Station.
Tolkach has heard them all — the hopes that University Square might become a stop for the Dinky train; the baseless rumors that the empty building was a boondoggle that was costing taxpayers real money (RXR paid the taxes). But he dismisses them out of turn, particularly the persistent, if hopeful plans to turn the building’s parking lot into a depot for train travelers.
Nobody connected with University Square ever has entertained the idea of the grounds being a stop for the Dinky, much less a lot for their cars, he says. Princeton Junction Station isn’t that far away and a lot of people like to get some fresh air and exercise by walking to and from the station. And as far as making the lot a spill-over parking area for train commuters, Tolkach says it is logistical masochism to even consider it — where would the cars go and what were those parkers supposed to do once tenants finally started working in the building?
One of the other main question marks about University Square is what it took for upkeep. “You’ve got to have deep pockets,” Tolkach says, referring to RXR and its nerves of steel when it comes to the speculative marketplace. RXR, though, has some experience in the area. The firm has built other behemoth-sized buildings on-spec around the northeast, not the least of which is a near clone of University Square on Long Island.
What can be said for sure is that the inside of University Square was built for effect. Its high, spacious lobby and the large-scale art that adorns its walls dwarf visitors. Turn past the elevators and you’re in a 100-person cafeteria, or, if you keep walking, a 3,400-square-foot fitness area, roomy enough for a dozen people and a step class, and one that includes his and hers dry sauna rooms.
These amenities also were built on-spec, fully built out before University Square was actively marketed to the big names. This, Romano says, made it a lot easier to sell the building because company scouts wouldn’t have to visualize what a gaping, empty space might someday be.
If you notice, the big names Newmark Knight Frank courted already had a heavy presence in Princeton. Tolkach points out that Newmark opted to forgo trying to lure companies away from other areas and concentrate on companies already here — and that would be large enough to have their own buildings if they really wanted them.
Axis had a small presence at the Regus shared office at 100 Overlook before this year. Most of its employees here now are new to the area.
Axis itself has declined to speak to U.S. 1. But the firm has many arms and the one that took space in University Square is its accident and health division, headed by Christopher DiSipio. Otsuka also declined to speak to U.S. 1, though it thanked the paper for offering it the opportunity.
The space each company occupies at University Square looks like two views of the future as envisioned by Stanley Kubrick. Axis, with its frosted glass partitions and generally off-white paintbrush is closer to “2001: A Space Odyssey,” where as Otsuka’s bright pockets of blues and oranges in an otherwise beige space have a decidedly “Clockwork Orange” appeal. Not lost in this Kubrickian vision is Otsuka’s top floor conference room, in which a massive round table and overhead ring light look not unlike the War Room in “Dr. Strangelove.”
Otsuka’s color-coded kitchenettes and exercise ball chairs also separate it from the usual office space. Each of its 11 conference rooms is wired for video conferencing, and though the office is quiet and professional, there is a sense that Otsuka wants its employees to feel as if they are still part of the outside world. The company has invested a lot in decor with a keen eye on what the building overlooks from its many windows — Route 1.
In the middle of a traffic tie-up, Route 1 might not seem so engaging, but from five floors up and a couple hundred feet back, the traffic moves as a single entity through a landscape that has far more green surrounding it than one might think. The top floor windows facing east, toward Princeton Junction, offer the best view — a surprisingly pastoral one, high enough for the busy streets to fade behind lines of trees, not high enough for the ground to reappear as a still from an overhead roadmap.
More than views, Romano and Tolkach like to point out their favored part of the economics of University Square — jobs. Otsuka moved to University Square from 100 Overlook and from its headquarters in Rockland, Maryland. Out of Maryland, the company employs 185 here and is expected to bring in another 50. Axis employs 60 and is expected to bring in another 20. Marsh McLennan employs 35 at Carnegie Center, but is expected to downsize.
And, of course, they like to point out how they have nearly filled a big, empty building in a bear market. Of the 330,000 square feet that sat empty a year ago, there are now less than 10,000 square feet to rent (Otsuka and Axis are both expanding within the building). Tolkach says Newmark is entertaining “a couple of interested parties” that would like to get in before they have to wait another 10 or 15 years to get another shot at a lease.
A lot Newmark’s ability to market University Square came from brokerage houses helping to get the word out. Much of the rest of it of it comes down to Newmark knowing what it had, what it faced, and how to talk to the right renters. “When you’re in our business, you know what lease expectations are,” says Tolkach. “You know if a business is doing well or not.”
#b#Newmark Knight Frank#/b#, 301 Carnegie Center, Suite 301, Princeton 08540; 609-896-1600; fax, 609-896-1753. John H. Buschman, managing principal. Home page: www.newmarkkf.com