Progress seems like the right word to describe the economic activity in the central New Jersey business community in the last year. The area’s economy has certainly equaled the rebounding national economy, and possibly surpassed that.
As commercial real estate broker Gerard Fennelly notes in an office market survey released last week, “the Princeton economic environment is moving into an expansion period fueled once again by pharmaceutical companies both nationally and globally. Complementing this is the push by major research centers to promote discovery and then take part in the commercialization of their efforts by starting new companies. Princeton is primed for this type of success because of Princeton University and Rutgers research centers, and the continued migration in — and growth of — global corporations.”
U.S. 1 newspaper’s tracking of businesses coming into and expanding within the U.S. 1 delivery area (a partial sample of the whole) corroborates the trend. In 2014 the list of companies moving into the area totaled more than 50, and included a dozen in pharmaceutical-related fields.
The year finished strong, reports Fennelly, “with 30 percent more square footage leased in the second half after an elevated fourth quarter of activity. The year saw the completion of over 200 lease transactions in a 25 million square foot speculative office market.”
Pharmaceutical companies accounted for 31 percent of the growth during the year, according to the Fennelly report, “equating to 305,000 square feet new growth from this sector. Otsuka, Taiho, Liquid Lyte, Tyrex, Xenobiotic Labs, and Berkley Life Sciences grew collectively, expanding 122,000 square feet. Otsuka leased all of 508 Carnegie Center (125,000 square feet) as a result of BlackRock expanding into a sublease from Otsuka for 60,000 square feet at University Square.”
The service/business/legal/finance sector absorbed about 27 percent of the expanded market, with Trac Intermodal leasing 82,000 square feet at 750 College Road East. BlackRock, Philadelphia Insurance, and Hamilton LLC grew collectively by 133,000 square feet of Class A space.
The medical sector also showed strong results as doctors sought new office space near medical consumer markets. Examples: 10 Forrestal Center Road in Plainsboro (40,000 square feet), next to the University Medical Center of Princeton hospital, and 296 and 298 Applegarth Road (100,000 square feet). These new buildings are already 98 percent leased, according to Fennelly.
The Internet/software/electronic & fiber category “experienced 88,000 square feet of growth, equivalent to 9 percent of the overall growth. Companies such as Akela, Sun Power, DataCede, Sparta Systems, and Internet Connections and Harmonic, all grew.
Growth in one sector slowed considerably in 2014 — education, government, and non-profit. As Fennelly reported, “education will continue to look for ways to deliver its message via the Internet. Princeton, Rider, the College of New Jersey, Mercer Community College, and Thomas Edison College are delivering a greater sector of their learning options using video and the Internet to increase enrollment, and potentially to drive down cost of infrastructure.”
For investors, the strong rental market helped raise property values, as well. Also impacting values was 100 College Road West in Plainsboro, a 150,000 square foot, Class A office building. As the Fennelly report notes, “it was purchased for $123 per square foot with a 30-year land lease. The owner invested $85 per square foot and resold it for $410 per square foot five months later.”
The value of commercial property ranges from highs of $300 to $410 per square foot for newer construction to as low as $70 for Class B, 30-year-old space.
Fennelly’s bottom line: “The greater Princeton office market will benefit from a continued migration internationally (Japan, China, Korea and India), a reinvigorated bio market, and the dominance of five educational institutions, providing a highly accomplished workforce to fill jobs in the IT, pharmaceutical, and financial sectors, or that may migrate in from other parts of the country or world.”