Five stories high, with a granite facade and reflective windows, University Square, sitting high on the intersection of Route 1 and Alexander Road, is marketed as the definition of “the next generation of Class-A properties in the 21st century.” It may well be the definition in terms of amenities — state-of-the-art pre-wired optics, lobby with cherry wood paneling, health club with saunas, elevators with satin stainless finish. But it is also the definition of a distressed office market.

Long vacant, the brand new Reckson building finally has a tenant lease, reports Jerry Fennelly, who says that Otsuka Pharmaceutical would like to take 67,000 square feet in the 313,000 square foot building. But, says Fennelly, the owner of commercial real estate brokerage NAI Fennelly, there is a problem. “The tenant has signed,” he says, “but there are lenders involved.” A new hurdle in an overbuilt market hit hard by the recession involves hypervigilant lenders scrutinizing leases as never before. Any money for tenant improvements has to be vetted by a nervous lending industry. As of press time, Fennelly was not sure whether the deal was going forward.

The office market in the greater Princeton area does not need more challenges, as Fennelly reports in his half-year summary of leasing and purchasing activity. Office vacancies in the greater Princeton market are still rising, hitting 23 percent, the highest since 1993, Jerry Fennelly writes. He believes that the economy as a whole is about half way through its decline, dragging office occupancy with it — fewer workers equal fewer occupied offices as the state’s unemployment rate reaches toward 9 percent.

“Halfway through means we are in the thick of things and are still experiencing increasing unemployment, with the national average reaching 9.4 percent, the highest since 1983,” he writes. “This certainly places additional stress on displaced workers who thought retirement was calculated based on a net worth graph that included a lopsided 401(k) plan, overleveraged real estate, and credit card debt; the Baby Boomer, who was about to retire, is hanging in there and pressing up against Generation Y.”

Few in either generation are sanguine as falling home prices press down on deflated 401(k)s while, at the same time, job security vanishes for many. But Fennelly is convinced that hard economic lessons have been learned, and a brighter day is about to dawn.

“Now, it’s a new day with the possibility of having a strong economy again over the next several years,” he writes. “It requires a new plan utilizing a little less risk, a little less debt, and a whole lot of work.”

Already there are pockets of good news. Fennelly reports that the greater Princeton area experienced a 37 percent growth in the biopharmaceutial field in 2008, while the Internet, software, and electronics sector is up 21.33 percent.

Unfortunately, the growth in these industries, which caused companies to add 408,000 square feet of space, was almost a complete wash, as 400,000 square feet was shed by companies that went under or shrank.

Back on the sunny side of the street, Fennelly points to the significance of the recent relocation of Vantage, a company that moved from Pennsylvania to Ewing. “After 10-15 years of tenants going across the river to save money, rents in Bucks County, PA., have been forced to rise higher in some circumstances,” he writes. “This fact, complemented with greater incentives, may cause some companies to now seek out New Jersey as the lower cost provider.”

Some of the bigger deals in Class A space during the first half of 2009 include Otsuka — 67,000 square feet at 1 University Square; Johnson & Johnson — 50,000 square feet at 23 Orchard Road; E&C Medical Intelligence — 4,100 square feet at 700 Alexander Park; and Integrity Health — 4,440 square feet at 103 Carnegie Center.

Vacancy rates in the greater Princeton area vary considerably. Downtown Princeton generally holds up well in almost any economy. With a vacancy rate of 6.5 percent, it is doing much better than most other areas, but its vacancy rate is rising. Carnegie Center is also doing relatively well with a vacancy rate of 10 percent, well below the 19.36 percent rate of Route 1 as a whole.

The Route 206 area saw a big decrease in vacancy from the year ago period — going from 27 percent to 17 percent, thanks in large part to J & J, which leased 100,000 square feet at Orchard Road. The Ewing/Lawrenceville area has a vacancy rate of 23.86 percent, up just a little from 2008. Cranbury is grappling with a vacancy rate of 31 percent, much of it in the form of lab space. Rents are going down in that area as vacancy remains above 25 percent for the third year in a row. Vacancy in southern Hamilton has nearly doubled, from 10 percent in 2008 to 19.85 percent. The increase is due in part to new construction of 120,000 square feet of speculative office space.

Fennelly concludes that investor demand and buying attitude is changing due to pressure from increasing taxes and utility costs, falling rents, and an uncertain lending market. He finds commercial real estate prices down 10 percent or more from their peak, in March, 2007. Commercial real estate foreclosures are just beginning to show up in New Jersey, he writes, “as select owners weaken under increasing costs and lowering revenue.” This environment, he writes, is an opportunity for investors “to achieve short and long term positive returns.”

This market, Fennelly writes, resembles that of 2002 when “600,000 square feet of dot-com ventures went bad.” The big difference this time, in his view, is that “this recession is across the board, touching bio, fiber, service, consumer products, and government.”

Will Race Car Tweets

Fuel Novo Nordisk?

Novo Nordisk Inc. (NVO), 100 College Road West, Princeton 08540-6213; 609-987-5800; fax, 609-919-7801. Jerzy Gruhn, president. www.novonordisk-us.com.

Novo Nordisk, the global healthcare company with a focus on the treatment for diabetes, has taken to Twittering, and is also embracing the race car crowd. The company has just announced the official launch of its “Race with Insulin” Twitter page. The effort is the latest development in the company’s 2009 partnership with Firestone Indy Lights race car driver Charlie Kimball, a diabetic who is embracing technology to spread his message that with proper management, the disease is not an impediment to living a full live.

As he travels to events across the country, the first American open-wheeled racing driver with diabetes will provide updates called “tweets” directly from his computer or mobile phone about his race progress and diabetes management, representing a different direction in sharing real patient experiences. Fans can read live tweets and subscribe to receive them by visiting www.twitter.com/racewithinsulin.

“Race with Insulin provides me the opportunity to regularly reach out to my fans with real-time updates about life as a race car driver with diabetes,” said Kimball in a prepared statement. “When I am not traveling at speeds of 160 miles per hour, I hope to reach as many people living with diabetes as possible with my own story and inspire them to take an active role in managing their health.”

Kimball also has a personal blog, YouTube Channel, fan club on Facebook, racing website, and second Twitter account, where he also discusses his life as a race car driver and type 1 diabetes. These sites are not affiliated with Novo Nordisk, while “Race with Insulin” is a sponsored branded Twitter page, where he can also tweet about the insulin he uses. Kimball, who began racing go-karts at age 9, chose to bypass admission to Stanford University to follow his dream to become a race car driver. When he was diagnosed with diabetes in 2007 he was forced to abandon his racing program mid-season. A year later her returned to the cockpit and claimed a podium finish in his first race back in the car.

Kimball was first introduced to Novo Nordisk when his physician prescribed Novo Nordisk insulins Levemir NovoLog. Last year, he approached Novo Nordisk about becoming a sponsor. Since the partnership began, Kimball has done a series of speaking engagements across the country talking about pursuing his passion and diabetes management.

Gone Virtual

RWD Technologies (RWDT), 214 Carnegie Center, Suite 106, Princeton 08540. Home page: www.rwd.com.

Tech company RWD, which provides software support for manufacturing and industrial applications, has closed its Princeton office and gone virtual, according to a company spokesperson.

Facing a tightening market and stiffer competition, the company decided to lose its physical office space rather than its employees. The company has maintained a staff of 15 in Princeton since a downsizing in 1999 from 25.

RWD also maintains its physical headquarters in Baltimore and employs more than 1,000 in two dozen offices. The company can be reached at 410-869-1000.

Crosstown Moves

New Jersey Builders Association, 200 American Metro Boulevard, Suite 123; 609-587-5577; fax, 609-587-0044. Patrick J. O’Keefe, chief executive officer. Home page: www.NJBA.org.

The New Jersey Builders Association, a nonprofit trade group representing developers in the state, has moved its 15-person office from 15 Horizon Center Drive to American Metro Boulevard.

RedEye Inc., 1675 Whitehorse-Mercerville Road, Suite 204; 888-475-5711. www.redeye-inc.com.

A little more than a year after moving to Princeton-Hightstown Road, IT consulting firm RedEye Inc. has moved to Hamilton. Headed by Ben Wingard — a licensed key grip on movie sets — the company positions itself as “an IT shop for small and mid-sized businesses” and employs a staff of six.

Wingard got into the business through his step-father, also a licensed key grip — a lighting technician on film sets. “It’s fun at first,” he says. “Then you’re doing a shoot at 2 a.m. and it’s raining, and you just want to go home.” Wingard says he would rather be with computers than actors.

Leaving Town

Crystal Ridge Partners, 17 Hulfish Street, Princeton. Home page: www.crystalridgepartners.com.

Private equity firm Crystal Ridge Partners has left its offices on Hulfish Street and moved to Maplewood.

The company’s niche market is small, middle-market companies in the Northeast and Mid-Atlantic. It can now be reached at 111 Dunnell Road, Suite 102, Maplewood, 07040.

Thales Nano Technology LLC, 7 Deer Park Drive, Monmouth Junction. Home page: www.thalesnano.com.

Thales, maker of equipment for the micro-chemistry industry, has closed its sales office in Monmouth Junction in order to move it closer to the homes of service manager Bill Heilman, and for less expensive rent, according to company representative Kathleen Battista.

The company had been in Monmouth Junction for about three years, Battista said, and over that time travel has grown increasingly wearisome for the sales staff. The staff represents the Hungary-based maker of equipment that allows chemical researchers to work with microdoses of often dangerous substances.

The firm can still be reached 50 South Penn Drive, Suite B-2, Hatboro, Pennsylvania, 19040.

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