Is the Princeton real estate market finally beginning to heat up? Yes, if you judge by the turnout at this week’s annual real estate forecast sponsored by the Princeton Regional Chamber of Commerce. Scheduled on what turned out to be one of the coldest mornings of the winter, Tuesday, January 28, at the Nassau Club, the venue had to be switched to the Hyatt Regency on Route 1 when registrations surged past the 100 mark.
The business crowd heard a panel that included Paul Anastos, president of Mortgage Master Inc.; Aubrey Haines, CEO, Mercer Oak Realty; Jud Henderson, owner of Callaway Henderson Sotheby’s International Realty; and Tom Gates, residential mortgage advisor with Mortgage Master Inc.
Meanwhile, several days before the chamber panel, commercial real estate broker Jerry Fennelly released his annual survey of real estate activity. Noting NRG’s decision to expand its Princeton headquarters in a 130,000 square foot deal at the Carnegie Center (see story above), and other moves, Fennelly declared “the economy is showing positive signs for the greater Princeton office market, with an overall vacancy rate slightly lowering again to 17.94 percent. There are areas already experiencing rent growth, including downtown Princeton (vacancy 10.47 percent) and Route 1 Class A office space (vacancy 17.75 percent.)”
Among the deals in 2013 pacing the Class A market, in addition to NRG’s build to suit at 804 Carnegie Center, were Berlitz, expanding to 78,000 square feet at 7 Roszel Road; Hill Wallack’s build to suit of 43,000 feet at 19 Roszel Road; UL Eduneering’s expansion to 25,076 feet at 202 Carnegie Center; Otsuka’s 20,000-square-foot lease at 508 Carnegie Center; Archer & Greiner expansion to 20,182 square feet at 101 Carnegie Center; AetnaHealth’s lease for 14,940 feet at 502 Carnegie Center; Fusion Academy’s lease for 10,000 square feet at Forrestal Village; OpthoTech’s expansion to 8,468 feet at 214 Carnegie Center; and Western International Review Board’s move into 7,048 square feet at 202 Carnegie Center.
Despite the positive Class A outlook, Fennelly noted, “the rest of the market, which encompasses a large majority of Class B and C office space, is still experiencing a languishing rent growth and continued increasing need for tenant improvements.”
According to Fennelly, the employees who are the driving force behind the Princeton market’s relative stability over the last five years, “gravitate to this area to either learn or become re-educated, migrate from another country or other part of the U.S., and are seeking these higher-paying positions. These jobs tend to require greater education and are positions of employment that require a strong skill set.
The greater Princeton area also generates its own highly skilled employees “through five different educational institutions: Princeton University, Rider University, Mercer County Community College, Thomas Edison State College, and the College of New Jersey. Additionally, expanded skill sets are developed through educational hospitals such as the University Medical Center of Princeton, Capital Health Medical Center, St. Francis Medical Center, and Robert Wood Johnson University Hospital, all poised as training hospitals and making available additional sources of medical recruitment.”
Noting several national economic trends that could impact the central New Jersey market, Fennelly reported that “big pharma is setting up venture capital offices in areas where new drug development companies have opened. These investment divisions are being established in places such as Palo Alto, California, and Cambridge, Mass., specifically where colleges are entrepreneurially launching companies that are developing new promising drugs. Princeton can benefit from this expansion as this area generates some of the world’s greatest minds and exploratory R&D companies. Although our area has been largely stable, we have the potential for more rapid growth and if managed appropriately could be highly beneficial.”
Princeton continues to have an international reputation, reports Fennelly. “China sent over 1 million visitors to New Jersey last year (spending an average of $7,000 per visitor,) their students encompass 12 percent of the U.S. college population, and have invested $12 billion in the U.S. real estate market in 2013, up from $7 billion in 2012. Major international markets such as Korea, Japan, UK, Israel, Germany, Greece, China, Sweden, and India consider Princeton a second home by owning real estate here.”
Princeton companies’ internal growth and “the migration from international markets fuel our need to have an abundant supply of office space. This is the first time in six years that over 30 percent of the Greater Princeton area companies have expanded and are planning for fast-tracked growth,” Fennelly said.