Corrections or additions?

This article by Barbara Fox was prepared for the April 17, 2002

edition of U.S. 1 Newspaper. All rights reserved.

Sizing Up the Downturn

One person’s loss can be another another person’s gain.

That seems to be the story of the sublet market in Princeton. When

the stock market turned sour for dotcoms and telecommunications


and when the banks and the pharmaceuticals consummated their mergers,

those companies found themselves with excess space and lengthy leases.

Usually expensive space, the Class A kind.

More than half of the available Class A rentals in Princeton are


as sublets, says Jerry Fennelly, who has been tracking this


micromarket for 20 years. Currently, a total of 1,091,000 square feet

of Class A space needs to be leased. Of that, 569,000 feet is in


A very small portion, 87,000 feet, is shell space (never before


and the remainder, 434,000 feet is "relet," where a lease

has expired and a tenant has moved on in the usual way.

Overall, Fennelly’s figures show that there has not been so much space

on the market since the early 1990s. Counting all the categories,

there is a total of 2.5 million square feet of vacancies. That is

almost exactly the amount of new space that has been built over the

last 10 years. Back in 1992, 2,549,000 vacant square feet represented

23 percent of the market. In today’s larger market that same amount

of vacant space amounts to just 15 percent of the market.

That’s good news for the landlords, who claim they aren’t worried.

Indeed, Class A landlords are in much better shape than they were

10 years ago. Then, many were left with empty buildings that had never

been leased. Now, it is their tenants — the companies that


— that are left holding the bag, paying rent on space they no

longer need.

"If not for the sublet market," says Micky Landis, senior

vice president of Boston Properties, which owns most of the space

at the Carnegie Center, "occupancy levels would be at a fairly

strong rate. Rates have not changed, but workletters have increased

a bit. Including sublet availability, I would say it is in balance,

not out of whack as either a landlord’s or a tenant’s market. "

But Wayne Kasbar of Newmark JGT suggests that it is indeed a tenant’s

market when it comes to sublets. "There are some great


out there for tenants who can take advantage of the large amount of

space that is being sublet," says Kasbar. Some pointers for


looking to improve their space with a sublet:

Lower rents. If the sublease term is very short, a tenant

might be able to work out a "blended" deal with the landlord,

blending in one year’s lower rent with the regular rent for a


lease. Kasbar’s sublet listing at 101 College Road, for instance,

offers 18,000 square feet for the next 18 months at just $18, compared

to the "regular" asking price of $27.

Fitouts and furniture. "People who have been sitting

on the sidelines have a great opportunity to get some very nice fitout

and very nice furniture," says Tommy Romano of Insignia


Cross. His firm is subleasing two floors of the Fleet Bank building

at the Carnegie Center at rates comparable to regular Carnegie rates,

and he is also subleasing the bank’s former operations center in


at $10 per square foot.

Short-term lease. A sublet is also useful as "swing

space," for temporary purposes such as housing workers acquired

through a sudden expansion until contiguous space is available. For

instance, Geneva Pharmaceuticals rented space formerly occupied by

Mathematica at 101 Morgan Lane as a temporary headquarters and has

just signed a lease for larger space in the 500 series at the Carnegie


Thrifty prestige. Sublet space is attractive to the


the companies in Class B space that want Class A amenities without

the prices. "A substantial portion of leases being made in College

Park," says Vincent Marano, COO of National Business Parks,


with Princeton firms that now have the opportunity to expand or trade

up from Class B to Class B space." Companies that could not find

buildings with more than 40,000 square feet are now able to step into

vacancies due to downsizing and consolidation.

So many are moving out and up, that Class B landlords are the ones

to be more aggressive in pricing. Nearly one-fourth of the Class B

space is vacant — 1.1 million feet. Two thirds of that is re-let

space, with just 10 percent in sublet. By comparison, the Class C

market is paltry, just 321,000 available feet, with a small sublet


Other significant news involves Thanet Circle, an enclave just north

of Princeton Shopping Center. The Institute for Defense Analyses has

vacated its fortress on Thanet Circle in favor of a reclusive area

on Bunn Drive, and it has contracted with Newmark JGT to sell its

48,000 square foot property on 9.25 acres.

Meanwhile Church & Dwight is moving its newly acquired staff members

from the former Carter Wallace property to new buildings on Thanet

Circle, and it has begun to market the Carter Wallace campus —

750,000 of mixed use buildings on 115 acres on Half Acre Road, near

Exit 8A. Back in the 1980s, when Mobil vacated its 800,000 square

foot campus, there was general despair about finding a tenant —

until Bristol-Myers Squibb stepped up to the plate. This time around,

the eventual buyer could come from much further afield, says Julie

Nachamkin, the Cushman Wakefield representative assigned to sell the


— Barbara Fox

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