Princeton market experiencing boom in spec development.
Similar to the 1999-2000 real estate market, where Princeton experienced its most prolific speculative office building phase, five new projects are rising along the Route 1 and 1-95 corridors totaling more than 800,000 square feet of Class A office space that is being constructed without any pre-lease tenancy.
However, unlike the late 90s, corporations are not eating up space at such a voracious pace. In recent months, there have been several large transactions completed in the market and there are seemingly more major leasing deals on the horizon, indicating a stronger office leasing market ahead.
Current spec projects along the Route 1 corridor include:
Reckson Associates' 313,000 s/f, five-story Reckson University Square: Patrinely Group's 167,000 s/ f, five-story l l00 Campus Drive; Hilton Realty's 140,000 s/f, five-story 902 Carnegie Center; Opus East's 120,000 s/f, four-story PrincetonSouth Corporate Center; Brandywine Realty's 75,000 s/ f three-story 1200 Lenox Drive.
In addition to these projects, Opus is constructing a second, 160,000 s/f building at PrincetonSouth, 83,000 s/ f of which has been preleased to Computer Associates. There is also nearly 500,000 s/f of available office product along the I-95 corridor in three projects: Princeton Pike Corporate Center (100 Lenox Drive--former Lenox China headquarters); the remaining space at American Metro Center in Hamilton; and the entire 220,000 s/f Technology Center at Princeton, which has remained fully vacant for the past two years.
Recently, however, American Metro Center, one of the Princeton market's most ambitious and successful renovation projects, has seen a spate of leasing activity totaling more than 300,000 s/f with 160,000 s/f remaining.
While these availabilities have caused a momentary spike in vacancy along the I-95 corridor, Opus' and Brandywine's commitment to building new office inventory into the submarket is a sign that steady demand will again surface in the Princeton Corridor, which also extends to Bucks County, Pennsylvania and southern New Jersey.
The lower Bucks County market in particular is supply constrained for both existing inventory and developable land--there are no sites along the I-95/Route 1 corridors in Bucks County that can accommodate an office use of more than 200,000 square feet. Therefore, the I-95 corridor in Ewing, Hopewell and Lawrenceville will benefit from the continued demand from executives who live in Bucks County and want to shorten their commute.
Other new leases during the second half of 2006 indicate winds of change on the horizon. Computer Associates' 83,000-square-foot lease and Church & Dwight's lease for 42,000 square feet at 29 Thanet Circle have proven that in a market with a high level of current vacancy, major companies are still willing to pay benchmark rental rates of more than $30 per-square-foot to achieve the kind of Class A space that their corporate buyer values demand.
During early 2007, there are six to eight other potential tenants kicking around the market for 30,000 to 100,000 square feet. Additionally, BlackRock's anticipated mid-range relocation from the Merrill Lynch Scudders Mill Road property, as well as Novo Nordisk's potential new headquarters, provides nearly one million square feet of large space needs in the greater Princeton market area at the present time, and each of these requirements carries an element of growth/net positive absorption.
The Princeton submarket seems to be strong and stable going into the first quarter of 2007.
The increased activity of speculative office construction is mirroring the demands of high-quality, Class A office space that is desired in New Jersey.
This is a good sign for the future of New Jersey's economy, as these new properties will compete with each other to attract larger corporations to the area, perhaps as possible headquarters locations.
While it will be interesting to see how leasing activity is affected, the Princeton office market is poised to remain one of New Jersey's premiere submarkets heading into 2007.
By Steven Tolcash, EVP, and Thomas Romano, senior VP, GVA Williams/Buschman
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|Title Annotation:||Commercial Sales & Leasing|
|Comment:||Princeton market experiencing boom in spec development.(Commercial Sales & Leasing)|
|Publication:||Real Estate Weekly|
|Date:||Feb 21, 2007|
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