For every space requirement on the market, prospective tenants are receiving about 10 to 12 proposals. In better times, three to four was typical.
Businesses are continuing to contract, leaving unprecedented amounts of office space available. Even big pharma, one of the mainstay industries of Central New Jersey, is now in survival mode and has undertaken mergers and out-of-state relocations, leaving large amounts of commercial space and thousands of jobs in its wake. And since the bottom line for commercial real estate is jobs, the market has been thrown into disarray.
For their part, landlords are becoming competitive and extremely flexible in lease negotiations and are offering generous concessions in the effort to keep their buildings filled. Rents in Princeton are now averaging in the mid $20s, down from the upper $20s less than 18 months ago. And while vacancy factors in Princeton are currently 16 percent to 17 percent, well below the statewide average, they still reflect a significant number of tenants lost.
National Business Parks has always done whatever it can do to retain its tenants. This has been our operating policy in good times and poor. And now with a fragile economy this method of doing business is clearly showing its merits. College Park, with its 815,000 square feet, is at the 97 percent occupancy mark with firms opting to renew in what is clearly a tenants’ market.
Ironically, the emotionally charged healthcare debate has dominated our national consciousness and the “cash for clunkers” program drew dazzling media coverage, while the basic issue of new job creation has largely faded into the background. In our business it’s very straightforward — without jobs, there’s no need for real estate. So from our point of view new jobs are the imperative. As employment traditionally lags behind other economic indicators, it’s difficult to see the office market in a rebound for the next 24 to 36 months. Landlords will need to become even more aggressive in deal making; for tenants, this is a time of unique opportunity.
College Park at Princeton Forrestal Center is an 11-building complex fronting Route 1. Included among tenants are SES Americom, Panasonic, JPMorgan Chase, the law firms of Drinker Biddle & Reath and Bracco Research. National Business Parks is the managing arm of Lawrence Zirinsky Associates, owners of College Park.