Company News

Spike in sublease space tarnishes Princeton’s crown

Submarket hopes recent deals spark more lease activity

By Evelyn Lee
NJ Biz - http://www.njbiz.com/
9/28/2009

David Osterman, managing partner of Goldberg Segalla, in the lobby of 902 Carnegie Center, in Princeton. The firm signed a lease in August. [Christina Mazza]

With a central location and diverse tenant base, the Princeton office submarket has weathered the recession better than much of the state, but corporate consolidations have eroded some of the submarket’s strength. Still unknown is whether more space will be shed in the submarket, or if a recent resurgence in leasing activity will help put the Princeton area back on the upswing.

Overall, “Princeton has held up better than other areas of the state,” said Matt Malatich, assistant director of leasing at Princeton’s Hilton Realty, which owns about 2 million square feet of office space in the submarket.

The greater Princeton area — “has a pretty diverse corporate base,” including financial firms, pharmaceutical companies and educational institutions, Malatich said. That diversity extends to size, too: While the area is home to large corporations, a large portion of its tenant base also is made up of tenants occupying between 3,000 and 8,000 square feet, he said.

The submarket’s location appealed to David Osterman, managing partner of the Princeton office at law firm Goldberg Segalla LLP, which is based in Buffalo, N.Y. “We can attract talent, because of the central location, from a very large geographic area.” In August, the firm signed a 7,625-square-foot lease to expand and relocate to Hilton Realty’s 902 Carnegie Center, in Princeton, he said.

The 12.8 million-square-foot Princeton office submarket — the largest in central New Jersey and the third-largest in the state — has seen three consecutive quarters of negative absorption, totaling 581,000 square feet, according to commercial real estate services firm Grubb & Ellis. By comparison, the submarket recorded eight consecutive quarters of positive absorption, totaling more than 1.3 million square feet from the fourth quarter of 2006 to the third quarter of 2008, the firm said.

The greater Princeton area has a 17 percent Class A vacancy rate, compared to a rate of more than 20 percent for the state overall, “but it still had a tough year,” said Micky Landis, senior vice president and general manager of the Princeton office of Boston Properties, which owns more than 2 million square feet of Class A office space on the Princeton Route 1 corridor.

The financial crisis that began a year ago “really put a damper on corporate relocations,” which are the “lifeblood of leasing,” said Aubrey Haines, chief executive of Ewing-based Mercer Oak Realty.

From the third quarter of 2008 to the first quarter 2009, “things looked very grim,” Malatich said. “We saw a pretty big spike in sublease space,” which often drives down rents, as a company that puts its space up for sublease is willing to lease it to a subtenant at below-market rates, he said.

Many of the recent deals in Princeton were tenants taking advantage of market conditions and extending existing leases early, Landis said. One such tenant was Pharmanet, a clinical research organization that extended a full-building, 120,000 square-foot lease at 504 Carnegie Center in August, said Landis, whose firm’s Princeton office portfolio is about 92 percent leased.

Meanwhile, “a fair amount of the larger firms have some vacancy” in the submarket, but have yet to shed large blocks of space of 100,000 square feet or greater, said Steve Tolkach, managing principal of the Princeton office of commercial brokerage Newmark Knight Frank.

For example, Bank of America — which purchased Merrill Lynch last year and owns its 1.7 million-square-foot office campus in Hopewell Township — has been consolidating throughout the country, he said. If the property is made available, Princeton’s vacancy rate would jump another 5 percent, further hurting rents, Tolkach said.

But insiders said things may be looking up. Otsuka America Pharmaceutical Inc.’s 67,531-square-foot lease at RXR Realty LLC’s One University Square, in Princeton, is “a positive deal for the market,” said Haines; the deal was the state’s largest office lease in the second quarter, according to Cushman & Wakefield Research Services, and the sixth-largest deal this year.

“It feels like the market is picking up,” Malatich said. During the second and third quarters of this year, the firm has signed 13 new leases, compared to 13 renewals — but no new leases — in the first quarter, he said.

“It’s a positive sign,” he said. But with few new tenants coming into the market and few existing tenants expanding, “I don’t know if we’re going to see sustained improvement in the market at this point.”

HILTON REALTY CO ANNOUNCES ELEVEN NEW LEASES

Princeton, N.J., September, 14, 2009 - Hilton Realty Co has seen an increase in leasing activity with eleven new office and retail leases signed, totaling 28,000 square feet, since the end of the first quarter of 2009.

The largest of the recent lease transactions was with Goldberg Segalla LLP, a Buffalo, NY based law firm, for 7,625 square feet at 902 Carnegie Center in Princeton, NJ. Goldberg Segalla expanded within Hilton Realty Co.'s portfolio to accommodate its recent addition of five trial attorneys. The Managing Partner of the Princeton office, which is currently located at 301 Carnegie Center, is David S. Osterman. Goldberg Segalla was represented locally by Thomas Romano of Newmark Knight Frank. To date, Hilton Realty Co has leased a total of 116,000 square feet in the building to twelve quality tenants.

At North Brunswick Commerce Center in North Brunswick, NJ, Hilton Realty Co signed two new leases totaling 5,508 square feet. Represented by Lori Gaffney and Jane Moni of Triad Properties, Chemspeed Technologies leased 3,132 square feet for their sales office and laboratory equipment show room. Also new to North Brunswick Commerce Center is dance instructor Diane Gressing-White of School of Arts Dance Education Center. Diane's dance school has been in North Brunswick for over 20 years. "School of Arts Dance Education Center is a great addition to the complex, which is also home to Retro Fitness," said Matt Malatich of Hilton Realty Co.

Other new leases include:

Gordon Software for 1,689 SF of newly renovated office space at Windsor Business Park, 186 Princeton Hightstown Road in West Windsor, NJ.
Global Engineering and Materials, Inc for 1,844 square feet at Research Park in Princeton, NJ. Global Engineering was represented by Kevin Coleman of Commercial Property Network.
Global Convergence expanded their office by 1,886 square feet at Montgomery Shopping Center.
Simcox's Flowers will relocate its store to 1,200 square feet at Kuser Shopping Center on Whitehorse Mercerville Road in Hamilton, NJ.
Toromont Energy leased 900 square feet of office space at Enterprise Park, 800 Silvia Street in West Trenton, NJ.
Family Pharmacy leased a 1,700 square foot store at Princeton Arms Shopping Center in West Windsor.
Alphion expanded its office at Windsor Business Park in West Windsor, NJ by 1,562 square feet.
Pedagogue Solutions, represented by Jerry Fennelly of NAI Fennelly, leased 3,112 square feet of office space at 1060 State Road in Princeton, NJ.

Matt Malatich, Mark Hill and Jon Brush represented the landlord in each transaction.

HILTON REALTY ANNOUNCES TWO LEASES AT 902 CARNEGIE CENTER

Princeton, N.J., April 30, 2008 - Hilton Realty Co is pleased to announce the signing of two (2) new leases totaling 17,424 square feet at 902 Carnegie Center.

Represented by Jeannine Dresch and Peter Dodds of Morford & Dodds Realty, Opinion Research Corporation, an infoUSA company (NASDAQ: IUSA) has leased 15,442 square feet on the 2nd floor of the building as their US and Global Headquarters. Opinion Research Corporation, founded in 1938, is a consulting firm that helps organizations worldwide by providing objective, fact based advisory services. They conduct market research programs and provide analysis and advisory services to the private and public sector. To learn more, visit www.opinionresearch.com.

Represented by Charles G. Horn of RE/MAX of Princeton, Commercial Division, DMV-Fonterra Excipients USA has leased 1,982 square feet on the 4th floor of the building for their regional sales office. The sales office will be managed by Willem Hoogwater. DMV-Fonterra Excipients USA is a global supplier of pharmaceutical excipients. Their name brands include, Primojel, Primellose, Pharmatose, SuperTab and Respitose.

To date, Hilton Realty has leased 91,985 square feet of space in 902 Carnegie Center. Matt Malatich, Jon Brush and Mark Hill represented the landlord in this transaction.

BLANK ROME LLP LEASE BRINGS 301 CARNEGIE TO 100%

Princeton, N.J., December 20, 2007 - Blank Rome LLP signs a long term lease for the balance of the available space at 301 Carnegie Center.

Subsequent to the Firm announcing the opening of a Princeton office, Blank Rome leased 32,524 square feet at Hilton Realty's 301 Carnegie Center in Princeton, New Jersey. The 127,000 square foot, four-story, Class A office building was acquired in November with 32,524 square feet of vacant space in shell condition. The Blank Rome lease brings the building to 100% occupancy.

Blank Rome LLP is one of America's largest law firms. With more than 500 attorneys serving clients across the globe, Blank Rome is an international law firm representing businesses and organizations ranging from Fortune 500 companies to start-up entities. A burgeoning market for health care, technology, intellectual property and venture capital, the Princeton location is a natural evolution of Blank Rome's full-service practice and the Firm's strong presence in these industries.

Robert Corr of Binswanger represented Blank Rome. Matt Malatich, Mark Hill and Jon Brush of Hilton Realty represented the landlord.

HILTON REALTY AFFILIATE BUYS 300 AND 301 CARNEGIE CENTER

Princeton, N.J., November 13, 2007 - Hilton Realty announces the acquisition of 300 and 301 Carnegie Center by its affiliate, S&S Investments, LLC.

In a transaction arranged in-house by BPG Properties, Ltd. and Hilton Realty, Hilton is pleased to announce the addition of 301 Carnegie Center, a four-story, 127,500 square foot landmark Class A office building and 300 Carnegie Center, a fully approved three-story, 90,000 square foot Class A office building, to its portfolio.

BPG Properties, Ltd., completed an extensive capital improvement program at 301 Carnegie Center is 2007. Renovations at 301 Carnegie include all new common area finishes, new European style restrooms, high end elevator finishes and extensive mechanical upgrades. The building is currently 73% occupied with 35,456 square feet of new space available for lease. Tenants include Bank of America, Pepper Hamilton, and KPMG. The building offers Class A amenities such as an on-site cafe, fitness center, concierge and banking.

301 Carnegie Center is a landmark Princeton market building. Built in 1984, it was one of the 1st buildings in the Carnegie Center complex and is visible from Route One at the main entrance to the complex. We are proud to add this fine asset to our portfolio and pleased to provide our tenants with more options for expansion within our portfolio. 301 Carnegie Center offers office users a unique opportunity to fit out new office space in the 3,000 to 25,000 square foot range in a high end, well located building. With the recent completion and partial lease up of 902 Carnegie Center, a new 135,000 square foot Class A building and the acquisition of 301 and 300 Carnegie Center, Hilton has 98,000 square feet of high end space available and the ability to build an additional 90,000 square foot RMJM Hillier designed, Class A office building with LEED Silver certification.

Click here to read the Commercial Property News article.

DECHERT LLP LEASES 28,643 SQUARE FEET AT 902 CARNEGIE CENTER IN PRINCETON, N.J.

Princeton, N.J., August 23, 2007 - Princeton New Jersey based Hilton Realty Co, LLC announces that Dechert LLP has signed a lease for the entire 5th floor (28,643 square feet) of its building at 902 Carnegie Center in Princeton, New Jersey.

Dechert LLP is an international law firm of more than 1,000 lawyers with top-ranked practices in corporate and securities; complex litigation, including mass torts and product liability; finance and real estate, and financial services and asset management. The firm also has well-established practices in intellectual property, tax, bankruptcy, employment, health, and environmental law.

The building at 902 Carnegie Center is a five (5) story, 135,399 square foot, Class A office building with a 28,000 square foot humidity controlled lower level for storage. Building amenities include a full service café offering catering services; a fitness room with lockers and showers; on site management; and covered parking. Located in the center of the Princeton office market on the South-bound side of Route 1, 902 Carnegie Center is within walking distance to the Princeton Market Fair which offers quality restaurants and shopping. Near-by is a variety of corporate/luxury and business class hotels including the Marriott Residence Inn located next door.

To date, Hilton has leased a total of 71,431 square feet of space in this building. Dechert LLP will join Wilmington Trust, Stifel Nicolaus & Company, Inc., PNYLAB, Ironbound Capital Management LP and Hilton Management LLC. Approximately 63,968 square feet remain available for lease. Mark Hill, Matt Malatich and Jon Brush represented Hilton Realty Co, LLC. For additional information, Call Hilton Realty at 609-921-6060.

WILMINGTON TRUST TAKES 8,664 SF AT 902 CARNEGIE CENTER

Princeton, N.J., April 26, 2007 - Wilmington Trust signed a ten (10) year lease for 8,664 square feet at 902 Carnegie Center. The building, with 135,399 square feet of Class A office space, is Hilton Realty's newest speculative development project in the Princeton market.

The local office of Wilmington Trust is managed by Sean S. Murray and staffed with a qualified, experienced team of professionals. Wilmington Trust's Princeton office will continue to offer diversified financial services through its Regional Banking, Wealth Advisory and Corporate Client Services business units. It this region, commercial banking and wealth advisory services are integrated to provide financing, insurance, wealth transfer, business succession, investment management and trust services to privately held business owners, affluent individuals and their families. The Princeton location will continue to have a Wilmington Family Office, providing independent advice and comprehensive services to the ultra high net worth client segment.

Wilmington Trust was represented by Jerry Fennelly and Andy Weinstein of NAI Fennelly. Hilton Realty was represented by Matt Malatich and Mark Hill.

HILTON REALTY SIGNS FIRST TENANT AT 902 CARNEGIE

Princeton, N.J., August 28, 2006 - Stifel, Nicolaus & Company, Inc. leased 4,615 square feet on the first floor of 902 Carnegie Center for 10 years.

Stifel, a subsidiary of Stifel Financial Corporation, is a full service brokerage and investment banking firm founded in 1890. It operates 119 offices in 26 states and the District of Columbia and offers a full range of investments including stocks, corporate and municipal bonds, mutual funds, annuities, insurance, options and managed asset accounts. The local office is managed by Steve Jusick.

Stifel, Nicolaus was represented by Karen Iman of Trammel Crow. Hilton Realty was represented by Matt Malatich, Mark Hill and Jon Brush.