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NEW JERSEY PHARMA/LIFE SCIENCES MARKET REPORT ---------------------------------------------- CUSHMAN & WAKEFIELD RESEARCH SERVICES

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NEW JERSEY

PHARMA /

LIFE SCIENCES

MARKET

REPORT

The market terms and definitions in this report are based on NAIOP standards. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals.

© 2015 Cushman & Wakefield, Inc. All rights reserved.

Cushman & Wakefield of New Jersey, Inc.

Licensed Real Estate Broker

One Meadowlands Plaza

East Rutherford, NJ 07073

201-935-4000

cushmanwakefield.com

NEW JERSEY

PHARMA/LIFE SCIENCES

MARKET REPORT----------------------------------------------

CUSHMAN & WAKEFIELD RESEARCH SERVICES

The near future should feel like the last few years for the New

Jersey commercial real estate market and pharmaceutical and

life sciences sector. Bristol-Myers Squibb will soon vacate

650,000 sf of class A office space in Plainsboro once they move

into their new headquarters in nearby Lawrenceville come

2016. The move will allow them to consolidate their office

needs into the Princeton/Route 1 submarket. Shire’s recent

purchase of NPS Pharma poses the question of the company

maintaining its Bedminster presence or backfilling other out-of-

state facilities. Meanwhile, Celgene’s expansion of its office

space at their Summit campus is underway. Once completed,

Celgene is anticipated to dispose of more than 100,000 sf of

their space at 110 Allen Road in Bernards Township.

NJ PHARMA/LIFE SCIENCES OUTLOOK

Furthermore, Celgene is in the process of purchasing Merck’s

1.1 msf Summit R&D campus, which the firm will then fully

occupy. In Princeton, Church & Dwight is renovating their

former headquarters and building a new lab/pilot plant in

excess of 125,000 sf.

With some of the aforementioned additional vacancies hitting

the market, the availability rate could rise once again by 2016,

unless demand persists. With research and development now

less of a driving factor in the state’s real estate market,

pharmaceutical companies’ office needs should continue to

boost both the local economy and office space demand.

NEW JERSEY RESEARCH TEAM

CHRISTA DILALO SENIOR ANALYST

Research Services

201.508.5286

[email protected]

JASON PRICEDIRECTOR

Research Services

201.508.5208

[email protected]

NEW JERSEY PHARMA ADVISORY TEAM

WILLIAM BROWNSENIOR DIRECTOR

Brokerage

973.292.4613

[email protected]

PAUL E. GIANNONEEXECUTIVE VICE PRESIDENT

Brokerage

732.452.6184

[email protected]

Sources: C&W Research, Bionj.com, NJ Department of Labor, Choose NJ

CHRISTINE DELTUFO

JUNIOR ANALYST

Research Services

201.508.5225

[email protected]

CHRISTOPHER KINUM EXECUTIVE DIRECTOR

Global Life Science Practice

201.508.5255

[email protected]

2015 | CUSHMAN & WAKEFIELD

NEW JERSEY

PHARMA/

LIFE SCIENCES

MARKET

REPORT

INTRODUCTION

The pharmaceutical and life sciences industry has played a key

role in New Jersey’s economy for many years. Many of the

world’s largest pharmaceutical firms either own or lease

substantial amounts of space in the Garden State, which has

helped New Jersey gain the moniker “Medicine Chest of the

Nation.”

The Garden State is home to some of the largest

pharmaceutical companies in the world, including Johnson &

Johnson, Merck & Co., Novartis, Bristol-Meyers Squibb, Sanofi,

and Bayer. Residents also include biotech companies Celgene

and Amicus Therapeutics. New Jersey’s skilled and highly

educated workforce, its highway system, and its proximity to

NYC and the Port of NY/NJ have made the state a desirable

location for global pharmaceutical firms. These high-profile

companies are also drawn to New Jersey’s 63 colleges, which

produce 22,000 life sciences graduates annually, and the state is

home to six higher education universities offering graduate and

post graduate degrees in the field.

However, since the last recession, there have been many cost-

cutting moves by the industry, including corporate

consolidations and mergers and acquisitions. In turn, New

Jersey has seen its fair share of pharmaceutical companies exit

the local marketplace; most recently, Roche. However, small

and mid-sized pharmaceutical companies have increased demand

for space over the last few years while the number of

pharma/life sciences establishments in the state has increased

9.4% since 2008. Firms such as Roche, which recently vacated

its Nutley campus in a move across the river to NYC’s

Alexandria Center, have left a glut of space available in both the

office and lab/R&D markets.

Meanwhile, Merck’s Whitehouse Station headquarters facility

and Summit and Union sites are currently for sale. Novartis

vacated over 365,000 square feet (sf) of its office space in

Florham Park, putting it on the market for lease as it

consolidated into owned campuses.

In addition, mergers and acquisitions by companies such as

Watson Pharmaceuticals purchasing Actavis (whose name was

then adopted), Warner Chilcott, Allergan, and Forest

Laboratories, have ended with blocks of space added to the

supply over the last few years. As many large pharma and life

science companies re-evaluate their real estate needs and costs

of owning and/or leasing in the New Jersey market, this trend of

large consolidations and departures could very well continue in

the coming years.

ECONOMY

As of early 2014, there were over 3,000 operations within the

bio-pharmaceutical life sciences cluster in New Jersey, consisting

of the pharmaceutical, medical device, and biotech/R&D

industries, with an economic impact of $26 billion annually.

From 2008 through 2013, the number of companies operating

in New Jersey has inched lower by 0.1%, due in large part to

consolidations and relocations. According to the State of New

Jersey, the life sciences cluster boasted more than 115,000

workers during 2013, or 3.6% of the state’s total. In

comparison, the cluster accounts for just 2.0% nationwide.

The pharmaceutical sector employs 50,016 people in the

Garden State, 43.5% of the life sciences cluster’s total. Although

the pharma sector boasts the highest concentration of

employees in the cluster, it has also seen a notable decline in

payrolls from 2008 to 2010 (-11.1%), mainly due to the

aforementioned mergers, acquisitions, and major consolidations.

Over the next two years, the workforce declined at a slower

rate (-4.2%), and edged slightly higher in 2013. Much of the

industry’s workforce is located in Northern New Jersey, where

48.3% of the jobs lie. Meanwhile, Central New Jersey boasts

42.1% of the state total.

New Jersey has historically filled the industry’s need for a highly

educated and skilled workforce. There are 20 four-year

universities in the state, including Princeton and Rutgers, along

with top engineering schools. Furthermore, more than 35.5% of

the population age 25+ holds at least a bachelor’s degree.

Within the life sciences/pharma industry itself, over 65% have

obtained a bachelor’s degree or higher.

50,016

24,251

40,779

NUMBER OF NJ EMPLOYEES BY INDUSTRY

PHARMACEUTICALS

MEDICAL DEVICE

BIOTECH/R&D

C&W OVERVIEW

Cushman & Wakefield, Inc. (“C&W”) is one of the largest commercial real estate firms in the world. Founded in 1917, C&W

now operates from 259 offices in 60 countries with 16,000+ employees. Our professionals offer expertise in every business

sector and real estate class and deliver integrated solutions by actively advising, implementing and managing on behalf of

tenants, landlords and investors throughout every stage of the real estate process.

C&W’s core services — Leasing, Capital Markets, Valuation & Advisory, Consulting, and Corporate Occupier & Investor

Services — span the full continuum of real estate services. We employ the leading professionals in these fields, thereby

ensuring best-of-class services in each area.

With a culture that puts our clients' needs and objectives first in everything we do, C&W has the expertise to provide the best

possible commercial real estate services in the world.

2015 | CUSHMAN & WAKEFIELD

NEW JERSEY

PHARMA/

LIFE SCIENCES

MARKET

REPORT

INTRODUCTION

The pharmaceutical and life sciences industry has played a key

role in New Jersey’s economy for many years. Many of the

world’s largest pharmaceutical firms either own or lease

substantial amounts of space in the Garden State, which has

helped New Jersey gain the moniker “Medicine Chest of the

Nation.”

The Garden State is home to some of the largest

pharmaceutical companies in the world, including Johnson &

Johnson, Merck & Co., Novartis, Bristol-Meyers Squibb, Sanofi,

and Bayer. Residents also include biotech companies Celgene

and Amicus Therapeutics. New Jersey’s skilled and highly

educated workforce, its highway system, and its proximity to

NYC and the Port of NY/NJ have made the state a desirable

location for global pharmaceutical firms. These high-profile

companies are also drawn to New Jersey’s 63 colleges, which

produce 22,000 life sciences graduates annually, and the state is

home to six higher education universities offering graduate and

post graduate degrees in the field.

However, since the last recession, there have been many cost-

cutting moves by the industry, including corporate

consolidations and mergers and acquisitions. In turn, New

Jersey has seen its fair share of pharmaceutical companies exit

the local marketplace; most recently, Roche. However, small

and mid-sized pharmaceutical companies have increased demand

for space over the last few years while the number of

pharma/life sciences establishments in the state has increased

9.4% since 2008. Firms such as Roche, which recently vacated

its Nutley campus in a move across the river to NYC’s

Alexandria Center, have left a glut of space available in both the

office and lab/R&D markets.

Meanwhile, Merck’s Whitehouse Station headquarters facility

and Summit and Union sites are currently for sale. Novartis

vacated over 365,000 square feet (sf) of its office space in

Florham Park, putting it on the market for lease as it

consolidated into owned campuses.

In addition, mergers and acquisitions by companies such as

Watson Pharmaceuticals purchasing Actavis (whose name was

then adopted), Warner Chilcott, Allergan, and Forest

Laboratories, have ended with blocks of space added to the

supply over the last few years. As many large pharma and life

science companies re-evaluate their real estate needs and costs

of owning and/or leasing in the New Jersey market, this trend of

large consolidations and departures could very well continue in

the coming years.

ECONOMY

As of early 2014, there were over 3,000 operations within the

bio-pharmaceutical life sciences cluster in New Jersey, consisting

of the pharmaceutical, medical device, and biotech/R&D

industries, with an economic impact of $26 billion annually.

From 2008 through 2013, the number of companies operating

in New Jersey has inched lower by 0.1%, due in large part to

consolidations and relocations. According to the State of New

Jersey, the life sciences cluster boasted more than 115,000

workers during 2013, or 3.6% of the state’s total. In

comparison, the cluster accounts for just 2.0% nationwide.

The pharmaceutical sector employs 50,016 people in the

Garden State, 43.5% of the life sciences cluster’s total. Although

the pharma sector boasts the highest concentration of

employees in the cluster, it has also seen a notable decline in

payrolls from 2008 to 2010 (-11.1%), mainly due to the

aforementioned mergers, acquisitions, and major consolidations.

Over the next two years, the workforce declined at a slower

rate (-4.2%), and edged slightly higher in 2013. Much of the

industry’s workforce is located in Northern New Jersey, where

48.3% of the jobs lie. Meanwhile, Central New Jersey boasts

42.1% of the state total.

New Jersey has historically filled the industry’s need for a highly

educated and skilled workforce. There are 20 four-year

universities in the state, including Princeton and Rutgers, along

with top engineering schools. Furthermore, more than 35.5% of

the population age 25+ holds at least a bachelor’s degree.

Within the life sciences/pharma industry itself, over 65% have

obtained a bachelor’s degree or higher.

50,016

24,251

40,779

NUMBER OF NJ EMPLOYEES BY INDUSTRY

PHARMACEUTICALS

MEDICAL DEVICE

BIOTECH/R&D

C&W OVERVIEW

Cushman & Wakefield, Inc. (“C&W”) is one of the largest commercial real estate firms in the world. Founded in 1917, C&W

now operates from 259 offices in 60 countries with 16,000+ employees. Our professionals offer expertise in every business

sector and real estate class and deliver integrated solutions by actively advising, implementing and managing on behalf of

tenants, landlords and investors throughout every stage of the real estate process.

C&W’s core services — Leasing, Capital Markets, Valuation & Advisory, Consulting, and Corporate Occupier & Investor

Services — span the full continuum of real estate services. We employ the leading professionals in these fields, thereby

ensuring best-of-class services in each area.

With a culture that puts our clients' needs and objectives first in everything we do, C&W has the expertise to provide the best

possible commercial real estate services in the world.

2015 | CUSHMAN & WAKEFIELD

NEW JERSEY

PHARMA/

LIFE SCIENCES

MARKET

REPORT

PHARMA/LIFE SCIENCES EMPLOYMENT & DEMOGRAPHIC TRENDS PHARMA/LIFE SCIENCES ACTIVITY

NJ EMPLOYMENT BY INDUSTRY TREND (2010–2013) New Jersey’s class A inventory, where the majority of

pharmaceutical and life sciences companies opt to lease space,

consists of 100.2 million square feet (msf) and boasts an

average asking rent of $29.54 per square foot (psf). Since the

start of 2010, pharmaceutical and life sciences corporations

have accounted for more than 22.0% of all new class A office

leasing within the state. Since then, there have been 45

50,000+ sf transactions executed by this sector. Renewal

activity has also been robust, as last year alone saw over

465,000 sf of office space renewed within the industry.

Life sciences demand has been heavily concentrated within a

few specific geographic areas in New Jersey. The I-78

Corridor, Princeton/Route 1 Corridor, and Morris County

together comprise 81.3% of life sciences leasing since 2010.

Over the past five years, the I-78 and Princeton/Route 1

Corridors have each seen over 1.3 msf of new leasing activity;

while Princeton’s activity was dominated by transactions in

excess of 10,000 sf.

In one of the most noteworthy leases in recent history,

Novo Nordisk leased 770,000 sf of specially-renovated space

in Princeton in 2011. Otsuka Pharma expanded during 2013,

and now occupies over 130,000 sf in Princeton. Meanwhile, a

handful of significant deals occurred in the I-78 Corridor:

Valeant Pharmaceuticals relocated its headquarters and leased

310,000 sf of class A space in 2013; LifeCell Corporation took

117,937 sf in 2011; and Celgene expanded by 79,323 sf and

renewed for a total of 104,323 sf in one of its multiple

locations in the area. Most recently, GlaxoSmithKline

(Novartis) took over 144,000 sf of class A space in Warren

for their headquarters.

In addition to these office-based transactions, the I-78

Corridor saw a unique abundance of activity within high

technology/R&D facilities in 2013 when Ashland Chemical and

Amneal Pharmaceuticals leased 198,000 sf and 141,930 sf,

respectively, at the former Sanofi-Aventis site in Bridgewater,

now known as the Center of Excellence.

0%

5%

10%

15%

20%

25%

30%

Less HS HS Associate Bachelor MasteR Doctoral

4.7%

Less Than High

School

High School

Diploma

Some College/

Associate Degree

Bachelor’s

Degree

Master’s/

Professional DegreeDoctoral

Degree

14.5%15.4%

31.7%

25.1%

8.6%

CLASS A OFFICE MARKET SNAPSHOT

Northern NJ Central NJ NJ Total

Inventory (SF) 60,587,993 39,595,094 100,183,087

Total Vacancy Rate 23.6% 17.0% 22.30%

Avg. Direct Asking

Rental Rate (PSF)$29.92 $29.17 $29.54

YTD Leasing (SF) 2,005,333 2,601,598 4,606,931

YTD Direct

Absorption (SF)1,196,486 (121,497) 1,074,989

81% of pharma/life sciences leases have

occurred in I-78 Corridor, Princeton/Route 1

or Morris County since 2010

65.4% of this workforce holds

at least a Bachelor’s Degree

-7.0%

-8.2%

-4.2%

PHARMACEUTICALS

MEDICAL DEVICE

BIOTECH/R&D

NJ LIFE SCIENCES EDUCATIONAL BREAKDOWN

CLASS A VACANCY VS RENTS

$29.4

1

$29.0

4

$28.8

2

$28.5

6

$30.4

3

$29.6

9

$29.9

2

$24.6

5

$24.6

1

$25.2

0

$25.8

9

$29.5

3

$29.2

1

$29.1

7

12.0%

16.0%

20.0%

24.0%

28.0%

$14.00

$19.00

$24.00

$29.00

$34.00

2009 2010 2011 2012 2013 2014 2Q15

NNJ Class A Rental CNJ Class A Rental

NNJ Class A Vacancy CNJ Class A Vacancy

2015 | CUSHMAN & WAKEFIELD

NEW JERSEY

PHARMA/

LIFE SCIENCES

MARKET

REPORT

PHARMA/LIFE SCIENCES EMPLOYMENT & DEMOGRAPHIC TRENDS PHARMA/LIFE SCIENCES ACTIVITY

NJ EMPLOYMENT BY INDUSTRY TREND (2010–2013) New Jersey’s class A inventory, where the majority of

pharmaceutical and life sciences companies opt to lease space,

consists of 100.2 million square feet (msf) and boasts an

average asking rent of $29.54 per square foot (psf). Since the

start of 2010, pharmaceutical and life sciences corporations

have accounted for more than 22.0% of all new class A office

leasing within the state. Since then, there have been 45

50,000+ sf transactions executed by this sector. Renewal

activity has also been robust, as last year alone saw over

465,000 sf of office space renewed within the industry.

Life sciences demand has been heavily concentrated within a

few specific geographic areas in New Jersey. The I-78

Corridor, Princeton/Route 1 Corridor, and Morris County

together comprise 81.3% of life sciences leasing since 2010.

Over the past five years, the I-78 and Princeton/Route 1

Corridors have each seen over 1.3 msf of new leasing activity;

while Princeton’s activity was dominated by transactions in

excess of 10,000 sf.

In one of the most noteworthy leases in recent history,

Novo Nordisk leased 770,000 sf of specially-renovated space

in Princeton in 2011. Otsuka Pharma expanded during 2013,

and now occupies over 130,000 sf in Princeton. Meanwhile, a

handful of significant deals occurred in the I-78 Corridor:

Valeant Pharmaceuticals relocated its headquarters and leased

310,000 sf of class A space in 2013; LifeCell Corporation took

117,937 sf in 2011; and Celgene expanded by 79,323 sf and

renewed for a total of 104,323 sf in one of its multiple

locations in the area. Most recently, GlaxoSmithKline

(Novartis) took over 144,000 sf of class A space in Warren

for their headquarters.

In addition to these office-based transactions, the I-78

Corridor saw a unique abundance of activity within high

technology/R&D facilities in 2013 when Ashland Chemical and

Amneal Pharmaceuticals leased 198,000 sf and 141,930 sf,

respectively, at the former Sanofi-Aventis site in Bridgewater,

now known as the Center of Excellence.

0%

5%

10%

15%

20%

25%

30%

Less HS HS Associate Bachelor MasteR Doctoral

4.7%

Less Than High

School

High School

Diploma

Some College/

Associate Degree

Bachelor’s

Degree

Master’s/

Professional DegreeDoctoral

Degree

14.5%15.4%

31.7%

25.1%

8.6%

CLASS A OFFICE MARKET SNAPSHOT

Northern NJ Central NJ NJ Total

Inventory (SF) 60,587,993 39,595,094 100,183,087

Total Vacancy Rate 23.6% 17.0% 22.30%

Avg. Direct Asking

Rental Rate (PSF)$29.92 $29.17 $29.54

YTD Leasing (SF) 2,005,333 2,601,598 4,606,931

YTD Direct

Absorption (SF)1,196,486 (121,497) 1,074,989

81% of pharma/life sciences leases have

occurred in I-78 Corridor, Princeton/Route 1

or Morris County since 2010

65.4% of this workforce holds

at least a Bachelor’s Degree

-7.0%

-8.2%

-4.2%

PHARMACEUTICALS

MEDICAL DEVICE

BIOTECH/R&D

NJ LIFE SCIENCES EDUCATIONAL BREAKDOWN

CLASS A VACANCY VS RENTS

$29.4

1

$29.0

4

$28.8

2

$28.5

6

$30.4

3

$29.6

9

$29.9

2

$24.6

5

$24.6

1

$25.2

0

$25.8

9

$29.5

3

$29.2

1

$29.1

712.0%

16.0%

20.0%

24.0%

28.0%

$14.00

$19.00

$24.00

$29.00

$34.00

2009 2010 2011 2012 2013 2014 2Q15

NNJ Class A Rental CNJ Class A Rental

NNJ Class A Vacancy CNJ Class A Vacancy

2015 | CUSHMAN & WAKEFIELD

NEW JERSEY

PHARMA/

LIFE SCIENCES

MARKET

REPORT

PHARMA/LIFE SCIENCES ACTIVITY NEW JERSEY LAB/R&D MARKET

Many drug companies now want to be near university

centers of excellence that conduct life science related

research (i.e. California and Massachusetts), something the

Garden State does not have in terms of scope and size. In

turn, New Jersey is no longer a strongly desirable location

for companies to set up research and lab facilities, which

makes large leases like that of Ashland Chemical and

Amneal Pharmaceuticals now unique. However, life sciences

firms continue to view the state as a viable option for office

space and headquarters locations. Located centrally along

the Boston-DC life sciences corridor, New Jersey offers

both an educated workforce and competitive rental rates.

Several relocations have occurred within the past several

years, creating hundreds of new jobs within the sector. In

2013, the aforementioned Valeant Pharmaceuticals acquired

Bausch & Lomb and relocated its headquarters within the

state, more than doubling its footprint in New Jersey. This

transaction added 500 new jobs to the 274 already existing

in the state.

Swiss company Ferring Pharmaceuticals recently purchased

a 135,000-sf facility in Parsippany for future expansion.

Generic drug manufacturer Actavis (formerly known as

Watson) chose New Jersey as its global headquarters

location and opened an R&D center, bringing 350 new jobs

to the state. The company also recently acquired Forest

Laboratories, Warner Chilcott, and Allergan and has been

relocating most of its operations to New Jersey.

PHARMA/LIFE SCIENCES LEASING ACTIVITY

2010-2Q15

5.94%

12.63%

18.63%

20.00%

42.81%

PHARMA/LIFE SCIENCES LEASING BY SIZE –

% OF TOTAL (BY SF)

<10,000 sf

10,000 - 24,999 sf

25,000 - 49,999 sf

50,000 - 99,999 sf

100,000 sf+

The lab/R&D market consists of over 6.7 msf of non-owner

occupied space within both office and flex properties. The bulk

of this market is concentrated in Morris, Somerset, and

Middlesex counties. The majority of the inventory which

houses lab/R&D space is less than 100,000 sf in size as only

17 buildings exceed that number within the inventory tracked.

The largest facility—the former Sanofi campus in Bridgewater–

exceeds 1.0 msf. The “Center of Excellence” has seen two

transactions (Amneal Pharmaceuticals and Ashland Chemical)

signed during 2013, bringing the campus to almost 50.0%

occupancy. However, a handful of the buildings in the campus

are slated to be demolished later this year.

Vacancy within the lab and R&D market has hovered above

25.0% in recent years, although it has seen a modest decline

since reaching its peak of 29.3% in 2013. Since this year began,

the vacancy rate fell by 2.0 percentage points due to some

healthy demand. As of Q2, there were 11 blocks of space

available throughout the market in excess of 50,000 sf, five of

which exceeded 100,000 sf. Activity within these properties

has seen some major fluctuations annually since 2011, with

more than 800,000 sf of space leased in that time. Notable

deals were inked by Amneal Pharmaceuticals, Ashland

Chemical, Bristol-Myers Squibb, Celgene and Bracco

Diagnostics. Much of the deal volume was concentrated around

Princeton/Route 1 and the I-78 Corridor.

Meanwhile, asking rents are down 4.5% since the close of 2013,

as competition to attract companies in need of lab space has

been strong due to the plethora of space being marketed for

lease in the state. Since the start of 2015, however, asking

rents have remained stable throughout many of these buildings.

With some large pharmaceutical companies moving their

research needs to other markets such as Cambridge, Boston,

and San Francisco due to their proximity to a higher

concentration of universities and centers of excellence, New

Jersey has seen a significant amount of R&D facilities placed on

the market for sale or lease.

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

$12.00

$13.00

$14.00

$15.00

$16.00

2011 2012 2013 2014 2Q15

Direct Rental Rate Overall Vacancy Rate

NJ LAB / R&D SNAPSHOT*

Inventory (SF) 6,765,645

Available Space (SF) 1,748,876

Overall Vacancy Rate 25.8%

Avg Direct Asking Rental Rate (PSF) $14.77

YTD Leasing Activity (SF) 202,469

YTD Overall Absorption (SF) 47,221

DIRECT RENTAL VS. VACANCY RATE

*Non owner-occupied buildings 20,000 sf + only included in this data set

0.00%

4.00%

8.00%

12.00%

16.00%

20.00%

24.00%

28.00%

0.0

0.5

1.0

1.5

2.0

2.5

2010 2011 2012 2013 2014 YTD

2015

Mill

ions

SF

New Leases Renewals % of NJ Total New Leasing Activity

500 new jobs created with

Valeant Pharma’s 310,000 sf

lease in 2013

COMPANY TRANSACTION TYPE ADDRESS SUBMARKET SQUARE FEET

GlaxoSmithKline New Lease 184 Liberty Corner Rd I-78 Corridor 144,536

Ferring Pharmaceuticals User Purchase 260 Cherry Hill Road Parsippany 135,000

Solvay Pharmaceuticals New Lease 504 Carnegie Center Princeton/Rt 1 107,000

Taiho Pharmaceuticals New Lease 101 Carnegie Center Princeton/Rt 1 60,000

Opthotech Sublease 1 University Square Drive Princeton/Rt 1 35,206

40% of the state’s lab/R&D inventory lies

within Morris & Somerset Counties

YTD 2015 MAJOR PHARMA/LIFE SCIENCES TRANSACTIONS

2015 | CUSHMAN & WAKEFIELD

NEW JERSEY

PHARMA/

LIFE SCIENCES

MARKET

REPORT

PHARMA/LIFE SCIENCES ACTIVITY NEW JERSEY LAB/R&D MARKET

Many drug companies now want to be near university

centers of excellence that conduct life science related

research (i.e. California and Massachusetts), something the

Garden State does not have in terms of scope and size. In

turn, New Jersey is no longer a strongly desirable location

for companies to set up research and lab facilities, which

makes large leases like that of Ashland Chemical and

Amneal Pharmaceuticals now unique. However, life sciences

firms continue to view the state as a viable option for office

space and headquarters locations. Located centrally along

the Boston-DC life sciences corridor, New Jersey offers

both an educated workforce and competitive rental rates.

Several relocations have occurred within the past several

years, creating hundreds of new jobs within the sector. In

2013, the aforementioned Valeant Pharmaceuticals acquired

Bausch & Lomb and relocated its headquarters within the

state, more than doubling its footprint in New Jersey. This

transaction added 500 new jobs to the 274 already existing

in the state.

Swiss company Ferring Pharmaceuticals recently purchased

a 135,000-sf facility in Parsippany for future expansion.

Generic drug manufacturer Actavis (formerly known as

Watson) chose New Jersey as its global headquarters

location and opened an R&D center, bringing 350 new jobs

to the state. The company also recently acquired Forest

Laboratories, Warner Chilcott, and Allergan and has been

relocating most of its operations to New Jersey.

PHARMA/LIFE SCIENCES LEASING ACTIVITY

2010-2Q15

5.94%

12.63%

18.63%

20.00%

42.81%

PHARMA/LIFE SCIENCES LEASING BY SIZE –

% OF TOTAL (BY SF)

<10,000 sf

10,000 - 24,999 sf

25,000 - 49,999 sf

50,000 - 99,999 sf

100,000 sf+

The lab/R&D market consists of over 6.7 msf of non-owner

occupied space within both office and flex properties. The bulk

of this market is concentrated in Morris, Somerset, and

Middlesex counties. The majority of the inventory which

houses lab/R&D space is less than 100,000 sf in size as only

17 buildings exceed that number within the inventory tracked.

The largest facility—the former Sanofi campus in Bridgewater–

exceeds 1.0 msf. The “Center of Excellence” has seen two

transactions (Amneal Pharmaceuticals and Ashland Chemical)

signed during 2013, bringing the campus to almost 50.0%

occupancy. However, a handful of the buildings in the campus

are slated to be demolished later this year.

Vacancy within the lab and R&D market has hovered above

25.0% in recent years, although it has seen a modest decline

since reaching its peak of 29.3% in 2013. Since this year began,

the vacancy rate fell by 2.0 percentage points due to some

healthy demand. As of Q2, there were 11 blocks of space

available throughout the market in excess of 50,000 sf, five of

which exceeded 100,000 sf. Activity within these properties

has seen some major fluctuations annually since 2011, with

more than 800,000 sf of space leased in that time. Notable

deals were inked by Amneal Pharmaceuticals, Ashland

Chemical, Bristol-Myers Squibb, Celgene and Bracco

Diagnostics. Much of the deal volume was concentrated around

Princeton/Route 1 and the I-78 Corridor.

Meanwhile, asking rents are down 4.5% since the close of 2013,

as competition to attract companies in need of lab space has

been strong due to the plethora of space being marketed for

lease in the state. Since the start of 2015, however, asking

rents have remained stable throughout many of these buildings.

With some large pharmaceutical companies moving their

research needs to other markets such as Cambridge, Boston,

and San Francisco due to their proximity to a higher

concentration of universities and centers of excellence, New

Jersey has seen a significant amount of R&D facilities placed on

the market for sale or lease.

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

$12.00

$13.00

$14.00

$15.00

$16.00

2011 2012 2013 2014 2Q15

Direct Rental Rate Overall Vacancy Rate

NJ LAB / R&D SNAPSHOT*

Inventory (SF) 6,765,645

Available Space (SF) 1,748,876

Overall Vacancy Rate 25.8%

Avg Direct Asking Rental Rate (PSF) $14.77

YTD Leasing Activity (SF) 202,469

YTD Overall Absorption (SF) 47,221

DIRECT RENTAL VS. VACANCY RATE

*Non owner-occupied buildings 20,000 sf + only included in this data set

0.00%

4.00%

8.00%

12.00%

16.00%

20.00%

24.00%

28.00%

0.0

0.5

1.0

1.5

2.0

2.5

2010 2011 2012 2013 2014 YTD

2015

Mill

ions

SF

New Leases Renewals % of NJ Total New Leasing Activity

500 new jobs created with

Valeant Pharma’s 310,000 sf

lease in 2013

COMPANY TRANSACTION TYPE ADDRESS SUBMARKET SQUARE FEET

GlaxoSmithKline New Lease 184 Liberty Corner Rd I-78 Corridor 144,536

Ferring Pharmaceuticals User Purchase 260 Cherry Hill Road Parsippany 135,000

Solvay Pharmaceuticals New Lease 504 Carnegie Center Princeton/Rt 1 107,000

Taiho Pharmaceuticals New Lease 101 Carnegie Center Princeton/Rt 1 60,000

Opthotech Sublease 1 University Square Drive Princeton/Rt 1 35,206

40% of the state’s lab/R&D inventory lies

within Morris & Somerset Counties

YTD 2015 MAJOR PHARMA/LIFE SCIENCES TRANSACTIONS

NEW JERSEY

PHARMA /

LIFE SCIENCES

MARKET

REPORT

The market terms and definitions in this report are based on NAIOP standards. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals.

© 2015 Cushman & Wakefield, Inc. All rights reserved.

Cushman & Wakefield of New Jersey, Inc.

Licensed Real Estate Broker

One Meadowlands Plaza

East Rutherford, NJ 07073

201-935-4000

cushmanwakefield.com

NEW JERSEY

PHARMA/LIFE SCIENCES

MARKET REPORT----------------------------------------------

CUSHMAN & WAKEFIELD RESEARCH SERVICES

The near future should feel like the last few years for the New

Jersey commercial real estate market and pharmaceutical and

life sciences sector. Bristol-Myers Squibb will soon vacate

650,000 sf of class A office space in Plainsboro once they move

into their new headquarters in nearby Lawrenceville come

2016. The move will allow them to consolidate their office

needs into the Princeton/Route 1 submarket. Shire’s recent

purchase of NPS Pharma poses the question of the company

maintaining its Bedminster presence or backfilling other out-of-

state facilities. Meanwhile, Celgene’s expansion of its office

space at their Summit campus is underway. Once completed,

Celgene is anticipated to dispose of more than 100,000 sf of

their space at 110 Allen Road in Bernards Township.

NJ PHARMA/LIFE SCIENCES OUTLOOK

Furthermore, Celgene is in the process of purchasing Merck’s

1.1 msf Summit R&D campus, which the firm will then fully

occupy. In Princeton, Church & Dwight is renovating their

former headquarters and building a new lab/pilot plant in

excess of 125,000 sf.

With some of the aforementioned additional vacancies hitting

the market, the availability rate could rise once again by 2016,

unless demand persists. With research and development now

less of a driving factor in the state’s real estate market,

pharmaceutical companies’ office needs should continue to

boost both the local economy and office space demand.

NEW JERSEY RESEARCH TEAM

CHRISTA DILALO SENIOR ANALYST

Research Services

201.508.5286

[email protected]

JASON PRICEDIRECTOR

Research Services

201.508.5208

[email protected]

NEW JERSEY PHARMA ADVISORY TEAM

WILLIAM BROWNSENIOR DIRECTOR

Brokerage

973.292.4613

[email protected]

PAUL E. GIANNONEEXECUTIVE VICE PRESIDENT

Brokerage

732.452.6184

[email protected]

Sources: C&W Research, Bionj.com, NJ Department of Labor, Choose NJ

CHRISTINE DELTUFO

JUNIOR ANALYST

Research Services

201.508.5225

[email protected]

CHRISTOPHER KINUM EXECUTIVE DIRECTOR

Global Life Science Practice

201.508.5255

[email protected]