The report said the Garden State came in second to only California in the number of people employed by the life science industry (112,000). The pharmaceutical cluster continues to stay in the lead with the highest concentration of employee (40.8%), slightly edging out the biotech industry. However, employment in these industries has been slowing down in recent years.
With 12 of the Top 20 pharmaceutical companies being in New Jersey (with a number of others in large office or lab/R&D space), the industry is positively impacting both the local economy and commercial real estate markets, the report said. Even though consolidation has been a trend in Big Pharma, the number of small- and mid-tier pharma and biotech firms in the state is on the rise.
“Today, approximately 3,190 life science companies operate in New Jersey,” Jason Price, director of Tri-State suburbs research at Cushman & Wakefield, said. “While there were some notable exits from the state earlier in the decade, overall demand by the industry has been healthy since the start of 2018. Our state’s moniker of ‘The Medicine Chest of the World’ still holds true, as does the industry’s significant impact on the regional economy and our lab/R&D and office markets.”
North and Central New Jersey’s lab/research and development inventory currently sits at 15.4 million square feet, the report said. About 70% of that is in Morris and Somerset counties and the Greater Princeton area.
“After peaking in 2014, lab vacancy had declined by the close of 2017,” Price said. “However, the rate swelled in 2018 when Bristol-Myers Squibb vacated an R&D campus in Hopewell, and it has ticked further upward after a number of large- and mid-sized space dispositions during the first half of 2019.
Demand has been reliable this year, the report suggested. The state’s largest lab lease since 2016 was PTC Therapeutics expanding beyond its South Plainfield headquarters into the Princeton/Route 1 corridor with a 185,000-square-foot lease at the former Bristol-Myers Squibb complex in Hopewell. Syneos Health and Bioarray Solutions also each renewed R&D space in Princeton (48,865 square feet) and the I-78 Corridor (37,417 square feet), respectively.
The life sciences industry has continued to impact the state’s office market, both in supply and demand, the report said. Since 2016, the life sciences sector has leased 4.8 million square feet in New Jersey, which included 40 deals larger than 10,000 square feet and 13 deals larger than 50,000 square feet. Life sciences demand totaled more than 2.2 million square feet of leasing in that time as well.
“Office demand among life sciences firms has been mainly concentrated within the three key life sciences submarkets: Morris County, the Princeton/Route 1 Corridor and the I-78 Corridor,” Price said. “These three regions accounted for 89.0% of the square footage leased by this industry over the past 18 months.”
Pharmaceutical, biotech and medical devices firms leasing space primarily look for Class A suburban inventory in North and Central Jersey to lease, the report found.
“While many life sciences firms – such as Celgene, Teva and LEO Pharmaceuticals – significantly expanded their footprints here, consolidations have persisted,” Price said. “As a result, many mid-sized and large blocks of Class A office space have returned to the market and space options remain plentiful – although asking rents in key submarkets continue to trend higher.”
Price said New Jersey’s highly educated workforce and the presence of numerous medical schools, research universities and hospitals is what continues to attract life sciences firms to the area.
“We anticipate demand within the life sciences industry to remain healthy through the remainder of 2019, especially within suburban Class A assets,” Price said. “While the future of state incentives remains in question, New Jersey’s current administration is focused on growing the state’s R&D and innovation-based sector, which should bode well for many life sciences firms looking to either grow, relocate to or move within the Garden State.”
The full report is available here.