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No quick cure for pharma vacancy Highly specialized space can be tricky to repurpose for unrelated industries

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Bob King, CEO of Ridge Road Properties, stands inside the former Wyeth/Pfizer property in South Brunswick.
Bob King, CEO of Ridge Road Properties, stands inside the former Wyeth/Pfizer property in South Brunswick. - ()

With its well-maintained, modern facilities and a large swath of open space, the former Wyeth and Pfizer research hub in South Brunswick caught the eyes of investors soon after hitting the market in 2010. Among them was Bob King, who worked with a partner to make a bid and acquire the Ridge Road site earlier this year.

"Despite the fact that there was competition, it was at a level a lot lower than where Pfizer had invested," said King, CEO of Ridge Road Properties. "There's a lot of money in the building, so for us, it was very much a value play — and I think that's probably the way that some of the other potential bidders saw it, as well."

King's property is one piece of the growing stock of space that has been shed by the state's pharmaceutical firms in recent years, thanks to the corporate mergers, outsourcing and downsizing that have become frequent within the industry. The trend has left the drugmakers — and potential real estate investors — with the challenging task of trying to market and reposition sites that often are highly specialized and far too big for today's users.

"The velocity of demand for the product is certainly less than the availability right now," said John Cunningham, an executive managing director with Colliers International New Jersey and national director of the firm's life sciences practice. "So the question is: How long will it take to take these facilities and repurpose them? It'll take time."

The state has 4.6 million square feet of life sciences space, nearly 35 percent of which is currently available, according to Cunningham. That does not include the roughly 2 million square feet of space that will be vacated by Roche, which announced last month it would close its 80-year-old research campus, in Nutley, by the end of next year.

The total does include everything from Sanofi's 1.2 million-square-foot research and development hub, in Bridgewater, to the 130,000-square-foot former Synaptic facility, in Paramus. Cunningham, who helped broker the sale of the Pfizer building, said that "life science parks" also are included in that total.

Large single-tenant properties often have a mix of office, laboratory and manufacturing space, sometimes with a central utility area that services the entire campus, he said. With demand now coming from smaller pharmaceutical and biotech firms, owners and investors must figure out how to modify and break up the space to appeal to multiple tenants.

Brokers working with Sanofi are taking that approach as they try to bring new life to the firm's 110-acre R&D campus in Somerset County. Dan Loughlin, managing director at Jones Lang LaSalle New Jersey, said the firm is marketing the property as both a "single-campus site" and as a series of buildings available to single users.

The latter calls for emphasizing a group of about five R&D buildings — which are about 10 years old and still "very attractive," Loughlin said — and branding them as the New Jersey Center of Excellence. For a group of older administrative buildings on the site, Sanofi is considering redevelopment or major renovations.

With sites like the Sanofi campus, "you need to have some creativity to preserve what you think are the higher-value assets that would be accommodating or of interest to prospective users in the life science world," Loughlin said. "And there are some other portions of the property where you might have to do some selective demolition and do some redevelopment."

JLL has been working with advocacy groups like Choose New Jersey and BioNJ to market the property, he said. The firm is also sending direct mail to C-suite planners in the life science industry to encourage them to consider using an existing space, rather than building their own.

At the former Wyeth property, in South Brunswick, King and Colliers are first trying to fill the 380,000-square-foot facility with another pharmaceutical or biotech user, King said. But he acknowledged that may be difficult, so he also is considering plans to convert it to a data center, or open the building to multiple tenants.

King's firm has also considered building age-restricted housing on the property's large swath of undeveloped land, he said.

The future of the Roche property is not nearly as certain.

Cunningham, of Colliers' Parsippany office, said the campus could be divided into several sites, some of which could be turned into new retail along the busy Route 3 corridor.

"There's no cookie-cutter answer to all of this," Cunningham said. "But the causality is the same in many cases."

But despite the challenges, brokers say pharmaceutical firms or investors can likely count on the cooperation of the municipal officials, who will be anxious to maintain their tax rolls and bring back lost jobs. King said South Brunswick officials have been "very supportive" through several meetings since his firm acquired the property.

"They want to see the jobs come back in," King said. "So they'll certainly be working with us and with any potential tenant or buyer of the building to make sure that there's a good result."

E-mail to: joshb@njbiz.com
On Twitter: @joshburdnj

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