NEW JERSEY INDUSTRY SPOTLIGHT LIFE SCIENCES CUSHMAN & WAKEFIELD RESEARCH

NEW JERSEY INDUSTRY SPOTLIGHT LIFE SCIENCES CUSHMAN & WAKEFIELD RESEARCH

TABLE OF CONTENTS Cushman & Wakefield 2 3 KEY TAKEAWAYS 4 ECONOMIC IMPACT 5 R&D / FLEX MARKET 6 CLASS A OFFICE MARKET 7 LIFE SCIENCES DEMAND / CONCLUSION

KEY TAKEAWAYS 37% of New Jersey s workforce holds a bachelor s degree or higher versus the national average of 30% Many of the world s largest life sciences companies have a major presence in the Garden State There are 3,280 life sciences facilities in New Jersey, with an annual contribution of $47.5 billion to the state s economy Historically, the life sciences sector has significantly impacted the New Jersey Class A office market with both large leasing transactions and space dispositions Approximately 1.8 msf of leases were signed during 2016 by life sciences companies, with another 1.0 msf leased in 2017 The R&D/laboratory market in New Jersey consists of 8.3 msf of space, much of which is concentrated in Somerset, Middlesex, and Morris counties 13 OF THE TOP 20 GLOBAL 13 BIO-PHARMA COMPANIES ARE HEADQUARTERED IN NEW JERSEY 50% OF 2017 FDA 50% APPROVALS CAME FROM NEW JERSEY LIFE SCIENCES FIRMS 48 LIFE SCIENCES DEALS 48 EXCEEDING 50,000 SF HAVE BEEN SIGNED IN NEW JERSEY SINCE 2012 cushmanwakefield.com 3

Economic Impact The Life Sciences industry continues to fuel not only the New Jersey economy, but also the commercial real estate market. There are 3,280 life science facilities in the state, employing approximately 117,300 people. While employment totals in the pharmaceutical and medical devices sectors declined over the last five years, the bio-tech sector rebounded since 2014, rising by 13.6%. This was primarily due to an increase in bio-tech start-up companies across the Garden State. Meanwhile, the life sciences industry s annual contribution to the state economy is estimated at $47.5 billion, 86.0% higher than the national average. Companies are attracted to the Garden State s skilled and highly educated workforce (37% of the workforce received at least a bachelor s degree) and its 60+ colleges which produce more than 20,000 life sciences graduates each year. New Jersey is ideally located for many life sciences companies as well, due in large part to its proximity to New York City and its placement in the heart of the nation s Northeast corridor, connecting Boston to Washington DC via I-95. Companies such as Bayer, Bristol-Myers Squibb, Johnson & Johnson, Novartis, Novo Nordisk, Celgene, and Actavis occupy large amounts of space throughout the market. While major departures by some life sciences companies have occurred in recent years, the industry remains at the forefront of the New Jersey office market. Life Sciences Workforce Educational Levels 62.8% OF THIS WORKFORCE HOLDS AT LEAST A BACHELOR S DEGREE 2014 2016 High School Diploma or below, 15.9% Associate s Degree or some college, 21.3% Bachelor s Degree, 32.2% Master s / Professional Degree, 23.5% Doctoral Degree, 7.1% BIO-TECH EMPLOYMENT INCREASED BY 12.6% OVER TWO YEARS Employees By Sub-Industry 24,320 45,120 Medical Devices 47,850 47,820 Bio-tech Pharmaceutical Cushman & Wakefield 4

R&D / Flex Market There are currently more than 8.3 million square feet of laboratory/r&d investor-owned space in Northern and Central New Jersey, the bulk of which lies within three counties (Morris, Somerset, Middlesex). Of the inventory, facilities larger than 100,000 sf now make up 54.6% of the square footage. Vacancy hovered above 28.0% in 2013 and 2014 when many life sciences firms were exiting the state and moving their research facilities to Cambridge, Boston, North Carolina, and San Francisco. Since then, vacancy has fallen markedly due to healthy activity it now stands at a recent low of 11.0%, a 940-basis-point decline since the close of 2016. This was due to healthy demand coupled with a slowdown in new supply to the marketplace. Within the flex/r&d inventory, the 116-acre former Hoffmann-La Roche campus in Nutley and Clifton recently rebranded as ON3 is making a name for itself as a new hub for the life sciences industry. Led by the Seton Hall-Hackensack Meridian School of Medicine as the anchor, the site is attracting serious interest from the bio-sciences community. Modern Meadow, a sustainable manufacturing company, was recently awarded $32.2 million in incentives. The bio-fabrication firm will relocate from Brooklyn into approximately 120,000 sf for a laboratory and manufacturing site at ON3. Demand also remains strong at the Center of Excellence in Bridgewater after being sold by Sanofi-Aventis in 2012, the campus is now more than 85.0% occupied. Meanwhile, a build-to-suit warehouse and light manufacturing facility is currently under construction in the Princeton area for Aurobindo Pharmaceuticals. The 567,000-sf building will serve as the company s new U.S. headquarters, warehouse, and manufacturing center and is expected to be completed in 2018. New Jersey Laboratory / R&D Statistics Inventory 8,346,909 Available Space 928,213 Overall Vacancy Rate 11.1% Avg Direct Asking Rental Rate $17.50 YTD Leasing Activity 414,915 YTD Overall Absorption 462,906 Direct vs. Overall Rental Rate $18.00 $17.00 $16.00 $15.00 $14.00 $13.00 $12.00 $14.84 $15.46 $14.67 $14.55 $15.83 $16.90 $17.50 2011 2012 2013 2014 2015 2016 2017 Direct Rental Rate Overall Vacancy Rate Total Square Footage Available Square Feet 112,667 0 88,636 140,945 155,360 430,605 0 Bergen Essex Mercer Middlesex Morris Somerset Union 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Top Flex/R&D Life Sciences Leases YTD 2017 MOST ACTIVITY CONTINUES TO OCCUR IN THE I-78 CORRIDOR AND THE EXIT 8A/PRINCETON ROUTE 1 CORRIDOR QUARTER LEASE TYPE TENANT NAME ADDRESS CITY MARKET NAME LEASED SF Q3 New Lease Modern Meadow ON3 Nutley Essex Route 23 South/GSP South 72,907 Q3 New Lease Parker Labs 4 Sperry Road Fairfield Suburban Essex 55,084 Q3 New Lease Eywa Pharmacueticals 1 Duncan Drive Cranbury Exit 8A 52,000 Q4 New Lease Celularity 33 Technology Drive Warren Township I-78 Corridor 49,660 Q4 New Lease Immunomedics 400 American Road Morris Plains Route 10/24 Corridor 45,654 Q1 Renewal/Expansion Magnifica 5 Cedar Brook Drive Cranbury Exit 8A 34,000 Q1 New Lease Avantor 1041 Route 202/206 Bridgewater I-78 Corridor 26,769 New Lease Solaris Pharma Corporation 1041 Route 202/206 Bridgewater I-78 Corridor 18,072 New Lease Ascendia Pharmaceuticals 661 Route 1 South North Brunswick The Brunswicks 18,000 Q1 New Lease Matinas 1041 Route 202/206 Bridgewater I-78 Corridor 14,336 cushmanwakefield.com 5

Class A Office Market The Class A office market consists of 99.4 msf throughout New Jersey, with more than 40.0% concentrated in the Princeton/Route 1 Corridor, Morris County, and the I-78 Corridor. These areas are known as life sciences hubs in the Garden State as many companies in this industry have taken space within Class A office buildings. Since the recession, the Class A market in New Jersey struggled to gain traction as large tenant dispositions some by large pharmaceutical companies landed substantial blocks of space on the market. It was not until 2015 and 2016 when the Class A office market began to improve in New Jersey. In those two years, 3.9 msf of Class A product was absorbed, with Morris and Somerset Counties totaling 1.8 msf (46.2% of the total). Several large life sciences transactions helped drive absorption totals, including deals by Allergan, Mallinckrodt, Daiichi Sankyo, Valeant Pharma, GlaxoSmithKline, and Zoetis. This positive momentum shifted in 2017, as not long after their 300,000-sf expansion, Valeant placed the space on the market for sublease. Additional large blocks of space came online this year formerly occupied by Allergan and Daiichi Sankyo, which helped push Class A absorption into the red during the first half of 2017. Bristol-Myers Squibb began its gradual move into its newly constructed headquarters in Lawrenceville, and will leave behind a total of more than 650,000 sf of Class A office space at its former headquarters on Scudders Mill Road. The Class A vacancy rate has ticked higher since the start of the year and at 19.7% remains 170 basis points higher than it was one year ago. This trend will continue into 2018, as another life sciences company slated to dispose of a sizable space is Eli Lilly, which just announced the closing of its Bridgewater office on Route 22 East where it occupies more than 100,000 sf. Class A asking rents increased markedly over the last few years as the overall market improved. Urban submarkets like the Hudson Waterfront and Newark recorded substantial increases in Class A rents during the last year, and areas such as Princeton/Route 1, Woodbridge/Edison, Monmouth, and Bergen Counties have also had Class A rents climb over the last year. Tenants continue to be attracted to Class A, amenity-rich campuses in suburban areas, resulting in some landlords spending capital to upgrade their portfolios in order to attract and retain companies. Class A Office Market NNJ & CNJ Vacancy vs. Rental Rates $35.00 $30.00 $25.00 $20.00 $15.00 Leasing by Industry 9.8 MSF TOTAL (INCLUDING RENEWALS) 57 DEALS Life Sciences. $29.04 $24.61 Computers / Technology. NNJ Class A Rental NNJ Class A Vacancy $28.82 $25.20 Financial Services NORTHERN NJ CENTRAL NJ NJ TOTAL Inventory (SF) 58,297,536 41,661,700 99,959,236 Total Vacancy Rate Average Direct Asking Rental Rate (PSF) $28.56 $25.89 Legal Services $30.43 $29.53 Communications. $29.69 $29.21 Insurance. $29.94 $28.39 Health Services $31.95 $28.59 Retail / Wholesale. Educational Services. $34.30 $29.96 2010 2011 2012 2013 2014 2015 2016 2017 NNJ Class A Rental NNJ Class A Vacancy 20.3% 18.8% 19.70% $34.30 $29.96 $32.82 YTD Leasing (SF) 1,731,635 1,819,512 3,551,147 1,028,268 YTD Direct Absorption 983,459 822,352 635,377-447,814-399,283-847,097 CNJ Class A Rental CNJ Class A Vacancy 520,795 408,126 528,754 CNJ Class A Rental CNJ Class A Vacancy 1,150,643 325,602 376,409 Business Consulting 30.0% 26.0% 22.0% 18.0% 14.0% 10.0% Cushman & Wakefield 6

Life Sciences Demand The life sciences industry remains a driving force of demand in New Jersey. Activity within this sector is primarily concentrated in the I-78 Corridor, Morris County, and the Princeton/Route 1 Corridor, and these three submarkets accounted for 71.5% of all pharmaceutical leases in the state since the start of 2012. This trend slowed in 2017, as these three markets accounted for only 49.5% of the industry s total activity through the third quarter. The Upper 287 Corridor emerged as a key region for life sciences firms in 2017, hosting notable leases executed by Terumo Medical Corporation, Johnson & Johnson, McKesson Corporation, and Regeneron Pharmaceuticals. In 2017, life sciences transactions accounted for 10.5% of all demand in the state, with nearly 1.0 msf of leases signed. In 2016, life sciences leasing totaled 1.8 msf and was driven by Allergan s 431,495-sf lease and Mallinckrodt s 233,000-sf lease, both of which received state incentives. Including these two firms, 10 life sciences companies received incentives through the Grow New Jersey program throughout 2016 totaling $125.2 million. Leasing By Submarket 50.6% OF LIFE SCIENCE DEAL VOLUME DURING YTD 2017 WAS IN THE I-78 CORRIDOR AND PRINCETON/ROUTE 1 CORRIDOR Upper 287 Corridor, 23.7% I-78 Corridor, 23.6% Princeton/Route 1 Corridor, 19.3% Bergen County, 10.9% Hudson Waterfront Market, 7.4% Morris County, 6.6% Other, 8.5% 6 life sciences leases exceeding 50,000 sf were signed in 2017 year-to-date Life sciences activity in the Upper 287 Corridor has quadrupled since one year ago Top Life Science Office Leases YTD 2017 QUARTER LEASE TYPE TENANT NAME ADDRESS 100 Nassau Park Boulevard 265 Davidson Avenue CITY MARKET NAME LEASED SF West Windsor Princeton/Route 1 Corridor 108,870 Franklin Township Upper 287 Corridor 95,023 Q1 Renewal Bristol Myers Squibb Company Sublease expansion/ Renewal Terumo Medical Corporation Renewal/ Expansion Celgene 400 Connell Drive Berkeley Heights Route 78 Corridor 60,019 Franklin Township Upper 287 Corridor 58,443 New Lease Johnson & Johnson 300 Davidson Avenue Q4 New Lease Regeneron Pharmaceuticals 110 Allen Road Bernards Township Route 78 Corridor 50,524 New Lease Bioclinica Inc 211 Carnegie Center West Windsor Princeton/Route 1 Corridor 47,025 Renewal/Expansion Ipsen Biopharmaceuticals 106 Allen Road Bernards Township Route 78 Corridor 45,220 Franklin Township Upper 287 Corridor 42,125 Q3 Renewal McKesson Corporation 220 Davidson Avenue Renewal Celgene 300 Connell Drive Berkeley Heights Route 78 Corridor 38,783 Q3 Sublease Glenmark Pharmaceuticals 461 From Road Paramus Bergen Route 4 East Corridor 34,416 New Lease Rising Pharmaceuticals, Inc. 250 Pehle Avenue Saddle Brook Bergen Route 17 South 29,756 Conclusion Life sciences transactions will likely continue to help drive leasing velocity in the key Northern and Central NJ submarkets in the foreseeable future. However, while some large pharmaceutical companies may look to consolidate operations and downsize with new space configurations, expect to see the number of small and mid-tier pharmaceutical and bio-tech firms expand further in the coming year. NJEDA incentives will also continue to play a major role in retaining and attracting bio-tech and pharmaceutical companies in New Jersey, both for office and R&D space. Also keeping New Jersey on the life sciences radar for is the state s deep talent pool providing companies with access to a highly educated workforce. Pharmaceutical companies are a key industry for New Jersey and will continue to have a significant impact in the state s economy. cushmanwakefield.com 7

About Cushman & Wakefield Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 45,000 employees in more than 70 countries help occupiers and investors optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $6 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn how you can achieve a real estate solution that supports your healthcare real estate goals, visit cushmanwakefield.com Jason Price Research Director Tri-State Suburbs One Meadowlands Plaza, 7th Floor East Rutherford, NJ 07073 USA Direct: +1 201 508 5208 Fax: +1 201 935 0724 jason.price@cushwake.com cushmanwakefield.com Christa DiLalo Associate Market Director Research One Meadowlands Plaza, 7th Floor East Rutherford, NJ 07073 USA Tel: +1 201 508 5286 Fax: +1 201 935 0724 christa.dilalo@cushwake.com cushmanwakefield.com Copyright 2018 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.