A major real estate developer is looking to make the most of a down economy by repositioning a former corporate campus along the New Jersey Turnpike as a low-cost option for smaller office and research tenants. But the project must grapple with weak real estate demand and its location in a market best known for distribution centers, according to other industry players.
Cranbury-based Matrix Development Group is eyeing small and midsized businesses for its newly acquired Matrix Corporate Campus, an 83-acre property composed of 13 buildings at Interchange 8A off the Turnpike.
The developer purchased the campus - builtinthe 1950s andearly 1960s as the corporate campus for specially chemicals company Rhodia - from Conshohocken, Pa.-based Preferred Unlimited in November.
The economic crisis has all but halted commercial real estate development in New Jersey, said Alec Taylor, a Matrix principal. "There are few new development projects going on right now," he said. "The overall demand, of course, is down in all of the use types that we're catering to."
But Taylor expects to make the project work with the flexibility of the corporate campus, which encompasses 342,000 square feet of office, laboratory and flex space in Cranbury and Monroe townships. Since space requirements range from 2,500 square feet to more than 300,000 square feet, "we will be able to cater to a broader array of tenants in this recessionary period," he said.
In the down economy, the job creation needed to fuel real estate expansion has been lacking, said Gary Hans, vice president of acquisitions at Matrix.
But in the case of smaller companies, "you do have some growth and expansion," he said. Also, while many companies are not looking to expand, some are in a position to relocate, he added.
With Matrix Corporate Campus, the developer is going after tenants looking to relocate in order to cut costs, Hans said. Both rent and sales prices at the campus are at least 15 percent lower than the market rate for comparable space in the area, the company said.
"By buying an existing campus, we're at a significantly lower cost range" than a developer building new construction, Hans said. Lower project costs will translate into lower rents at Matrix Corporate Campus, as well as higher returns on investment, he said. The campus' buildings, which range from 5,000 square feet to nearly 100,000 square feet, can be delivered to tenants essentially as is, or stripped down to the steel and rebuilt, he said.
Matrix Corporate Campus currently has one tenant, phosphate products producer Innophos, which has its headquarters at the property The company moved into the complex in August 2007, while the site was still under Preferred Unlimited's ownership, and expanded its lease to 50,000 square feet after Matrix took over.
Matrix Corporate Campus has several distinct advantages for office tenants, said Gerry Fennelly, president of NAl Fennelly, a Hamiltonbased corporate real estate services firm that had marketed the properly - then known as the Mid-Atlantic Corporate Center - on behalf of Preferred. The site has more than 2,000 feet of frontage along the Turnpike, which "is nice to have if you're trying to create an identity" he said.
Also, "it's always hard to buy small buildings, but the unique thing there is you can actually buy small buildings," he said. Nine of the property's 13 buildings are between 5,000 and 20,000 square feet, according to NAI Fennelly.
Matrix currently is in discussions with several potential tenants, and expects one small deal to close this month, Taylor said.
"We should be attracting from all points around the property," he said. "Through hard work and effective marketing, there should be a steady deal flow that should enable us to develop the park successfully."
But Matrix Corporate Campus's location at Interchange 8A - widely known as a regional distribution hub, not an office market - could be a drawback, according to other real estate players. The Interchange 8A markethas approximately 2.5 million square feet of office space, compared to 40 million square feet of warehouse and distribution space, according to NAI Fennelly.
"I haven't seen a whole lot of success with office type projects in the 8A market," said Jeff Milanaik, president of Heller Industrial Parks, which owns 2 miflion square feet of warehouse and distribution space near 8A. Prominent office markets in New Jersey, such as Morris County tend to have a large number of major corporate headquarters, as well as mass transit access to Manhattan, he said; "those are things I don't see at 8A."
Interchange 8A also lacks the advantage of office markets along the Route 1 corridor, which has proximity to Princeton and Rutgers universities, Milanaik said. "8A, to me, seems just a little on the outside," he said. "What's the draw? I don't quite see it."