BIOSECURE Act’s Potential Impact on the Princeton Area Commercial Real Estate Market
By: Jerry Fennelly, SIOR, President, Fennelly Associates
Currently working its way through the United States Congress, the BIOSECURE Act aims to limit Chinese companies’ involvement in our biotechnology sector. The bill is focused on strengthening our national security while protecting intellectual property and sensitive data from foreign interference.
Whether passed or not, the bill will significantly impact the future of the biotech industry including potential disruptions to the Princeton area lab and office market.
To explain why, it’s important to understand how crucial foreign investment is to Princeton’s regional commercial real estate market.
Princeton – A Hub for Innovation
An unbeatable location between two of the largest cities in the country, paired with a highly talented labor pool has made New Jersey a magnet for international companies looking to establish their presence in the United States.
According to ChooseNJ, New Jersey is home to over 1,100 multinational companies and 225 foreign company headquarters. Over the last two decades alone, New Jersey has attracted $20.9 billion in foreign direct investment (FDI) from these companies.
Among the largest sources of FDI in N.J. comes from China, ranked 11th globally in the New Jersey Economic Development Authority’s first annual New Jersey Global Economic Index. Although China’s influence can be found across every industry, its impact on the state’s biotech field cannot be overstated. A recent study highlighted that 79% of all biotechnology businesses in the United States contract with Chinese businesses and nearly one-quarter of active drug development now has a Chinese origin.
Regionally, Princeton University’s unmatched presence as a global research hub has made the surrounding market one of the most sought-after markets for cutting-edge companies like biotechnology businesses. Beyond Princeton University, the area is home to over 10M square feet of state-of-the-art lab, research, advanced manufacturing and office space well suited to biotechnology users. Within the dynamic Princeton market, Chinese biotech firms are estimated to lease nearly 1M square feet of space.
What will the BIOSECURE Act mean for Princeton?
While the future of the BIOSECURE Act is unclear, its potential implications for Chinese companies operating in the biotechnology sector are immense.
The threat of the BIOSECURE Act has already pushed some Chinese companies to begin to rethink long-term investments and substantially alter their strategies in our local market. Although this iteration of the bill may not pass, this will likely not be the last time that pressure is placed on Chinese businesses operating in critical industries like biotechnology.
As a result, I expect to see a softening in demand for high-tech space in the Princeton area from Chinese companies. In addition, firms that may be U.S.-based but have deep ties with Chinese companies may also rethink their business strategies.
However, in a market as strong as Princeton, as one door closes another is opening. The challenges facing Chinese biotechnology companies are creating a gap that is already being filled by domestic and foreign operators. American companies currently have a 6.9M-square-foot presence in the market that is expected to grow as federal and state investments in technology continue to expand. In addition, it is expected that domestic research, biomanufacturing and related businesses will look to exit the Chinese market and return back to the United States to occupy vacated spaces.
Beyond American companies, nations like India, Japan, Norway, South Korea and Taiwan already have strong established positions in the market. As Chinese companies leave or reallocate resources, I expect both domestic and foreign operators to capitalize on emerging opportunities to fill the gap.
How can owners navigate the market?
Quite simply, the Princeton market and its highly educated scientific workforce is far too strong to not attract foreign investment. I expect this trend to continue as the future of the BIOSECURE Act comes into greater focus. Although the market will remain a global hub for biotechnology, removing or altering a traditional demand driver like China will lead to both predictable and unforeseen challenges for operators in the area.
Looking ahead, owners will need to continue to invest in their spaces to ensure they can attract innovative foreign companies. Buildings that do not meet modern standards will quickly fall behind in such a dynamic market. It’s also important to be in regular communication with tenants to understand how their businesses are changing to ensure their spaces meet their needs.
By working with an experienced broker possessing unmatched local market knowledge, owners can ensure their spaces are aligned with the needs of both domestic and foreign biotechnology businesses to find success in the current market conditions.Learn more by contacting Fennelly Associates today.
