James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, an expert on demographic changes in the office market.

 

NEW BRUNSWICK, NJ—Radical changes in how the pharmaceutical industry develops new drugs are having a significant impact on the kind of office space drug companies will use in the next several decades, James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, an expert on demographic changes in the office market, tells GlobeSt.com exclusively.

Hughes, co-author with Rutgers Prof. Joseph Seneca of the Rutgers Regional Report, “Reinventing the New Jersey Economy: New Metropolitan and Regional Employment Dynamics,” tells Globe Street.com that New Jersey is likely to see some continued demand for administrative office space for corporate headquarters, but that research facilities are more likely to be situated near university centers of excellence in the life sciences, making cities like Boston, Cambridge, and San Francisco more attractive.

Hughes believes the market is likely to see more transactions like the sale of the Novartis research campus in Suffern, NY, reported last week by Globe Street.com. The old model in mergers usually meant that companies consolidated in the facilities of the acquiring company, but changes in the pharmaceutical industry’s approach to research mean that is not always going to be the case, says Hughes.

“These companies are spending less money on research versus creating scouting staffs to identify and acquire new companies,” as the trend moves from pure chemical research in pharmaceuticals to more of a focus in the biosciences, says Hughes.

“Old pharmaceutical companies had a need for high security in isolated suburban fortresses,” says Hughes. “They didn’t want their scientists talking to other scientists.”

Roche, part of F. Hoffman-LaRoche, had a major office and research campus in the Nutley area. However, when it acquired biotech firm Genentech in California, Roche centralized research at the Genentech facilities, to take advantage of the company’s more nimble structure. Roche is now in the process of selling its Nutley campus, which has been a major presence for decades, says Hughes.

Similarly, Sanofi Aventis in Bridgewater, NJ, which acquired Massachusetts-based Genzyme, has closed its laboratories in New Jersey and moved the bulk of its research to Cambridge, MA. Sanofi’s US headquarters remains in Bridgewater, and other pharmaceutical companies maintain administrative and headquarters facilities, such as Johnson & Johnson in New Brunswick, says Hughes.

Millennials are also more interested in working in edgier urban environments, such as the relocation of Glaxo Smith Kline from suburban and Center City locations in the Philadelphia market to a new facility in the Navy Yard in South Philadelphia, near the sports complexes and some trendier restaurants and clubs, he says.