Somerset County, which dates back to its agricultural roots in 1688 and is now one of the world's foremost
pharmaceutical industry centers, still maintains its historical rustic presence. The county, however, along with
those of Middlesex and Morris in northern New Jersey, is undergoing a surge in office space and mixed-use
development, and this is producing a new wealth of hotel demand for the area. Northern New Jersey's hotel
market and submarkets have benefitted from major corporate expansions over the past several years, which
have brought a substantial rise in corporate lodging demand. This HVS Market Pulse report details the area's
major economic entities and office-space expansions and their impact on the local lodging market.A Diversity
of Major Demand GeneratorsSomerset County's proximity to New York City brings the benefit of additional
travelers through the area, especially those generated by consumer services. Yet while continuing to draw
from New York City's roaring economic engine, the economy of northern New Jersey boasts many of its own
economic cornerstones and major hotel demand generators. Fortune 500 mega-companies including Verizon,
Pfizer, Johnson & Johnson, GlaxoSmithKline, MetLife, and AT&T are the most prominent pillars of the greater
northern New Jersey economy and continue to produce high volumes of commercial room nights for local
hotels. Employers in the fields of biotechnology, health care, and pharmaceuticals are deeply entrenched in
Somerset, Morris, and Middlesex Counties. These counties have long been preferred destinations for
pharmaceutical and healthcare corporations because of the presence of an educated workforce and the
nearby Newark International Airport. Hotel demand generators in Middlesex County include the shipping and
distribution companies in Raritan Center and the Technology Centre of New Jersey, which was established by
the New Jersey Economic Development Authority as a high-tech business park. The Technology Centre's 75-
acre campus, located in a research-and-development (R&D) corridor between Princeton University and
Rutgers University, was designed to meet the needs of emerging R&D companies in the advanced materials,
biosciences, communications, and microelectronics industries. Also in Middlesex County, Robert Wood
Johnson University Hospital (RWJUH) is a 610-bed academic medical center affiliated with Rutgers, The State
University of New Jersey. U.S. News & World Report ranks the hospital as one of the best in America for its
cancer and pediatric urology specialties. Construction began on a seven-story parking garage topped with
two stories of medical office space in early 2014, and the hospital was approved for an additional tower to
house new intensive-care units, operating rooms, private patient bedrooms, and a pavilion. In the past year,
three major corporations have announced plans to move to Somerset County. Just this summer, Linde
Americas, one of the world's largest gas and engineering companies, relocated into the Somerset Corporate
Center. Daiichi Sankyo, the second-largest pharmaceutical company in Japan, is in the process of moving its
headquarters to the former Avaya headquarters in Basking Ridge, and employees are expected to begin to
transition to the new building in 2017. In addition, Nestle Health Science announced its move to the former
Sanofi U.S. Research and Development Campus in Bridgewater. A $250-million makeover of this property is
anticipated to begin next year.Transforming Office Space into "Metro Burbs"According to REIS, the greater
northern New Jersey market offers over 100 million square feet of office space. Northern New Jersey, which
has always been a bedroom community for New York City, continues to offer tax incentives and lower rents to
entice Manhattan office tenants to set up shop over the state line. The area's office space offers Class-A
features similar to the office buildings of New York City, though with more space at considerably lower prices.
Most recently, developers have been seeking to transform vacant suburban office parks in northern New
Jersey into attractive mixed-use developments. A prime example of this repositioning can be seen in
Somerset County, where the redevelopment of the New Jersey Center of Excellence is planned to include 400
luxury residences, restaurants, a wellness center, a grocery store, entertainment venues, shops, and outdoor
recreation. In Morris County, the Mack-Cali Realty Group recently acquired a vacant 150,000-square-foot,
three-story, Class-A office building. The scope of the renovations is expected to include a full-service fitness
center, a business-class conference center, and numerous dining options. The potential gain for northern
New Jersey hotels from these office-space opportunities and mixed-use developments comes in part in the
form of better average rates, as the spaces should draw higher-rated clientele. These developments should
also reinforce the market's strong foundation of commercial demand.OutlookPharmaceutical and healthcare
companies, many belonging to the Fortune 500, underpin the economy of northern New Jersey, which is
going through a period of growth. The strength of the area's office market also continues to attract high-
rated, long-term tenants. Hotel occupancy in the market is anticipated to remain stable, with RevPAR and
average rate gains supported by the area's high level of corporate demand. With the local economy expected
to continue to grow, the outlook for the northern New Jersey hotel market remains positive.