By Peter Dodds and Jud Henderson
Historic, iconic, and distinguished, Princeton combines the charm and academic and cultural resources of a college town with the power of three major industries — pharmaceuticals, technology, and financial services. Its excellent public and private schools, theaters, museums, shops, restaurants, recreational options, and a prime location between New York and Philadelphia draw a diverse, educated, and tech-savvy demographic who find it a great place to live and work.
The town’s economy and growth depend largely on the availability of commercial and residential real estate. And as in any dynamic economy, there have been many changes in Princeton’s real estate market that will influence buyer’s decisions to reside or do business here.
Princeton’s commercial real estate inventory has changed to accommodate the profound changes in office space that has transformed from closed doors and cubicles to wide open spaces. Millennials are driving these revolutionary new offices and collaborative work spaces, disrupting corporate hierarchies, exchanging vital technical information, and redefining social interactions. Their entrepreneurial spirit and a global economy has changed 9 to 5 to 24/7, creating flexible and often long business hours. Princeton attracts these businesses with its small-town vibe, safe environment, exceptional amenities, and easy access to stores, restaurants, and Princeton University.
Today Princeton’s commercial market is clearly defined. Where once the town businesses consisted largely of attorneys and other professionals, companies reflect the wider business trends impacting its core businesses. Pharmaceutical companies continue to downsize their labs in the area, and smaller research and support companies have moved into the available spaces. As financial services continue to grow, private equity and wealth management firms have expanded into new and larger spaces. Tech firms, particularly biotech and pharma startups, are drawn to the area’s many academic and technical resources and possibilities of attracting new clients and funding. These trends will impact commercial and residential real estate as businesses draw new and younger professionals and current residents downsize or expand.
With stately mansions, grand Victorians, historic homes, classic ranches, architectural gems, modern houses, and contemporary condos, Princeton’s housing stock spans virtually every period of American history. While these options do not come cheaply, the quality of life, cultural and educational opportunities, and sound investment value can make Princeton an inviting choice for families, young professionals, and empty nesters.
However, as in any market, factors come into play that impact sales. 2018 marked the first year since 2009 that Princeton was down in both the number of sales and the average sale price. (In 2018 and the first quarter of 2019, we have seen a drop in the Princeton market, at its lowest since the recessionary days of 2009.) The trend continued into January and February, although admittedly slower months, with inventory up a significant 49 percent year over year. This high inventory and lower sales are not reflected in surrounding areas such as Hopewell and Lawrenceville, where home prices tend to be substantially lower.
Another of these factors is the loss of deductibility for mortgages. The Tax Cuts and Jobs Act (TCJA) altered two important tax breaks for homeowners. The old tax laws allowed itemized deductions on property taxes paid to state and local governments. The law also provided deductions on income and sales taxes. The new law limits these deductions, in total, to $10,000 for both individuals and married couples. Of course, $10,000 does not come close to covering the combined property and income tax bills in New Jersey.
The residential market relies largely on local buyers who are committed to the area because of jobs, schools, and family needs. Millennials purchase first homes, families are moving into larger spaces and empty nesters are downsizing into condos and rental apartments.
Rental units, particularly luxury apartments built in the last three years, are doing well, offering a range of services and facilities and renting from $2,500 to around $9,000 per month. Homeowners who find the market slowing down may opt to rent rather than selling at a lower price.
Despite these challenges, there are many reasons to sell now. Traditionally, there are more buyers in the spring and current interest rates remain low. And, the Princeton market is showing a promising recalibration of prices that should generate sales.
On Tuesday, April 23, the Princeton Merchants Association will host its annual Local Real Estate Panel. Peter Dodds of Morford & Dodds Realty and Judson Henderson of Callaway Henderson Sotheby’s International Realty, alongside architects and property managers, will discuss the state of residential, office and retail activity and trends in Princeton real estate. The meeting will at the Princeton Public Library Community Room. Visit www.princetonmerchants.org for more information.