The first half of 2025 brought more questions than answers for the Greater Princeton office market, and that’s not surprising.
In a period marked by global uncertainty, economic policy shifts, and institutional disruption, many tenants and investors understandably hit the brakes. As we move into the second half of the year, there are early, encouraging signs of forward movement.
This market isn’t collapsing. It’s recalibrating.
Let’s start with the big picture. The Princeton office market includes over 26 million square feet of speculative office space. As of July 2025, vacancy sits at 23.93% overall, with Class A space at 32.38%, still elevated, but not accelerating. In fact, certain parts of the market are already adjusting:
- Velocity picked up in Q2, after a slow Q1
- Demand is holding steady at about 650,000 to 700,000 square feet/year
- A flight to quality is creating opportunity for modern, flexible buildings
- Demolitions and conversions are reducing obsolete supply
There’s a clear pattern here: the first quarter was cautious, but by Q2, tenants began to re-engage, with multiple sectors contributing to absorption.
What caused the initial pause?
According to the report, it came down to three key shocks:
- Tariff instability – Corporate budgets tightened as U.S. trade policy with China and the EU fluctuated. By midyear, companies had accepted the volatility and resumed long-term planning.
- Loss of federal research funding – Princeton University lost $500 million in NIH and NSF grants. That disrupted the innovation ecosystem and slowed demand for R&D and lab-adjacent office space.
- Geopolitical risk – The June 22 bombing of Iranian nuclear sites and rising Middle East tensions drove up oil concerns. Although prices have remained manageable, the possibility of inflation looms.
Yet even with these headwinds, the Princeton market is proving resilient.
The second quarter brought a string of new leases, expansions, and repositionings. The office/technology category alone accounted for 206,000 square feet of new demand. Medical and pharmaceutical tenants – including Capital Health, Sun Pharma, and ANI Pharma – are expanding their presence, while nonprofits and municipalities like Robbinsville Township are stepping in to fill space through large bank (47,000 SF) subleases.
On the investor side, the tone is shifting, too. While 2023 and early 2024 were dominated by deep discounts and right-sizing, we’re now seeing select buyers pursue strategic opportunities. Renovated and well-located buildings – particularly those with strong amenity packages – are finding a market. There’s a clear flight to quality, and tenants are willing to pay more per square foot for the right product, even if they lease less overall.
Another quiet positive? Obsolete buildings are coming offline. More than 1 million square feet have already been repurposed or demolished, including sites like 3131 Princeton Pike and parts of the Dow Jones campus. That takes direct competition out of the leasing market and helps stabilize occupancy rates.
Of course, challenges remain. Remote work is still dampening the average deal size. According to the report, average lease sizes dropped 30% in the first half of 2025, and overall velocity was down 20%. However, those numbers are expected to improve modestly in the back half of the year, especially if interest rate cuts, which the Fed is actively signaling, begin to materialize.
This is why we call it a pivot point. There’s no surge. No boom. But there is a shift underway – from hesitation to action, from fear to recalibrated confidence.
At Fennelly Associates, we’re seeing it play out firsthand. We’re placing tenants in rightsized, high-quality spaces. We’re advising landlords on repositioning and re-pricing. And we’re helping buyers identify value before the competition sees it.
If you’ve been waiting for a signal that it’s time to re-engage, this is it. The data is clear: the pause is giving way to progress.
Let’s make sure you’re positioned to take advantage of it. Reach out and we’ll talk.
