As you might have read in the front page story in the Business Bulletin, we are beginning to see more activity on the real estate /development side of the economy.
Neal Dangello of Newmark, Grubb, Knight Frank reported that tenants are looking at office space, perhaps with an eye toward expansion or upgraded quarters. That’s good news, given the fact that the recovery in northern Delaware office leasing has lagged behind the rate posted in neighboring areas.
To the south, Sussex County is also seeing an upturn, led by a rebound in residential real estate. Residential activity had been depressed in portions of the county for a number of years and a modest turnaround has been in place for a while. The even higher level of activity could also bring more commercial projects.
The residential market is also coming back to a lesser degree in New Castle and Kent counties. Eventually, this activity could translate into more jobs in construction, a chronically depressed area of the job market in recent years. Locally based WSFS also expanded into the sector with the purchase of a mortgage and title company in neighboring Pennsylvania.
The health of construction is reflected in one section of the Newmark Grubb report that reported no new multi-tenant non medical office space has been constructed in New Castle County in the last few years, thanks to uncomfortably high vacancy rates. This comes despite low interest rates and plenty of liquidity among investors.
Even with all the hopeful signs in place, there is no assurance that the activity will translate into more jobs. Shoppers for real estate can disappear in a heartbeat if sharply higher interest rates or other factors, including a national downturn, come into play.
The Newmark Grubb report took note of that possibility regarding the state’s giant banks, which have pledged to add jobs and so far seem to be doing so. Another worry is the perception of the business climate. On the development side, this means we should be worried about the level of not in my back yard attitudes as seen by the opposition to the Barley Mill and Wal Mart projects in New Castle County. These projects are not on greenfield sites, a distinction that should be kept in mind for those worried about sprawl.
We can argue the merits of a retailer like Walmart and its effect on local businesses or the prospects for traffic at Barley Mill. But in the end many businesspeople will be uncomfortable about spending their money, knowing their enterprise could later become an object of scorn.
Regardless, businesspeople are adaptable. Barring other challenges and external events, real estate and development, a sustained upturn, seem to be on steadier footing.
