Corporate-owned office space continues to move into the office leasing market as big employers restructure their operations.
That was the message coming from the third quarter report Wilmington area office report of Newmark Grubb Knight Frank. The firm has an office in Wilmington. Click here for the full report.
The latest example, according to the firm, took place when AstraZeneca sold the 195,000-square-foot building at 2200 Concord Pike, commonly known as the Rollins Building, to Roch Management, Inc., an investment firm controlled by the founder of Applied Bank.
The sale by AstraZeneca for $10.5 million was the largest transaction. Applied was founded in Delaware as a credit card bank and operates a full service bank in the state with branches in Newark and Rehoboth.
The entire Applied building is currently available for lease. In addition, AstraZeneca is now marketing a two-building, 357,551-square-foot portfolio on its south campus for sale as the company reduces its Wilmington staff by 1,200.
“This phenomenon of corporate-owned assets adding to vacancy is not a new one for the greater Wilmington area,” said Neal Dangello, NGKF senior managing director. “Fortunately, the legal and financial services sectors are showing signs of positive momentum as of late. These sectors have tallied 400,000 square feet of positive absorption since 2012. This is a hopeful sign for our market as law firms and banks are the largest office occupiers in the region.” Still, if the AstraZeneca and Applied office space is added in the county could see its office vacancy rate increase from 19.2 percent in the third quarter to more than 31 percent. The AstraZeneca space will be vacated in the next year or so.
Also on the office leasing market, at least on a short-term basis, are DuPont Co. buildings at Barley Mill as the company builds new office space at Chestnut Run. Plans by Stoltz to convert the Barley Mill site to a mixed use project have been stalled by a court decision over zoning.
“Looking forward, rents will soften amid the backdrop of persistently high vacancy,” said Wills Elliman, senior managing director. “Vacancy increases are largely a result of additions to supply rather than demand deterioration as employment gains in traditional office occupying sectors showed signs of growing, albeit slowly, as of late.”
