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The flight to quality is continuing in both the office leasing and sales market in northern Delaware. North Wilmington (Route 202) is showing the greatest momentum with encouraging signs coming in the city of Wilmington.
“ Route 202 is on fire,” says Rick Kingery, vice president at Colliers in Wilmington. Kingery and other brokers noted the vacancy rate has dropped along the corridor, which had been hit by corporate downsizings at AstraZeneca and elsewhere.
Class B owners face choices
The Collers report for the first quarter noted the continued move toward higher end office space by tenants in New Castle County. That is leaving landlords of some Class B buildings with the option of upgrading or even demolishing buildings.
The big news of late has come in the north Wilmington (Concord Pike) area.
In the past year, the AstraZeneca sold its South Campus to JPMorgan Chase and the once vacant Rollins Building, now the Applied Bank Center, is at or near full occupancy with continuing reports that Wells Fargo is taking remaining space. AstraZeneca earlier sold the building to Buccini/Pollin Group, which in turn sold it to local banker and real estate investor Rocco Abessinio.
“Overall, it seems as if the New Castle County office market has finally recovered from the recession. Tenants are not only active in the market, but they have an actual intent to relocate,” said Neal Dangello, senior managing director at Newmark Grubb Knight Frank. “Moreover, there has been growth in some existing companies (SevOne and Nemours) and new businesses (Kelmar Associates) have set up camp here in northern New Castle County.
The 202 corridor has also been the site of office real estate sales, with 3 Beaver Valley Road and more recently the Delaware Corporate Center sold at prices that reflect a surging market. (See story, this section).
Abessinio’s purchase of the Rollins high rise for a reported $10.5 million is beginning to look like a bargain as the building nears full occupancy.
Dave Morrison of NAI Emory Hill, New Castle, says the overall office leasing market could be more vibrant. “It’s old news, but Delaware lost a lot of jobs,” Morrison says.
More people in less space
Other factors include employers squeezing more workers in less space and technology that allows less space to be used. One example is laptop computers that are replacing large desktop systems and workers working from their homes a day or two a week.
One side effect of more employees being put into less space is a strain on surface parking at suburban office complexes. More parking ramps are likely, Morrison says.
Morrison agrees that north Wilmington is the strongest market. He also notes that Buccini/Pollin Group has plans for the sprawling Concord Plaza office park in north Wilmington that include retail and apartments as well as office space that is likely to be upgraded.
Another success story, according to the first quarter Newmark Grubb Knight Frank report from Research Director Joe Gilbert is the STAR Campus of the University of Delaware.
The STAR Campus saw strong activity after worries a year ago that the former Chrysler Administration Building was struggling to gain traction in the market.
Glasgow Medical Center and Newark’s Independence Prosthetics-Orthotics Inc. moved into the 69,321-square-foot office have building.
SevOne comes to STAR Campus
Technology company SevOne is slated to occupy 50,000 square feet this summer and Delaware Technology Park Laboratory Incubator could occupy up to 10,000 square feet in coming months, virtually filling up the building.
Leasing is said to be running ahead of schedule at the site being developed by Delle Donne and Associates and built by Bancroft Construction Co.
Downtown Wilmington is also showing promise, according to Kingery of Colliers. One positive sign came with a reduction of Class B office space, due in part to the demolition of the Jefferson Plaza building in downtown.
“I couldn’t be more optimistic,” Kingery says of downtown. He adds that the pieces are being assembled for a more vibrant downtown as Buccini/Pollin adds apartments that will bring in more young people who want access to transportation options that include the train station.
The legal market, which drove growth in downtown leasing for a time, has slowed down somewhat, brokers say. Fewer law practices are being spun off from existing firms.
Law firms are also changing their office configurations and eliminating law libraries, leaving more room without more square footage.
Bankruptcy law concerns
Another concern is legislation on the location of bankruptcies cases that could lead to fewer firms choosing Delaware. While crime remains a big story in the city, brokers say safety is not a huge concern with employers and landlords. Amenities, such as cafeterias and secure parking, ease those fears. Also crime remains relatively low in downtown.
As for the remainder of the year, the report from Newmark Grubb Knight Frank is modestly upbeat.
“Demand is expected to remain relatively stable for the balance of 2015,” according to the firm. “As has always been the case in this market, a few larger leases may sign this year that could grow occupancy significantly in the near term. But, these leases are far from certain and a large vacancy swing may not be in this market’s future for 2015.”
The Colliers report stated that the” suburban market is primed to have a strong 2015 as an influx of new debt sparks an increase in renovations. Price wars for non-trophy office space in downtown Wilmington will continue as landlords fiercely compete on rents”
