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High-end office buildings are faring well in downtown Wilmington, mirroring a nationwide trend,
Despite generally soft office market fundamentals, new analysis by CBRE Research shows vacancy in downtown Wilmington’s trophy office buildings sits at 8.2 percent, versus a vacancy rate of 25.4 percent for the remainder of the downtown market.
The average full service asking rate for downtown Wilmington trophy space was $32.65 a square foot in the first quarter, on par with the trophy class of Suburban Philadelphia (8.4 percent, $32.97 per square foot .) and not far below trophy buildings in Philadelphia’s CBD (5.2 percent $34.96 per sq. ft.).
The trend accelerated over the last two years. The vacancy rate in trophy offices dropped significantly between late 2013 and early 2016, while vacancy in the rest of the market continued to rise.
The disparity between the trophy buildings in the Wilmington central business district and the rest of the market is more extreme than in suburban markets.
“Users of office space are shifting their presence to trophy buildings for several reasons,” said Ian Anderson, CBRE’s director of research. “Technology and workplace efficiencies have reduced the amount of space required to conduct business and, consequently, enabled some organizations to afford the higher rents.”
Attracting employees is another trend driving the trophy building market.
“Many employers are realizing, to attract the best and brightest, they need to offer the shiniest and best-located workplace. As a result, markets across the region and the country see an increasing gap between the top buildings in the market and the remaining product. Wilmington has joined the multitude of markets where commodity office product has frequently become outdated and undesirable,” Anderson said.
More young professionals are choosing to live in cities versus the suburbs, an urban core like Downtown Wilmington benefits.
“Demand for residential apartments and retail services increases, which is evidenced by the spectacular renaissance along Market Street. Ultimately, these trends support demand for top-quality office space as users seek live-work-play environments with amenities,” the report stated.
Meanwhile, owners of older, outdated real estate are expected to convert their properties to new uses. One long-vacant office building in downtown is being converted to a hotel.
CBRE Group, Inc. is the world’s largest commercial real estate services and investment firm (in terms of 2015 revenue.
The company has more than 70,000 employees and 400 offices, including a branch in Wilmington.