Expect another year of improvement in Wilmington’s commercial real estate market, a CBRE report indicates.
The commercial real estate firm operates an office in Wilmington.
Occupancies should rise in more of the region’s of office buildings, despite a “ fight to quality” in office space that has greatly helped Class A “trophy” buildings. In Wilmington, the report states.
Meanwhile, residential development activity remains strong in downtown Wilmington. Retail and industrial properties throughout the region should also continue to see improving demand. That should also help sales to investors.
In the first quarter of this year, total office-using employment in the Wilmington region passed the 2007 peak and hit 102,310.
Much of the statistical information came from Moody’s Analytics.
Despite the trend toward more people being packed into less space, the growth in jobs forecasted for the next two years (7,200) should drive down the vacancy rate.
The reported noted that users of office space are moving to Class A buildings, especially “trophy” buildings for several reasons. Technology (digitization of files, reduced size of computing equipment) and workplace efficiencies telecommuting, less individual space, more collaboration space) have reduced the amount of space required to conduct business and, enabled some organizations to afford the higher rents. As a result, vacancies in “trophy buildings” have decreased in recent years.
One sign of the strength of the “trophy” space in downtown Wilmington comes in occupancy and rental rates that rival those of other “trophy” buildings in downtown and suburban Philadelphia.
Another driver will be population and income growth. While growth in the Philadelphia region is flat, the Wilmington area has seen faster growth, the report noted.
Apartments, will be a part of this growth, the CBRE report indicated. A preference for living in urban areas and a desire to rent, rather than own, is fueling the trend here and elsewhere.
CBRE reported that 4,000 new apartment units added in the past four years. Despite this 38 percent increase in inventory, occupancy levels have remained strong in the 93 to 95 percent range. Increasing demand has pushed average monthly rents above $1,100.
The CBRE report noted that In the last three years, approximately $575 million worth of office properties has changed hands. Between 2006 and 2008, the amount was only $360 million.
In the past three years, $480 million of apartment properties have changed hands in the Wilmington region.
In response to the current market, the conversion of older class B & C office buildings will continue as owners seek to maximize value by converting the space into apartments.
