Office vacancy rate rises  as banks downsize space in downtown

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Office vacancy rate rises as Capital One downsizes space in downtown

The office leasing vacancy rate in northern Delaware rose throughout 2018 as downtown Wilmington saw additional office space enter the market.

A report from the commercial real estate firm Newmark Knight Frank indicates theoverall rate now stands at 17.1 percent The amount of available space is the highest since 2015. NKF operates an office in Wilmington.

Sallie Mae’s occupancy in the first quarter of 57,576 square feet at 90 Christiana Road in New Castle was more than offset in the fourth quarter by Capital One’s departure from half of its 145,080 square feet at 301 West 11th Street in Wilmington’s Central Business District.

In the Wilmington CBD, the vacancy rate rose to 21.1 percent. The Class A vacancy rate rose to 18.7 percent in Wilmington, largely due to the consolidation of space by Capital One.

This figure will further increase in 2019. Capital One will vacate an additional 145,080 square feet at 301 West 11th Street in the first quarter. The sale of Bracebridge I and III in the second quarter and vacating of space will add another half a million square feet to the vacancy figure.

Relief from the high vacancy rates could come from scheduled apartment conversions of existing office space.

Buildings scheduled for multi-family conversion include 901 Market Street (110,000 square feet); 1220 Market Street (93,545 square feet); 913 North Market Street (74,172 square feet); and the Nemours Building, located at 1007 North Orange Street (two floors totaling 66,000 square feet).

The suburban segment, which now accounts for more than half of the entire Delaware office market, has a 14 percent vacancy rate.

Wilmington North was the only suburban submarket to post any negative absorption in the fourth quarter, and even that figure was a paltry 385 square feet. The fourth-quarter vacancy for Wilmington North remained flat at 12.1 percent, with 18,793 square feet of negative absorption for the year.

The Wilmington South (New Castle/Newark)submarket posted 53,261 square feet of positive net absorption for the year. Although vacancy in Wilmington South remained flat at 14.0 percent, Sallie Mae’s occupancy of 57,756 square feet at 90 Christiana Road in the first quarter helped keep the yearly absorption positive.

In Wilmington West (Little Falls and other areas), Bank of America’s occupancy of 42,000 square feet at 2951 Centerville Road in the fourth quarter drove absorption up to 40,451 square feet for the quarter and 31,154 square feet for the year.

The report noted that northern Delaware is seeing new hotels in the Wilmington area that should boost employment numbers. Most, if not all of the activity is on the Wilmington Riverfront.

“The construction industry remains the largest growth market, posting an 11.7% increase in employment over the past 12 months. This is down slightly from the 18.0% figure from August, as rising construction costs and a nationwide shortage of workers have cut into the sector’s ongoing growth. The residential and hospital sectors are the main drivers,” the report noted.

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