A second-quarter report from commercial real estate broker Newmark, Knight, Frank shows downtown Wilmington dealing with a glut of office space.
With more than half a million square feet of former Bank of America space in downtown hitting the leasing market,, the vacancy rate in downtown rose from 16.1 percent to nearly 23 percent. The vacancy rate is likely to head higher in the coming years due to Amtrak and Capital One’s consolidation.
On the plus side, the report pointed out the ability of downtown to spring back, citing its location on the Northeast Corridor, an inventory of office space and a well-educated workforce.
The combined northern Delaware vacancy rose from 14.3 percent to 16.6 percent as suburban areas fared well.
Connections CSP moved into 64,992 square feet at 590 Naamans Road in the Claymont area. The suburbs saw a 12.3 percent vacancy rate and a tight supply of prime space.
By contrast, downtown is now seeing one of the highest vacancy rates of any office submarket in the Greater Philadelphia area.
The last time Wilmington’s CBD market witnessed vacancy at such heights was in 2015, following the retraction of Ashland Inc. from Hercules Plaza.
“Yet, over time the submarket rebounded due to a combination of organic demand growth and thoughtful repurposing of existing vacant office space into more community-enriching uses,” the NKF reported noted.
Downtown has seen some office space go off the market. The 1220 North Market Street building was removed from statistical inventory following its sale to a Florida-based hotelier, Driftwood Hospitality Management.
The property, located in a Qualified Opportunity Zone, the office will undergo conversion into a hotel, joining more than 500,000 square feet of new development in multifamily and hospitality projects underway in downtown.
“The downtown is experiencing a real renaissance as a vibrant destination to visit – and in which to live – and it is likely that its quality office supply featuring competitively priced large-block availabilities will eventually attract more companies to participate in the popular live/work/play model,” the report stated.
The downtown conversions from office also mean suburban areas of northern Delaware now account for a large percentage of leasable office space in the market.
