NKF report: Office leasing market saw a strong start followed by the coronavirus crisis

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Northern Delaware was seeing a strong first quarter -up until mid-March, according to an office leasing market report from Newmark  Knight Frank.

The company has an office in Wilmington.

At that time the global COVID-19 pandemic plunged the Wilmington region (along with the entire country) into not just a health crisis – but an economic crisis as well.

The first quarter of 2020 began strongly with the Wilmington office market tallying its largest quarterly absorption in more than a decade – more than 400,000 square feet.

Propelling the gains were new  leases and announcements of development projects. In a best-case scenario, the robust market conditions noted in the first-quarter 2020 will return when the virus has been contained and businesses re-open.

The record net absorption in the first quarter was primarily driven by the healthcare industry, one of the most recession-resistant sectors.  Christiana Care Health System consolidated numerous administrative and support services dotted across New Castle County into a single location, taking occupancy of the 386,460-square-foot Center Building at $16 Avenue North, a mixed-use complex located at the former AstraZeneca campus north of Wilmington.

While the healthcare provider vacated leased office space in the relocation process, the result was a strong net gain in occupied, statistically tracked office space. Chemical company Solenis joined Christiana Care at Avenue North, relocating within the Wilmington North submarket from 3 Beaver Valley Road and occupying the 87,640-square-foot Pavilion
Building.

Rounding out other significant first quarter tenant activity, Glenmede Trust and Bessemer Trust took occupancy in the 32,000- square-foot expansion portion of 20 Montchanin Road in the Wilmington West submarket.

To the south, Delaware Children’s Department occupied 25,000 square feet at 90 Christiana Road.

In Wilmington’s Central Business District,  PNC gave back two floors at 300 Delaware Avenue. Still downtown saw  smaller tenant expansions and move-ins that offset negative absorption, including Bayard, P.A.’s expansion by 9,000 square feet at Courthouse Square.

Although the full scope of the economic fallout from the current COVID-19 crisis remains to be seen, Wilmington-based law firms may be poised to benefit from potential increased activity as Delaware’s Bankruptcy Court.

Wilmington’s suburbs are increasingly marked by large-scale mixed-use campus redevelopment projects, including Delle Donne & Associates’ Avenue North and Buccini/Pollin Group’s The Concord – the former Concord Plaza.

In the first quarter, fintech company Marlette Funding signed for a 60,000-square-foot build-to-suit at The Concord, indicating the strength of tenant interest in the redeveloped complexes.

Delle Donne & Associates announced plans for a new project that would add another  suburban campus to the list: Delle Donne will purchase a portion of DuPont’s  Chestnut Run area  and work with the  company to redevelop and transform the space into a mixed-use environment.

In the short-term, developers may pause on projects to see if tenants start to shed large amounts of space due to the ongoing economic disruption, but in the longer term, demonstrated tenant interest in these types of projects will lead developers to continue the established trend of repositioning assets through enhancement of further aesthetic appeal, the NKF report indicated 

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