Amazon drives Delaware distribution market surge

Amazon will occupy a 3.8 million-square-foot distribution center at the former GM Boxwood plant, its biggest
investment in Delaware so far, starting this summer. | DBT PHOTO BY MIKE ROCHELEAU

WILMINGTON – The findings of a recent brokerage report that Amazon’s practically insatiable growth is leading to a boom of industrial and distribution space in Delaware probably won’t surprise many.

The sheer scale of that growth may though.

The e-commerce giant had 7 million square feet of space in Delaware either in operation or under development as of February, according to a report by Newmark, a major brokerage that closely tracks the state market. With last-mile delivery centers announced in Delaware City, Newport and Seaford, Amazon now has more space under contract than the entire Wilmington central business district, which measures 7.3 million square feet.

“It’s hard to overstate the ‘Amazon Effect’ in the First State,” Newmark research manager Lisa DeNight wrote, noting that only the San Antonio market has more square footage under development by Amazon than Delaware.

In New Castle County, 5.9 million square feet of industrial space was under construction as of February, and 90% of it was pre-leased. That development pipeline represents nearly a quarter of Delaware’s existing industrial inventory and exceeds the combined volume of space delivered in the past 20 years.

Industrial development, much less institutional-grade projects, has been scarce in Delaware in recent years. As land dwindles in other popular regional areas like the Lehigh Valley of Pennsylvania and parts of New Jersey, however, more developers are turning their sights south.

Three major projects – the 142-acre redevelopment of the former GM Boxwood plant by Dermody Properties in Newport, the 190-acre redevelopment of the AkzoNobel plant by Northpoint Development near Delaware City, and the 125-acre development of Blue Diamond Park by Stoltz Real Estate Partners near Bear – have turbocharged that interest in the past few years. All of them are now home to Amazon projects.

DeNight noted that industrial growth nationwide has been trending toward secondary markets like Wilmington over the past few years, not because rents are typically cheaper there but because more space is available in favorable areas, typically near highways.

“It’s all about location,” she said, explaining that “first-mile” warehouses like the 3.8 million-square-foot distribution center planned for Boxwood can feed into a network of smaller “last-mile” delivery centers before reaching your doorstep.

John Taylor, director of economic research for Delaware Prosperity Partnership, the state’s economic development agency, said Delaware “certainly has an opportunity for further growth in distribution throughout the state” even aside from Amazon.

“Other distribution companies like USA Fulfillment have announced growth in Kent County, while companies like Dart Container and Newacme have targeted New Castle County,” he said. “Having national developers like Dermody Properties and NorthPoint enter the Delaware market is a major win for Delaware, and that space was absorbed pretty quickly between Amazon and others.”

DeNight agreed and said that the arrival of institutional developers like NorthPoint and Dermody, who have existing relationships with Amazon and other large companies, have accelerated the growth in Delaware.

Wills Elliman, senior managing director for Newmark’s Wilmington office, noted that he’s also dealt with clients looking for 100,000 square feet or more in the area because they supply Amazon. He noted that Bentonville, Ark., saw such a buildout around the headquarters of Walmart despite being far-flung from a metro market.

While DeNight said that there are still parcels large enough to develop into further distribution and logistics sites in New Castle County, development may begin to creep farther south as Route 1 provides a convenient path up to Interstate 95.

“A good example is Salem County, N.J., which was just nothing on the end of the New Jersey Turnpike, and now it’s a very competitive part of South Jersey’s industrial landscape,” she said.