WILMINGTON – With offices emptied, restaurants and bars struggling amid reduced capacity and an uncertain outlook for what the post-pandemic “normal” will look like, it would be understandable for Delaware’s largest landlord to be worried about the state of the commercial real estate market.
Instead, the Buccini/Pollin Group (BPG) signed leases for nearly 1 million square feet of space companywide worth about $300 million over the 12 months of the pandemic. In Delaware, BPG notched 459,000 square feet of leases worth about $80 million – more than the firm signed in Pennsylvania, where it has considerable holdings in Philadelphia and Pittsburgh.
The signings in Delaware include a 10-year lease by Marlette Funding, owner and operator of the Best Egg consumer lending platform, for 60,000 square feet at The Concord north of Wilmington, a more than 58,500-square-foot renewal by health insurer Cigna at the Bellevue Corporate Center, and a 14,000-square-foot lease by manufacturer Taghleaf Industries at the Iron Hill Corporate Center near Newark. In the city of Wilmington, BPG signed Delaware Claims Processing to a 67,000-square-foot lease and Citibank to a renewed nearly 69,000-square-foot lease in the Brandywine Building, while signing manufacturer SSM Industries to 80,000 square feet off A Street.
Chris Buccini, co-president of BPG who leads its commercial leasing practice, said that the firm has overwhelmingly seen tenants looking to keep their space, but renew for a shorter period of time. Those renewals, often for three years, give large corporate employers time to bring staff back, assess their future needs and negotiate a future, longer lease.
“I think you’re going to start seeing people come back into the office in April-May-June time frame, but the majority will come back in the summer,” Buccini said.
About 25% of BPG’s tenants have returned to offices, Buccini estimated, but added that the momentum is building.
“We see it literally week by week. You can feel the increased level of vaccinations and so we’re starting to see people come in,” he said, noting that foot traffic at BPG’s DECO Food Hall in downtown Wilmington has been ramping up. “We’re seeing every single week that the revenue goes up [at DECO], and that is a direct indicator of who’s coming back to work.”
Buccini would know, as the firm was among the first to fully return staff to offices last June. They had hoped to stress test what their tenants would face when they hopefully returned to offices around Labor Day 2020 – a target that came and went as the pandemic continued.
“I think we were literally the only office that had everyone there,” he said of their 110-person central office staff. “As an office landlord, we wanted to be up there serving and leading from the front.”
Buccini credits that move with the reason why they were able to continue a robust sales year despite the pandemic.
While layouts may change for future workplaces and density may decrease to levels seen decades ago in an effort to lessen the risk of transmitted viruses, Buccini believes that ultimately most employees will return to offices post-pandemic, both because employees will tire of working from home and that employers will want to strengthen their corporate culture.
That would spell good news for BPG, which is also the largest residential landlord in the city of Wilmington. Its residential leasing also held up well last year, with its units 90% occupied right now, Buccini. It’s preparing to open several hundred more units at The Cooper in the Lower Market community after adding 200 to the DuPont Building last year.
With major employers like Goldman Sachs beginning to put roots in the city and the “Biden effect” of having the presidential connection here delayed by COVID-19, Buccini said there are plenty of reasons to remain bullish on growth here.
“When you really peel away and look at the underlying fundamentals of the office market and Wilmington, it really is strong for the next few years,” he said.
