Like every North American office market, Delaware has endured its share of hardship over the last couple of years, culminating in the expectation for an improvement in conditions during 2015.
In the last six months of 2014, while the average class A vacancy rate dropped, full service lease rates remained relatively stagnant. Given that rental rates are not experiencing major changes, it is implied that there has not been, nor is there expected to be, an increase in demand for the construction of new office space.
It can be surmised that the office market will experience positive absorption in 2015. Governmental initiatives are in place to enhance the market’s appeal for new businesses considering locating in the state.
The Delaware Economic Development Office is actively engaged in negotiations with prospective users on a regular basis. Combining these initiatives with the willingness of landlords within the marketplace to negotiate more palatable deals, provides further indication that absorption in the marketplace is imminent.
Delaware Retail: Great Real Estate = Great Tenants
If you have it, they will come. If you don’t have it, but build it, they will come.
The Delaware retail market has rebounded impressively in the wake of the protracted recession. Significant vacancy levels created by the downturn rapidly evaporated, even with the construction of a significant amount of new retail space during that time.
The rapid recovery can be primarily attributed to landlord willingness to modify earlier leases to provide struggling tenants the time and latitude to reestablish profitability, and secondly, the readiness and willingness of municipal planners to move new projects through approval processes on an expedited basis.
National retailers and restaurants have flocked to the state to join existing centers, as well as several new major projects, including an expansion and renovation of the Christiana Mall, and the development of large projects in Middletown, Dover, Georgetown, and Millsboro. Both Middletown and Millsboro, once considered tertiary or middle-markets by retailers, have evolved into substantive consumer markets.
Middletown is expected to add over 1 million square feet of retail space in the coming decade, and preliminary plans of several large retail projects show a similar amount of developable retail space in and around Millsboro.
In part, the addition of national retailers in these markets, and the opening of premier national retailers like Cabela’s at Christiana Mall, can be attributed to the sales tax free shopping offered by the state of Delaware to not only its own residents, but to residents of other states that are willing to travel here to purchase large ticket items to save significant money in sales tax.
Additionally, the migration of retirees to Delaware, particularly Sussex County, continues to feed an already growing population that demands commercial goods and services. This expansive retail development and growth cycle throughout the state is expected to continue into the foreseeable future.
(Tripp Way is managing partner at DSM Commercial, Newark Delaware and can be reached at tway@dsmre.com)
