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Delaware’s industrial sweet spot remains on the small side

June 19, 2025 |By Katie Tabeling

Amazon has leased out small distribution centers, like this one in Seaford, to "mega warehouses" in Newport. While Amazon is considering another multi-story facility, experts find that Delaware's best serve in the small warehouse sector. | DBT FILE PHOTO BY KATIE TABELING

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Amazon’s prospective second mega-warehouse in Delaware could help highlight the core strengths of the state’s industrial market, though experts say that developers will likely need to see leases signed before more space is built. The announcement that Amazon would copy its existing “next generation” five-story building in Newport follows early signs of new warehouse spaces coming online, like First Industrial Realty Trust’s warehouse in Claymont and the future Aldi distribution plant in New Castle. In total, Newmark tracks 36 million square feet of industrial space. But those projects are outliers and not the norm, according to commercial brokerage firm Newmark. The firm’s research found that 2% of the total industrial inventory in northern Delaware is under construction and many large buildings are still seeking a tenant. “Along the I-95 corridor, there’s been a district pain point with absorption of large spec buildings. There’s been some deals done, but there’s also been a bunch of buildings that are still seeking a tenant,” said Nick Pickard, Newmark managing director who focuses on industrial space in eastern Pennsylvania markets.  “Wilmington has punched above their weight in some regards with leases like Pepsi with First State Industrial, but Delaware as a whole has the ability to scale faster,” he added. “There’s an ability to buy sites at a discounted rate and get the buildings a little bigger. We just need those tenants to come.” Amazon’s interest in Middletown highlights a lot of the state’s strengths in labor and land costs compared to Philadelphia and New Jersey, as well as access to 100 million people within an overnight drive. But still, the market is still not quite oversupplied or hurting for space yet. “I like to say Delaware and the Greater Philadelphia industrial market is like a tortoise. It’s slow and steady. It’s active but it’s pretty well-balanced in terms of supply and demand,” said Carolyn Bates, Newmark Regional Research Director for the Mid-Atlantic Region. One firm that knows the market better than others right now is Harvey Hanna & Associates which owns 3 million square feet of industrial space in the Delaware market. That firm was the first to see what the former General Motors plant could be and eventually set the foundation for the first Amazon “next gen” warehouse. “We’re generally sub-500,000 square feet of space and we’re below market vacancy. The largest one we have right now for what’s built is 50,000 square feet,” Harvey Hanna Portfolio Manager Greg Ellis said. “We have a number of tenants that are 100,000 square feet that are looking to expand.” Harvey Hanna works with a diverse pool of tenants, from the Tile Market of Delaware to pickleball facilities to shift gear manufacturers that adapt nicely to the pre-engineered metal buildings that can be flexible for tenant needs. It’s been so successful that Harvey Hannah has eyes set on a new project in New Castle with no tenants lined up. Harvey Hannah Director of Development Thomas Harvey is confident that the site will find a tenant soon, even with the economic headwinds of high interest rates and material costs. “Typically, that does make tenants put a pause on things like expansions and extensions. But our space isn’t rolling over. We’re retaining tenants and seeking solid demand,” Harvey said. It’s less likely there will be more robotics in new flex warehouses, as companies like Amazon and even Pepsi and Aldi design their industrial space with their specific needs in mind. But with advanced manufacturing and data centers on the rise, there’s a heightened demand for energy. Developers will likely question whether the foot slab is strong enough to hold thousands of pounds of machinery and hif the local electric grid is reliable enough to handle the demand. “So long as we can try and provide those things like electric, sewer and good roads - that’s not so specific and generally marketable- I think is the best way to position ourselves. I think we’re positioned well and future proofing our buildings,” Harvey said.