Despite high vacancy rate, brokers bullish on Wilmington
WILMINGTON – Although about a quarter of the city of Wilmington’s office space is currently sitting vacant, brokers believe there are reasons to be optimistic about the city’s commercial real estate future.
Panelists at the fourth annual Delaware Commercial Real Estate Forecast Conference, hosted by the Mid-Atlantic Real Estate Journal on Nov. 6 at the Sheraton Wilmington South Hotel, described a market that has a few “problem children” buildings in Wilmington, but strong undercurrent trends in office space.
Wills Elliman, senior managing director at Newman Knight Frank, reported that his brokerage tracks a Class A vacancy rate of 23.8% in the city, representing about 7.4 million square feet.
Of the 21 buildings that comprise the central business district market, however, representing about 5.33 million square feet, there are five buildings that are the “problem children,” Elliman said, noting they total more than 1 million square feet of vacant space and about 19% of the vacancy in the city. “Those five buildings are the elephant in the room … if we eliminate those buildings, we’ll be great.”
Among those with more than 100,000 square feet available are 301 W. 11th St.; the Brandywine Building at 1000 N. West St.; the Hercules Building at 1313 N. Market St.; and Bracebridge I and III at 1100 N. King St. and 1100 N. French St., respectively.
“Hopefully (Delaware Prosperity Partnership) can pull something out of a hat in terms of getting someone from out of state,” Elliman said of filling these large vacancies that most prospective tenants don’t look at.
Jamie Vari, senior vice president at JLL, said that according to his brokerage, which typically doesn’t track Class C listings, 28% of the total Wilmington central business district is vacant while only 4% of the Riverfront is vacant.
“When you really start breaking down these numbers and understand how these subsectors operate, you can look at the trophy building market and see an under 10% vacancy,” he said of buildings that are newer and amenity-rich. “The trophy market has seen rent growth above $30 per square foot.”
Vari said that the average city tenant is 6,800 square feet, which excludes many of those “problem child” listings, large as they may be. “I think the city of Wilmington is a little less of an Armageddon story,” he added.
Elliman agreed that there are winds of change at work in the city, especially developer Buccini/Pollin Group, the city’s largest property owner that has also built housing and office space along with the 76ers Fieldhouse.
“Buccini has done an amazing job in Wilmington, and they just bought the Brandywine Building and put themselves in 56,000 square feet there. There will be much more energy downtown with them there,” he said.
Prospective tenants are increasingly asking about amenities in the market, including access to public transportation, parking, fitness centers, conference centers, dining and more, which the city is increasingly offering.
“There is some vibrancy coming to town. There is a cool factor that we didn’t have before,” Vari said, pointing to the DECO Wilmington food hall and increasing multi-family living options.
Vari noted that many major employers are holding access to public transit, especially regional rail, with increasing importance due to its ability to connect qualified workers from farther afield of their offices.
Corporate clients like AstraZeneca are also putting less value on dedicated working spaces for individual employees, creating shared spaces for employees that allows them to cut down on their footprints, he said.
“We represent a tenant in the market today that is trying to achieve 68 square feet per person,” he said. “Office space is getting denser.”
Outside of the city, northern New Castle County has a 6% office vacancy while the southern county has 15% vacancy rate, Vari reported.
“In the northern suburbs, it’s the tightest office market that we’ve seen in a decade,” he said, noting there may be some movement to below the canal in coming years where rents are cheaper.
By Jacob Owens