WILMINGTON – The northern Delaware office market has continued to improve from a rough start to 2021, with the third quarter showing vacancy rate decreases in reports from all four major commercial real estate brokerages.
The New Castle County office market’s vacancy rate fell 70 basis points in the second quarter to 17.5% as nearly 160,000 net square feet was leased in the period, according to Newmark, the national brokerage that most closely tracks the Delaware market. Regional reports from brokerages CBRE, JLL and Cushman & Wakefield all reported vacancy decreases between 10 and 110 basis points last quarter. Each brokerage has different qualifications and definitions for the space it tracks.
Despite the slow leasing of available space on the market, Newmark noted that the vacancy rate is still 100 basis points higher than a year ago and asking rents are down 0.7% over the last year as well.
The large amount of leased space last quarter, despite only a small movement in the vacancy rate, is attributed to Marlette Funding occupying 60,000 square feet of new build-to-suit space at Buccini/Pollin Group’s The Concord plaza off U.S. Route 202.
Meanwhile, Delaware Claims Processing Facility, a firm that handles legal claims paperwork, also moved from the Nemours Building on Orange Street to 66,630 square feet of leased space at the Brandywine Building at 1000 N. West St., contributing to the positive absorption.
There were some contractions in the summertime though, as Capital One left 91,000 square feet at the Highmark Building at 800 Delaware Ave. to consolidate into its neighboring 240,000-square-foot building at 802 Delaware Ave. That move means some employees will no longer work downtown, although the bank is still determining how many.
“In May, a decision was made to shift the majority of our retail bank frontline contact center and operations roles into long-term work from home environment. This direction gives additional flexibility and resiliency in our long-term operating model and delivers on the overwhelming majority of preferences expressed by associates on these teams,” Stacy Jones, a Capital One spokesperson, told Delaware Business Times about the move, noting that there were no job losses.
In a similar scenario just west of city limits, Corteva’s consolidation of office space at the Chestnut Run research and development campus has led DuPont to list 41,635 square feet at the shared complex for lease. Kacey Birchmier, a Corteva spokesperson, said the consolidation also didn’t result in any job losses, but was the result of employees spending less time in the office.
“Through hybrid work schedules and more efficient utilization of space, Corteva was able to reduce its office footprint by 50% in the Wilmington area while still accommodating its existing headquarters’ workforce,” she told DBT.
Smaller notable leases reported by Newmark include the state’s Division of Public Health leasing 12,000 square feet in the Cambridge Building, located at 263 Chapman Road in Newark; Ferry Joseph, P.A. leasing 9,036 square feet at Brandywine Plaza West, located at 1521 Concord Pike; Tata America International Corp. renewing for 8,929 square feet at 4250 Lancaster Pike in Wilmington, Buchanan Ingersoll & Rooney PC taking 3,784 square feet at 500 Delaware Ave. in Wilmington, and Compassionate Care Hospice of Delaware leasing 3,606 square feet at 111 Continental Drive in Newark.
The vacancy rate is expected to continue to fall in the final months of 2021 as no new construction lies on the horizon and companies seek to bring their staff back to offices next year, reported Jared Jacobs, the regional researcher for Newmark.
“While some tenants may continue to downsize their space requirements, the amount of available sublease space appears to have reached its peak back in the first quarter of 2021. Asking rental rates are expected to remain steady, as landlords will remain firm in their asking rates but may offer increased concessions for longer term leases,” he wrote.
