Northern Delaware leasing rises led by law firms
WILMINGTON – Although 2022 started with concerns over an omicron surge, the northern Delaware office leasing market saw headwinds by the end of the first quarter led primarily by major law firms.
The vacancy rate fell by 80 basis points, more than erasing the fourth quarter’s rise, to finish at 17.3%, according to Newmark, the real estate brokerage that mostly closely tracks the Delaware market. The first quarter reportedly saw more than 70,000 square feet of net office space occupied, while average asking rents rose to $26.25 from $26.04 at the end of 2021, and it remains about 3% higher than a year ago.
Notably, regional reports covering New Castle County from brokerages CBRE and JLL both reported net losses last quarter though, spanning from about 95,000 square feet to more than 220,000. Each brokerage has different qualifications and definitions for the space it tracks, with many of the differences coming from what is considered second-tier Class B space, and timing of lease reporting also plays into each calculation.
The market-wide net occupancy gain reported by Newmark was largely due to the lease renewals and expansions of major law firms in the downtown central business district.
Heavyweight law firm Richards, Layton & Finger renewed nearly 134,000 square feet of offices at 920 N. King St., marking a major commitment to the downtown market as other large employers have decreased footprints. In a much smaller footprint, McElroy, Deutsch, Mulvaney & Carpenter renewed its lease for 2,148 square feet at 300 Delaware Ave.
The boutique litigation law firm Ross Aronstam & Moritz recently leased 19,347 square feet in Hercules Plaza at 1313 N. Market St., while international firm Greenberg Traurig signed for 13,477 at the PNC Bank Center at 222 Delaware Ave.
One major loss in the downtown area was the departure of Condé Nast, the publisher of magazines like Vanity Fair, Vogue, The New Yorker and GQ, among others. It left 76,448 square feet at Hercules Plaza after moving accounting and other functions to remote working.
Another positive sign for the market to start the year was a reduction of more than 111,000 square feet of space seeking a sublease, or a secondary tenant, Newmark reported. There is still 287,675 square feet of such space on the market though, with more than half of that ascribed to the former Comcast call center at 400 Commerce Drive in the Christiana Corporate Center.
Newmark analyst Jared Jacobs also noted that some positive market changes should be in store for the Wilmington-area market over the remainder of the year.
The redevelopment of the former DuPont Chestnut Run campus will take tens of thousands of square feet of existing office space off the market and replace it with modern inventory that will likely be leased as quickly as it is finished. The firm is also seeing increased appetite by tenants to return to workplaces now that the pandemic is subsiding.
“Employers are eager to get employees back into the office to better foster company culture and collaboration as well as train and monitor employees. General leasing activity reflects this desire as longer-term leases and renewals are being observed in the Wilmington central business district and surrounding suburbs,” Jacobs wrote in his quarterly report.