WILMINGTON — The New Castle County office market finished 2024 on a strong note as vacancies fell 20 basis points and a positive net absorption rate, according to real estate brokerage Newmark.
Last year had the highest leasing activity since 2019 with 443,00 square feet of space in transactions, according to Newmark senior managing director Wills Eillman. Five years ago, the northern Delaware region saw around 1.2 million square feet of leases signed in a 12-month span.
In the past four years, office leasing has hovered around 400,000 square feet of space with the vacancy rate has been slowly inching down. In the fourth quarter of 2023, Newmark reported was at 20.9% while the fourth quarter of 2024 records an 18.9% vacancy rate.
Much of the gains last year had to do with Potter Anderson Corroon LLP renewing its lease while Morris James LLP opted to move its main operations to the $1 billion Avenue North. Incyte Corporation also bought the former Bracebridge buildings in Wilmington’s center city.
By the final quarter of the year, Newmark reported that 43,292 square feet of space was occupied, or absorbed, in the industry parlance. While Newmark is the firm that watches Delaware closely, other notable regional reports from national firms like Cushman & Wakefield and Colliers reported a vacancy rate for northern Delaware around 15% overall, with Wilmington above that average.
CBRE had reported a rising vacancy rate of 20% for northern Delaware. Each brokerage has different qualifications and definitions for the space it tracks.
One reason for the possible turn of events has been the recent move by some major companies seeking to bring employees back to the office five days a week, shifting the local market. Now, after five years of remote work, offices may have already shed the space they can do without and start to consider what the future of work looks like.
To Delaware, the most consequential of these companies moving five days a week may be JPMorgan Chase & Co. CEO Jamie Dimon has been bullish on bringing employees back to work– and with 11,300 employees in Delaware, that means there could be more activity in Wilmington in the months to come.
As the office market has slimmed down with space and demand, asking rents rose to $26.99 per square foot of space in the fourth quarter, Newmark reported. Over the past year, the rents have steadily risen and is now 60 basis points higher than in the fourth quarter of 2023.
The asking rent per square foot in 2020 was $2 less than where it is today.
One firm, Colliers, noted that the regional office market may be shrinking overall with the demand already met and with older spaces becoming less attractive. Colliers analysts also noted that all but two floors of the Nemours Building, owned by the Buccini/Pollin Group, have been converted into apartments.
“Like other regional markets, the office inventory will be shrinking in 2025. [That] project will reduce the office inventory and improve vacancy rates as surplus space is taken off the market,” Colliers analysts note.
