WILMINGTON – Although the last quarter of 2021 saw office vacancies tick up about 60 basis points, the New Castle County office market managed to finish the year with a positive net absorption rate, according to real estate brokerage Newmark.
The fourth quarter saw nearly 51,000 square feet of net office space vacated but was a small enough loss for the market to finish in the black at 92,297 square feet occupied, or “absorbed” in industry parlance, over the year, according to Newmark, the brokerage that mostly closely tracks the Delaware market. Notably, regional reports covering New Castle County from brokerages CBRE, JLL and Cushman & Wakefield all reported losses at year end though, spanning from about 62,000 square feet to more than 210,000. Each brokerage has different qualifications and definitions for the space it tracks.
While the vacancy rate sat at 18.1% at year’s end per Newmark, it was lower than the 12-month prior which sat at 18.7% Meanwhile, average asking rents rose from $25.48 at the end of 2020 to $26.04 at the end of 2021.
The market-wide net occupancy loss was largely due to Comcast’s decision to move its Newark-area call center workers to permanent remote work. It has since listed its entire 154,086-square-foot office building at 400 Commerce Drive in the Christiana Corporate Center for sublease, one of the largest spaces to seek a secondary tenant this year.
On the positive side, Analytical Biological Services bought the 48,000-square-foot building at 2 Reads Way for $4.9 million and will move its expanding operations to the site this year. Meanwhile, Nurses ‘n Kids bought the 24,000-square-foot building at 11 Reads Way for $2.5 million, with plans to convert it to a medical daycare center and relocated this year from 904 Churchman’s Road in New Castle.
There were several notable leases as well, with the Wilmington-area charter school Academia Antonia Alonso moving from the currently redeveloping Barley Mill Plaza to 115,000 square feet at 300 N. Wakefield Drive in Newark, a former Comcast office owned by Capano Management. It will reportedly move to the new site in the second quarter of 2022.
In downtown Wilmington, brokerage CBRE reported that heavyweight law firm Richards, Layton & Finger has 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. Newly expanded law firm Barnes & Thornburg also signed a new more than 24,000-square-foot lease in the PNC Bank Center, located at 222 Delaware Ave. The firm will leave a smaller space at the Brandywine Building.
In the city’s suburbs, Advanced Materials Technology has signed a lease for nearly 30,500 square feet at Concord Plaza off Silverside Road. Supported by the state’s new lab fit-out grants, AMT will expand its lab space there by nearly 10,500 square feet.
For Wills Elliman, senior managing director of Newmark’s Wilmington office, the market right now tilts in the tenant’s favor.
“Unless you have a really, really high-quality asset, it’s tough to have optimism as a landlord right now,” he told Delaware Business Times, explaining that employers are weighing the future of remote work and the possibility of downsizing spaces.
Meanwhile tenants are largely looking beyond COVID and planning for the future, Elliman said.
“Tenants are looking at the fact that it’s really good time to lock in long term,” he explained, noting that plenty of open space and favorable rates allow tenants to make more demands at the bargaining table.
Elliman noted that most tenants are seeking less space than they would have pre-COVID, in perhaps a nod toward increased hybrid work schedules, but they are also seeking “amenity-rich” spaces. A simple break room will no longer suffice, he said.
“The break room right now is kind of the showpiece. Some tenants are putting it at the top of their list,” he said, noting full kitchens with granite countertops are becoming more common, often with couches or soft seating to encourage gathering in the space. “There’s also a law firm downtown that chose to put their break area on the uppermost floor of a high-rise downtown, which had the nicest view.”
With a highly competitive labor market right now, many employers are making the comparatively cheaper investment in such office amenities to help differentiate themselves from competitors and attract talent, Elliman said.
“They’re realizing that you can’t cheap out on the office space. Make the space really nice and make people want to be there,” he added.
