In Delaware’s largest city, Wilmington, it is a tenant’s market when it comes to office leasing. There is much activity and redevelopment to attract new tenants downtown. Rental rates hover around $18 to $21 per square foot for Class B office space and $23-plus for Class A office space. Vacancy for Wilmington and its suburbs combined has decreased to around 13 percent.
In the past year, nearly vacant office buildings have garnered activity from new investors looking to purchase at lower price points, freeing up excess capital for renovations or redevelopment. Some office buildings are being redeveloped into residential apartments due to the demand of millennials and professionals who desire a “live-work-play” lifestyle in downtown Wilmington, and who wish to reside near the city’s Amtrak station to take advantage of the easy access to larger cities like Philadelphia, New York, and Baltimore.
The Buccini/Pollin Group has been putting hundreds of millions into the construction or redevelopment of residential, office, and hotel, as well as sports and entertainment properties on Market Street and in the Riverfront area. The company recently acquired a 13-story building comprising the former DuPont headquarters and the Hotel DuPont, which will be converted into a mixed-use complex including a modern headquarters for Chemours, apartments and 40,000 square feet of retail space with a food court. 901, 913 and 1220 North Market Street were all auctioned at prices between $15 and $24 per square foot. Combined, the buildings comprise more than 270,000 square feet of office space and were less than 19 percent occupied. Redevelopment plans are still being determined for all three buildings.
There has been real growth in tech startups planting roots in Wilmington. While Wilmington has always had a strong banking presence — including Barclays Bank, M&T Bank, Capital One 360, Wilmington Savings Fund Society, JPMorgan Chase, and Bank of America — the tech industry has boosted office growth in Wilmington within the last couple of years. According to a recent press release published by the City of Wilmington, Wilmington outpaced the tech employment growth of the Philadelphia Metro region, Southern Pennsylvania and New Jersey from 2010 through 2015 by adding 4,400 new tech jobs in the five-year span. Wilmington Mayor Mike Purzycki has said, “Millennials are bullish on Wilmington and are a big part of the city’s growing reputation for creating tech employment opportunities and the availability of working capital to fund tech business ventures.” These companies also benefit from lower rents and quick access to larger cities. Some of the tech companies that have come to Delaware in recent years are Zip Code Wilmington, a computer coding boot camp, and Alpha Technologies Inc., a leading provider of IT management services. In addition, JPMorgan Chase aims to hire more than 1,800 technology employees by 2019.
Large-scale office deals outside of Wilmington were set in motion recently, including Delaware-based chemical research and development company, Chemours, planning to move a portion of its technician and research employees from its Wilmington site to a new, 312,000-square-foot facility at the University of Delaware. The $150 million facility, known as Star Campus, was once the site of the assembly plant for Newark Chrysler.
North Wilmington’s 80-acre AstraZeneca office campus sold to a group led by Delaware-based developer, Delle Donne, in a deal valued at $50 million. The pharmaceutical company leased back a portion of the campus and Delle Donne plans to renovate the remaining site.
All this activity has many looking forward to 2018. The redevelopment and repurposing of office space to fit the demands of today’s marketplace has fueled a new chapter of business redevelopment in Delaware.
— By Greg Ellis, principal, Patterson-Woods Commercial Properties. This article first appeared in the January/February issue of Northeast Real Estate Business magazine.