The Delaware Office Market realized positive net absorption during calendar year 2015. According to Costar, the current Delaware office market vacancy rate is 10.2%. The trending decrease in vacancy rates has resulted in a slight increase in rental rates, as well as an increase in the probability of leasing.
That said, the vacancy rates for office space in Delaware’s most populated County, New Castle County, is above the average for the State and landlords are currently seeking to fill nearly 1,000 spaces totaling approximately 4.25m s/f of space.
While vacancy rates for class A office space in the northern and western New Castle County office market remain in the single digits, nearly half of all of the County’s vacancy is located in the Wilmington Central Business District (CBD). This bodes well for tenants currently in the CBD market place, with many landlords offering attractive incentives (i.e. improvement allowances, rent abatement, etc.) to either attract new tenants or retain existing tenants.
The current tenant friendly environment is expected to continue until vacancy rates tighten further, as landlords realize that every lost day of revenue (i.e. vacant space) is a day of revenue they will never get back.
While the State of Delaware continues to offer an attractive business climate for new companies seeking to locate in the Mid-Atlantic region, the State is currently bracing for the yet-to-be determined effect of the recent Dow / DuPont merger and the already announced downsizing of one of its longest standing corporate citizens, DuPont, which will definitely have an impact on Delaware’s office market. This uncertainty makes it a difficult task to predict the pace of office space absorption, which is so closely tied to office-related employment.
Fortunately, Delaware continues to be a leader in the financial service sector, and has seen major investments by JP Morgan Chase, yielding a reported 2,000 new jobs for Delaware.
The industrial and flex market in NCC also tightened in 2015. Leasing activity at Emory Hill’s Airport Business Center in New Castle, DE is reflective of positive growth and was very strong for 2015, and it seems the trend will continue for 2016. The complex is nearly fully leased; several new tenants include Datrex, a US manufacturer and importer of marine emergency products and supplies, which relocated their northeast distribution center from Lancaster, PA to Delaware and DMC Power, a national designer and manufacturer of high quality connection systems for transmission, distribution, substation and industrial projects, headquartered in California. Aircrafters, a supplier of commercial aircraft parts and an existing tenant, expanded their occupancy to approximately 36,000 s/f on a long term basis. Thus far in 2016, two transactions totaling 13,500 s/f have been completed.
Neil Kilian, CCIM, SIOR is a principal of NAI Emory Hill, a full service commercial real estate firm specializing in office transactions and providing landlord and tenant representation.