Patterson-Woods Commercial Properties/CORFAC International recently brokered an auction of a 71,852 s/f office building in downtown Wilmington, DE, at 913 N. Market St. for $15.34 per s/f. A neighboring 14-story, 121,206 s/f office building, 901 N. Market, recently sold at auction for $14.73 psf. Purchasing a high-rise office building at $14-$16 psf may seem low for a property in a densely populated Central Business District location, however, the lower price point supports an emerging trend in the downtown Wilmington market.
Lower priced office buildings, auctions and foreclosures are allowing new investors to come in with a lower basis, new capital, and therefore, an ability to price to the market and meet market needs.
A recently purchased retail/office/multifamily building in the 400 block of Market St. provided an investor an opportunity to buy a historically renovated building for a fraction of the initial redeveloper’s cost. By purchasing the property significantly below replacement cost, the investor now has a more competitive lease pricing advantage. The same can be said for 405–411 N. Market St. The investment includes a structurally deficient building that allows the investor to tear it down and redevelop it into a modern, usable structure priced to market. Patterson-Woods has been retained as the exclusive broker for the leasing of both of these projects.
At these lower rates, buildings can be affordably redeveloped into nicer office buildings, or converted into other uses, such as apartments, condos or hotels.
The repurposing of older or abandoned office/retail buildings into residential apartments has surged over the past couple of years due to the demand of millennials and professionals who want to live in Market Street’s “live, work, play” environment. It also allows them to be near rail transportation and rapidly growing neighborhood entertainment. Over 1,783 units have been recently or are about to be added to the market.
As for hospitality, Delaware saw around 8.5 million visitors in 2015, with 1.69 million of them business travelers. This lends an opportunity for hotel conversions such as the new Marriott Suites at 1300 N. Market St. and the planned upgrades to the Hotel DuPont.
Additionally, there are several incentives and support for new development/conversion from local municipalities. Delaware has been providing upfront capital and on-going tax incentives for new developments and renovation projects in Wilmington.
Wilmington has seen its share of tough times and vacancies within the last 10 years. However, these conditions have led to opportunities for investors to clear out the dead wood and lead to new growth.