Wilmington and New Castle County, Delaware Office Market


Fortunately, the 2008 office leasing market in Delaware has not been as negatively impacted as the residential marketplace has been over the past year.  Many industry experts felt that 2006 was a good year in terms of leasing activity, and 2007 was almost 10 percent higher. At the end of the year, there was more vacant space available, but that was mostly attributable to the fact that approximately 807,000 square feet of product was added in five buildings, several of which were at high vacancy levels.  At the same time, three buildings,  which were almost full, were removed from the Delaware inventory. The additions and subtractions of buildings in the market was caused by changes in ownership, from multi-tenant space for lease to owner occupied and vice versa.  At the end of the year, 832,000 square feet of leasing activity is a good year.

The most common measuring stick, absorption (the net gain or loss of occupied space in a given period), was a positive 500,000 square feet, just a shade less than 2006, but three times greater than the 10-year average.

Unfortunately, the number which continues to rise, and the number that most people talk about, is vacancy.  Most owners would be very happy if their building’s vacancy rate was 8 to 10 percent. The 10-year averages for Class A space, both city and suburbs, has been right around 10 percent. However, high vacancies in Class B buildings puts those 10-year combined A and B numbers up to 16.7 percent (city) and 12.3 percent (suburbs).  At the end of 2007, those combined numbers were 21 percent (city) and 18 percent (suburbs).

Despite increased vacancy rates, there is a positive feel in the Wilmington office marketplace.  New construction has been under control with only one new building coming out of the ground in the CBD — The Renaissance Centre. This new facility did not come online until last June, so although the vacancy is still high, activity is starting to heat up. The one new building that was developed in 2006 achieved an occupancy of 72 percent by the end of 2007.

Overall, as is usually the case, the suburban marketplace, approximately 7.2 million square feet in size, has had twice the leasing activity as the CBD, has less space available, a Class A vacancy rate of only 12.2 percent and rental rates that are holding at $23.00 per square foot, full service.

Early 2008 has been on the quiet side, but some prospective tenants have been looking in the area. My expectation is that with some new product on the market, both the city and suburbs will have decent activity between now and late May, and again in the September to November time frame. Bring your clients and prospects, the owners in the Wilmington marketplace are hungry and ready to do business.

— Pete Davisson, SIOR, CCIM is a founding partner of Jackson Cross Partners

©2008 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.

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