NORTHEAST SNAPSHOT, DECEMBER 2004

Wilmington, Delaware Industrial Market

The industrial sector in New Castle County, Delaware, is performing at a level comparable to 2003. For a number of years, industrial construction activity has steadily declined. The 446,296 square feet of industrial space completed in 2003 was less than half of what was constructed the year before. Through the first three quarters of 2004 there is little development underway, though the total square feet of industrial construction is slightly ahead of last year’s pace.

A major development within the city of New Castle is the Twin Spans Business Park. Harvey Development Company is developing the 1.3 million-square-foot business park. Construction on individual buildings within the park began in 2000 and full build-out is expected in the next 1 to 2 years. Approximately 1 million square feet of new and retro-fitted industrial space already has been completed.

There is a negligible presence of REITs and large, national developers in the area. Most activity is handled by a small number of closely held companies and a few large third-party asset managers and owners.

Owner/landlords are seeking to attract tenants requiring distribution, warehousing and light industrial spaces, according to Charles Brown, vice president with Grubb & Ellis’ Wilmington, Delaware, office. “The New Castle County market has an abundance of new space and solid second-generation space able to accommodate these uses in 50,000-square-foot to more than 100,000-square-foot segments,” Brown adds.

A majority of the industrial development is taking place within New Castle County’s unincorporated towns. Because of the county’s difficult approval process, development is being driven into towns such as Newport, Middletown and New Castle. Developing industrial projects is easier under the jurisdiction of these towns.

The largest lease completed in the New Castle County area so far in 2004 was negotiated within Twin Spans. Zenith Products signed on to occupy 105,000 square feet in the business park.

Innotrac completed another large lease in the city of New Castle in 2004. The company has leased 75,000 square feet within Centerpoint Business Complex, an industrial park located on Centerpoint Boulevard.

The range for rental rates in the New Castle County area is between $3.25 and $4. Currently, the vacancy rate for industrial space is 14.77 percent.

However, according to Brown, the vacancy rate should decrease soon. “Prospective tenant activity has increased, and General Motors’ new suppliers for the re-tooled Boxwood Road Saturn plant in Wilmington will begin production in 2005,” he notes. “This GM activity alone will have a 2 percent or 3 percent positive impact on New Castle County’s vacancy rate during the fourth quarter of 2004 or the first quarter of 2005.”

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