Delaware CRE Makes Comeback
I-495 may be closed for the summer, but the doors to Delaware real estate are wide open, we heard from panelists at Bisnow's Delaware State of the Market, held at Wilmington’s Chase Center on the Riverfront last week. (As long as people can get over the Christina River.)
Delaware Economic Development Office director Alan Levin says location, quality of life, and accessibility to decision makers are the differentiators for DE businesses. On the last point, all of our panelists agree: “A phone call to the governor goes a long way here,” says CBRE SVP John Kaczowka. (It works better than texting or liking an Instagram post.) DEDO has taken to roadshows to get the word out, which have generated more expressed interest and RFIs to Alan's office. Another standout: cash incentives for development, which Alan calls "a great equalizer" against tax credit programs offered by other state governments.
Alan says that he’s especially proud of the state’s ability to retain growing companies like Incyte, who inked a lease on the 191k SF Wanamaker Building on Augustine Cut-Off. Statewide unemployment is now down to 5.8% (down from a peak of 8.4%) and shuttered properties like the Chrysler plant in Newark are slated for new development. Questions remain about the fate of the former Avon Building, while the old GM plant on Boxwood Road is undergoing due diligence from an interested buyer. He stresses patience and a long-term perspective for Delawareans to get to where they need to be economically. "This is the turning of an aircraft carrier; it’s an evolution, not a revolution," says Alan. (That quote sounds like it should be the hook of a CSNY song.)
John says that while vacancies from job cuts by companies like AstraZeneca have hurt, JPMorgan Chase has stepped in to fill much of the void. JPM now owns the 633k SF at One and Three Christina Center in Wilmington's CBD that it previously leased, and John says its additional buying spree is a sign its stakes are in the ground. JPM activity also points to a rise in job densification; the firm needed 700 parking spaces for its 98k SF space at Cole House at Iron Hill Corporate Center, almost double the old industry norm of 3.5 spaces per 1,000 SF. (They like to make sure there's enough pull-through spots.)
Wilmington still needs to overcome office vacancy, which continues to hover around 20% in the CBD, says Brandywine leasing director Larry Maister. Still, a pronounced flight to quality means that Class-A numbers are healthier than Class-B. Overall, Brandywine’s 1M SF of space in the state are 90% leased, and Class-A is strong at 96%. Negative absorption, however, has been a result not just of companies’ downsizing work forces, but also moving to collaborative and coworking spaces. Nonetheless, a slight increase in pipeline activity of late has Larry feeling hopeful.
Buccini/Pollin CIO Karl Wagner says that banks are back in the market for commercial office space lending, although spec projects aren’t on anyone's deal sheet yet. The CMBS market is red-hot, too, and equity loves Wilmington. (They must really love the Clifford Brown Jazz Festival.) Multifamily is bringing more live and play to a work-oriented downtown, and there's a noticeable distinction between the CBD, which attracts price-conscious renters, and riverfront apartments filled by those who like suburban-style living and are willing to pay extra. Karl says a multi-use project planned at the site of the Midtown Parking Garage on 9th Street will bring over 200 multifamily units and BPG hopes it can enliven the Market Street spine connecting the two neighborhoods.
Our panel moderator was Richards Layton & Finger director Sara Toner (right, with Mark Kurtz and Joni Fleet). The firm is involved in CRE developments, Sara tells us, from financial-industry clients in Newcastle County to mixed-use projects downstate, to obtaining construction loans for multifamily conversions statewide.
We'd like to thank sponsor LibertySBF, specializing in non-recourse bridge loans. Liberty also provides CMBS and owner-occupied lending products direct.. Snapped: LibertySBF VP Charlie Bowles and CEO Alex Cohen.
