JACKSON CROSS PARTNERS REPORTS THE WILMINGTON OFFICE MARKET IS STABILIZING
Wilmington, DE – August 4, 2010 – “The Greater Wilmington office market showed signs of stabilizing during the first half of 2010,” said Pete Davisson, Partner at Jackson Cross Partners. “While leasing activity still lagged both 10 and 20 year averages, rental rates were essentially unchanged from the end of 2009 and vacancy rates were steady in the central business district and rose only slightly in Wilmington’s suburban office markets.”
“While national unemployment is still hovering around 9.5%, many of the factors that impact our overall economy are trending in a positive direction. Corporate earnings are increasing and businesses have begun hiring, albeit at a slow rate. If economic trends continue in a positive direction, we believe we will continue to see a stable office market in the Greater Wilmington area during the rest of this year, with further strengthening in 2011.”
Leasing in the central business district totaled 32,545 square feet of Class A space and 35,088 square feet of Class B space during the first half of 2010. Class A vacancy rates in the CBD now stand at 14.8%, down 9% since the end of 2009. Class B vacancy rates increased during the first half and are now 33.3%. The combined vacancy rate is 20.5%. As a result, full service average asking rental rates for Class B office space decreased by 3.5% to an average of $20.45 per square foot, as Class B building owners reacted to market conditions. Class A asking rental rates were unchanged at $26.35.
Leasing in Wilmington’s suburbs totaled 173,286 square feet during the first half of the year. This is a positive sign, as this represents 65% of 2009’s total leasing activity. Class A leasing was 119,940 square feet, Class B was 53,346. Vacancy rates in the suburbs remain high, with 23.4% of Class A space and 22.0 % of Class B space available. The average asking full service rental rate for Class A space is $23.52 per square foot with Class B space averaging $21.64.
Counterbalancing the positive leasing activity and the stable vacancy and rental rates was the increase in sublet space. An increase in sublet space is a strong indicator that businesses are running lean and have excess office space that they are willing to lease.
A positive sign is the construction of two office buildings by the Pettinaro Company in the central business district. The combination of The Star Building, a recently completed 163,800 square foot new construction on Justison Street near the River, and The Courthouse on Rodney Square, which is under construction, will result in more than 300,000 square feet of new office space. When completed in 2012, The Courthouse (165,000 sf) will be occupied by the law firm of Young Conaway Stargatt & Taylor.
Davisson observed, “Most people believe that absorption, the net increase or decrease in occupied space, is the best indicator of a market’s health. By that measure, we still have a way to go, as absorption was negative in both CBD & OCBD with 14,449 square feet and 99,637 square feet respectively.
“Last year was the worst year in the history of the Greater Wilmington office market. We rebounded from that low during the first half of this year. But until we see substantive and consistent positive signs in our economy, and a resulting increase in both consumer and business confidence we won’t see a return to strength. Since commercial real estate lags the economy by 12-18 months, we believed we will be well into 2011 before we see significant strengthening in Greater Wilmington’s office market,” concluded Davisson.
Jackson Cross Partners is a Commercial Real Estate company, focusing on a consultative approach to client service. The Jackson Cross team brings extensive experience in Corporate Real Estate, Brokerage, Development and Finance to the property life cycle. With offices in Philadelphia and King of Prussia, Pennsylvania; Wilmington, Delaware; and, Swedesboro, New Jersey, Jackson Cross provides market coverage throughout the Delaware Valley as well as access to markets throughout the world through its affiliation with ONCOR International.
Jackson Cross Partners is a NorthMarq Capital affiliated company. Through a joint venture with Fameco, Jackson Cross Partners provides Property Management and Retail brokerage services.