WILMINGTON — Vacancy rates held firm in the New Castle County office market last quarter – it may become the baseline as major employers in Wilmington keep to hybrid schedules.
The overall vacancy rate rose 50 basis points to an adjusted 18.8%, according to a new quarterly report from Newmark, a major commercial real estate brokerage that closely follows the Delaware market. Other reports from regional brokerage firms like Colliers and Cushman & Wakefield saw vacancies slightly lower than that number, with the lowest reported at 14.5%.
Incyte’s purchase of the two former Bracebridge buildings continues to have a major impact on Wilmington’s central business district. It dropped the city’s Class A office vacancies by one-third when it bought the buildings earlier this year. Wilmington’s central business district is now at 20.9%, according to Newmark’s research.
Once the biopharmaceutical company moves its U.S. Oncology and Dermatology teams and global corporate employees to the massive complex that overlooks Rodney Square, it will bring the bulk of its 1,200 local employees to the heart of Wilmington’s business district.
In the past, Market Street and Delaware Avenue were humming with bankers, lawyers. City leaders and the business community alike have high hopes that Incyte will bring that activity back to Rodney Square.
The quarter that ended Sept. 30 saw a net loss of 41,122 square feet of leased space, Newmark reported. South Wilmington led the demand with 30,529 square feet of space being leased, followed by 20,231 square feet in Wilmington’s business district.
With less vacant space on the market, rents in the Greater Wilmington area have risen to $27.30 square feet per square foot. That shows the average rent rose $1.61 cents, although the removal of Bracebridge I and III had depressed asking rents. Rents have risen 5% compared to a year ago, the highest it has been in the last decade, partially driven by the concessions offered in-office.
Notable leases for the quarter include Young Conaway Stargatt & Taylor, LLP renewing its lease for 144,000 square feet at its offices on Rodney Square for 15 years. Potter Anderson & Corroon LLP also renewed its lease for a 82,738 square-foot suite at 1313 N. Market Street.
Troutman Pepper, a national law firm with Delaware offices at 1313 N. Market Street also reduced its space when it renewed its lease. Many deals made in the third quarter of the year were smaller spaces, trending below 10,000 square feet.
Still three days a week
In the four years since the COVID-19 pandemic, the city’s major employers have still held onto hybrid policies, with the majority requiring three days a week in the office for workers. In return, that means that Wilmington has seen uneven foot traffic throughout the week, as Tuesdays can be busy while Fridays could be lighter.
JPMorgan Chase, the city’s largest employer, still has a hybrid work policy and requires employees to come in office between two to three days a week. Company representatives estimate its daily workforce is 1,200 employees but credits that to the major renovations at the Chase Corporate Campus. One of its two towers is reportedly vacant during construction.
From a global perspective, two-thirds of JPMorgan employees are in the office five days a week, according to representatives.
Bank of America has also not changed its hybrid policy since 2022, reportedly requiring employees to be in the office anywhere between three to five. The banking giant is also currently working on its exit from Wilmington, moving its staff from the Bracebridge campus to other offices in Pike Creek and in Stanton.
Barclays has also unchanged its hybrid policy, with “the majority” of its 2,000 employees at the Wilmington Riverfront coming in three days a week.
The city’s largest law firm, Richards, Layton & Finger is one of the rare companies that has moved to four days a week to continue its “culture of mentorship and collaboration.” RLF also offers the opportunity for its staff to work remotely during holiday weeks, while accommodating other requests.
The firm has just completed renovations of 20,000 square feet of trial, mediation and conference centers and more renovations are underway. Those renovations will include a 5,000 square-foot event space for town halls to team celebrations.
WSFS Bank is also looking to move its associates, including 260 that work out of the bank center on Delaware Avenue, to four days in the office in 2025. Right now, the Delaware bank runs two hybrid schedules: three days in the office, two at home, or four days in the office, one day at home.
Wills Eillman, Newmark senior managing director who keeps a close eye on the northern Delaware office market, told the Delaware Business Times that it’s quite possible that companies have stopped considering downsizing.
“Certainly people have given up space during the pandemic, and now that has cycled through. The virtue of leases is that they’re typically five to seven years, so we’re probably at the end of that cycle,” he said. “Some have shed space and they’re done with that. You won’t see new vacancies from large tenants on the market.”
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