Delaware officials finalized the purchase of 704 N. King St. in Wilmington, taking the 87,000 square-foot building off the inventory listing. l PHOTO BY KATIE TABELING
WILMINGTON — Despite the state buying One Custom House and taking a largely-empty building off the market, vacancy rates in Wilmington’s central business district have risen. Still, analysts see some warning signs for northern Delaware’s office space.
Earlier this year, Delaware officials finalized the purchase of 704 N. King St., taking the 87,000 square-foot building off the inventory listing overall. Now that the deal is finalized, the Wilmington central business district vacancy rate moved to 27.2%, according to a new quarterly report from Newmark, a major commercial real estate brokerage that closely follows the Delaware market.
Also known as One Custom House or the former Alpha Technologies building, the building sold for $6 million, according to Newmark. Right now, the only existing tenant is the Delaware State Bar Association, occupying a little over 2,250 square feet — or 2.6% of the whole building.
Representatives of the Delaware Office of Management and Budget (OMB) told the Delaware Business Times that the state had planned to renovate the building to “further reduce the state’s reliance on leased space.” State officials did not specify if there were any plans to relocate any state agency to 704 N. King St. at this time.
In the meantime, the Delaware State Bar Association has an existing lease with previous owners Alpha Technologies that the state will honor until 2028. DSBA Executive Director Mark Vavala said that the organization will move with the Delaware Supreme Court once that building is complete.
Even though plans for 704 N. King St. may be a way off, Newmark noted that the deal still significantly lowered the vacancy rate of the city’s commercial district. By the end of the first quarter of 2024, the submarket’s vacancy rate dropped by 110 basis points from the previous quarter.
Other notable transitions include Morris James which is preparing to move into Delle Donne Associate’s Avenue North building off Concord Pike, vacating the 60,000 square-foot office at 500 Delaware Ave. next year.
Citizens Bank has also signed a lease for office space at the Christiana Corporate Campus in Newark. Citizens Bank Vice President and Communications Director Courtney Robinson said the bank will keep its 919 N. Market St. branch while moving 15 employees for operations out of the city.
Newmark noted that leasing activity in the northern Delaware market has shown a robust performance, surpassing recent leasing averages. In the first quarter of 2024, a total of 140,509 square feet has been leased out, 13.5% higher than the quarterly average in the past four years.
Still, Newmark found the city of Wilmington had a 20.9% vacancy rate. Other reports from CBRE found the vacancy rate for northern Delaware at 25.5%, while Cushman & Wakefield placed the vacancy rate for Northern Delaware at 19.3%.
One of the challenges Delaware may face soon is the attraction of more modern spaces like Avenue North. A look at inventory found that offices built or designed in the early 2000s had a vacancy rate 35% lower than the broader market.
“The continued removal of obsolete or aging offices from competitive inventory remains crucial for the health of the Delaware office market,” Newmark Mid-Atlantic Research Director Carolyn Bates wrote. “Current office demand is not sufficient to reduce vacancy to a sustainable level.”
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