Commercial Real Estate Outlook Looking Good for 2015 | Harvey Hanna
5 Top Reasons to do Business in Delaware

Commercial Real Estate Outlook Looking Good for 2015

January 20, 2015

2015“The U.S. is gaining traction as the preferred investment destination”, according to the Deloittte ‘2015 Commercial Real Estate Outlook’. It also states that Commercial Real Estate (CRE) is on more solid footing than it has been for some time.

As the U.S. economy continues to improve, the CRE sector is expected to have strong growth for the next year as extensive availability of financing through domestic and international sources increase.

“What’s really going to be a driver in 2015 will be the strengthening real estate fundamentals first and then access to capital. We are seeing REITs increasingly finding opportunities to do development and leveraging their access to capital to get that done,” said Bob O’Brien, U.S. real estate services leader at Deloitte.

The report also predicts that rents and vacancies will continue to improve and that in lieu of new development, more redevelopment of existing properties to make them more competitive will likely be the trend for 2015.

The CRE Outlook report cautions CRE players to engage potential or existing tenants at the design stage. This will allow them to take into account the tenants technology needs in order to incorporate them into the design.

“Tenants, more so than ever, are really incorporating technology demands and sustainability considerations in their leasing decisions,” O’Brien said. “Properties that can’t support the technology needs of their tenants, or aren’t sensitive to their sustainability goals, won’t perform as well.”

Pete Davisson, SIOR, CCIM of Jackson Cross Partners stated at their annual Real Estate Forecast Meeting that “There were a number of positive factors in the office market in Wilmington’s Central Business District (CBD) and its suburbs, with leasing activity totaling more than 1.3 million square feet. Absorption, the net increase or decrease in occupied space was also positive and stood at 79,915 square feet.” 

However, Davisson cautioned, “Not all of the news is positive. The total square feet of available space is just less than three million square feet, distributed almost equally between the CBD and suburbs. The Class B vacancy rate is still very high, and above the 10, 20 and 30 year averages. Further, the overall vacancy rate, for both Class A and B, in both city and suburbs, is 20%.  

Taking a more detailed look at the market, Davisson noted a number of positive signs on the development front, “Just north of the Delaware state line at the intersection of Routes 1 and 202, a 140,000 square foot Wegmans store is under construction. At that site there will be an additional 40,000 square feet of new retail construction, plus the redevelopment of an existing 12,000 sq ft strip of shops. 

“Further south, in Dewey Beach, Harvey Hanna Associates announced the start of Phase 2 of Lighthouse Cove. Phase 1 included the first Hyatt Hotel in the State of Delaware, and 16 condominiums. All but two of the condominiums have been sold, with an average price of $695,000. 

“There was significant leasing during the year at 2200 Concord Pike, still thought of by many as the Rollins Building. The 15-story, 195,000 square foot building now known as the Applied Bank Center saw 144,000 square feet of leasing this year. “I expect the balance to be leased in early 2015”. The current owners purchased the building for $10.5 million in 2013.  

~~ ‘Jackson Cross Partners Reports on the Wilmington Real Estate Market’, Press Release from Jackson Cross Partners

Integra Realty Resources, Inc. (IRR) recently published its annual ‘Viewpoint 2015’ report that predicts another positive year of value appreciation across all property sectors nationally, with the strongest expectations within the industrial, lodging and multifamily sectors and a more muted expectations for the retail and office sectors.

For the specific reports for the Wilmington, Delaware market, click the links below:

IRR 2015 Annual Viewpoint Wilmington | DE Lodging

IRR 2015 Annual Viewpoint Wilmington | DE Multifamily

IRR 2015 Annual Viewpoint Wilmington | DE Office

IRR 2015 Annual Viewpoint Wilmington | DE Retail

In looking ahead to 2015 Davisson said, “People are thinking positively, and there is a buzz of optimism in the marketplace, but the numbers haven’t yet reflected those positive thoughts. Corporate restructuring and downsizing is not helping. The CBD is still the hole in the donut.”

“In 2015 the City will have to work to work on its safety and security issues to improve its image. The State will have to work to find or create an economic “driver”. As we meet here this morning the New Castle County Chamber of Commerce is meeting to discuss ways to bring people to live and work in Wilmington. Positive steps by these entities should lead to a more positive 2015 as the regional and national economies continue their gradual, but positive growth.

“In closing, I ask all of you to do something positive in 2015 to make the Greater Wilmington area a better place to live and work,” concluded Davisson.

~~ ‘Jackson Cross Partners Reports on the Wilmington Real Estate Market’, Press Release from Jackson Cross Partners