Wilmington Is A Development Hotbed For Northern Delaware
Northern Delaware is still characterized by its proximity to Philadelphia and its relative affordability, but Wilmington is growing into something more.
Wilmington has seen substantial growth from some homegrown businesses like corporate services firm CSC and pharmaceutical company Incyte, both of which have opened new headquarters in the city in the past couple of years. In general, financial and financial technology companies have seen some explosive growth recently, which has had an appreciable impact on the area's real estate market.
“We haven’t been as busy on the [office] leasing front in 10 years as we are now,” Buccini/Pollin Group co-founder and principal Rob Buccini said. “We’re heading in a good direction. We had as good a first quarter as we’ve had in a long time."
Buccini will be among the speakers at Bisnow's North Delaware State of the Market event at the Hilton Wilmington/Christiana on May 17.
Buccini compared Wilmington's performance to that of the western suburbs of Philadelphia, which has seen vacancy decrease and rents rise steadily due to high demand for Class-A office space without much in the way of new supply. Like the rest of the region, speculative office development is all but impossible — Incyte and CSC's new digs were both build-to-suit.
“In New Castle County, it’s very hard to build, and that’s why you’re seeing growth in Wilmington," Buccini said. "And the good buildings lease, and the old buildings with high vacancy just need to be converted to residential, and that’s beginning to happen.”
BPG, the largest landlord in the state, recently completed three such redevelopments in Wilmington and has two ground-up multifamily projects in the works. The new construction is being filled with workers from expanding companies and commuters to Philly who seek a lower cost of living. Delaware is a value proposition for developers as well, which helps to preserve the area's relative affordability.
“The operation costs are somewhat lower in Delaware," Westover Cos. President Guntram Weissenberger said. "Certainly we don’t have the real estate tax issue that we do in Southeastern Pennyslvania, so there is not as much upward pressure on rent.”
BPG's new apartments are asking rents at the top of Wilmington's market, which is more expensive than anywhere outside of Center City in the region, according to Buccini. But affordability is still a big demand driver, even in the newest units.
“The same apartment in Wilmington costs at least a third less than [it would] in Downtown Philadelphia,” Buccini said.
The influx of multifamily supply has also influenced a relative boom in Downtown Wilmington's retail community, specifically along Market Street. Four new restaurants have opened on that drag since the year began, and three more will be opening up by the end of May, Buccini said. His group is also developing a 14K SF food hall on the ground floor of the former DuPont building, which is being redeveloped for Chemours' new headquarters.
“There’s no retail corridor ... that you’d find as attractive in the state of Delaware as Market Street,” Buccini said. “It has been totally transformed, and it’s aesthetically pleasing now.”
Office, retail and multifamily growing together have created the beginnings of a walkable community in Wilmington. In the last eight years, the downtown population has grown by 3,000, and Buccini believes that with 2,000 more people, the city will reach a "tipping point" of density.
The walkable portion of the city is so far focused near the Christiana River to the south, which is also close to the Wilmington train station that serves both the SEPTA regional rail and Amtrak. New residential developments are pushing north, and hope to drive more foot traffic along with them.
"Wilmington is slowly turning around, certainly down by the river," Weissenberger said. "You’ve seen those mixed-use developments, and I do think that is flowing up into the Midtown section.”
Although no municipalities in the area can compete with Wilmington's density, Harvey Hanna & Associates is attempting to build a smaller, mixed-use community in the town of Newport, with a 400K SF development centered around the reopening of the town's train station. Hanna is in the process of designing the development and acquiring the land required.
"This is well beyond the idea stage; we’re certainly in the execution stage, but planning [within that stage]," Harvey Hanna & Associates President Thomas Hanna said. "DelDOT and [the Wilmington Area Planning Council] seem to be in agreement that a transit stop is warranted in Newport.”
Near Newport, Hanna is also planning a complete overhaul of the former General Motors plant at Boxwood, which will likely result in 3M SF of new industrial real estate. Capitalizing on the ongoing demand for industrial space in the region, Hanna is hoping the new uses (likely distribution centers) will be staffed by Newport residents.
“We hope that some employees of Boxwood would live and shop in the downtown Newport redevelopment," Hanna said. "All told, we’re probably looking at something like a $400-$500M commitment to the Newport area.”
One factor that Hanna and other developers may struggle with in trying to replicate Wilmington's success is in getting projects permitted. Businesses in the state have long lamented the onerous process, which some view as holding back the state's otherwise business-friendly reputation.
“I think Delaware gets skipped over by the regional and national development community because it’s become widely known as an area where the land use process is tedious, expensive and unpredictable," Hanna said. "So they’ve been trained, right or wrong, to skip past Delaware.”
Buccini and Weissenberger agree that Wilmington is substantially more friendly to development since Michael Purzycki became mayor, with Buccini calling the usage of third parties to review development plans on behalf of the city "the most important part" of the revival.
“You might have a project that you want to redevelop in Downtown Wilmington, and they throw you whatever you want, because they want it to be redeveloped and improved,” Weissenberger said. "If you try something in, say, Greenville, the neighbors might say they don’t want any change."
With all that has been happening in Wilmington (lest we forget the 76ers' massive new fieldhouse and NBA G-League arena being developed by BPG), it could be time for the rest of the area to take note.
Come discuss Wilmington and the rest of the region at Bisnow's North Delaware State of the Market event at the Hilton Wilmington/Christiana May 17.
CORRECTION, APRIL 26, 10 A.M. ET: A previous version of this story misattributed the source of the image of CSC's new Wilmington headquarters. This article has been updated.