Did You Know – April 2020

Over the past month, we have all been faced with unprecedented economic and social upheaval precipitated by the COVID-19 pandemic. This global health crisis has caused the U.S. GDP to plummet and unemployment to shoot upward in what is now being termed the “Great Suppression”. The biggest concerns at this time – beyond the life, health, and safety of everyone – are how does the economy rebound, how do businesses reopen, and how does commercial real estate fare?

The outlook for the U.S. commercial real estate market has changed in response to the pandemic. Because of uncertainty in the timeline to find an effective treatment or vaccine for the virus, market momentum has slowed in the short term. Some market participants are on the sidelines taking a ‘wait and see’ approach, whereas others are being more opportunistic to hunt for distressed deals at advantageous prices. The good news is that the commercial real estate market by nature is slow-moving and yield focused, and the leasing and rent fundamentals do not swing wildly from day-to-day.

We know that there will be a reopening of business, but we need to be patient and understand that the economy might not bounce back to normal right away. People will need to continue to heed the CDC guidelines of social distancing, hand washing, and wearing face masks.

Below, we have summarized notable commercial real property sales located throughout Delaware occurring between December 2019 and March 2020. The asset sales range from an assisting living facility, an industrial office/warehouse, office buildings, apartments, and a hotel. The five leased investment sales below reflect a wide range of cap rates from 5.5 to 10.0 percent with an average of 6.77 and median of 7.75 percent.

The Summit at Hockessin – a 4-story, assisted living complex with 91 independent and 94 assisted living units (185 bed total) on 20.59 acres that sold in December 2019 for $46.9 million, or $253,514/bed.

Liberty Square Apartments – a three-story, 297-unit apartment complex located in Newark that sold in December for $32.5 million, equivalent to $109,428 per unit.

Galloway Court Apartments – a two-story, 129-unit apartment complex located in New Castle that sold in December for $11.4 million, equivalent to $88,372 per unit.

Former PPG plant – a sale in Dover in January for $4.25 million with 176,853 total square feet in two office/industrial buildings on 51 acres. This equates to $24.03 per square foot.

Wawaset Park Apartments – a five-story, 32-unit apartment building located at 2600 West 7th Street in Wilmington that sold in January for $4.5 million, equivalent to $140,626 per unit.

Pennsylvania Railroad Building – a sale at 112 S. French Street in Wilmington for a five-story office building, totaling 43,313 square feet, that sold in January for $4.8 million, or $110.82 per square foot.

Rite Aid – a 10,908 square foot drugstore with a drive-thru located at 1999 Pulaski Highway sold in February 2020 for $2.0 million, or $183.35 per square foot.

The Bellmoor Inn & Spa – a 78 room hotel in Rehoboth that sold in February for $17.3 million, or $221,795 per room.

One Avenue of the Arts – a part 2- and 3-story, 24,445 square foot office building on the Wilmington Riverfront. It sold in February for $4.325 million, or $176.93 per square foot.

Emblem at Christiana – a 3-story, 245-unit, garden apartment complex that was built in 2017 that recently sold in February for $60.5 million, or $246,939 per unit.

Did You Know – March 2020

The cumulative risk of the travel bans, school and university closings, the closing or adjusted of hours to stores, restaurants and pubs, canceling of court trials and religious services, and postponing of all sports games and social events, could lead us into a negative feedback loop. A negative feedback loop is a reaction that causes a decrease in function. This loop, like in 2008, starts with a drop off of economic activity caused by the above closures, then spurs job losses and the potential for an increase of distressed properties/loans. This then leads to price declines and the potential for an increase in loan defaults, which in turn leads to bank losses and credit contraction before the loop starts over and continues. Being caught in this negative feedback loop like in 2008 would put us in a recession.

Many consider the U.S. to be in a recession, measured by two quarters of consistent economic downturn. ULCA economists have forecasted U.S. GDP growth in the first quarter of just 0.4%. They forecast second quarter GDP to decline by 6.5%, and by 1.9% in the third quarter. “With the assumption of an end to the pandemic and repaired supply chains by this summer, the forecast predicts the resumption of normal activity in the fourth quarter of 2020 and a GDP growth rate of 4.0%,” UCLA officials said in their report.

A recession is typically caused by excesses in the system (i.e., overbuilding, too much debt, etc.). Hopefully, this is a short-term medical pandemic; unfortunately, without containment of the virus, there will be job losses and other economic pains. In addition, with the economy in flux and stock prices down across the board, it seems likely that the U.S. commercial real estate property markets will hit a soft spot. Clearly, we will experience a short-term economic downturn.

Following the erratic stock market pricing in March as COVID-19 spreads, REITs have performed worse than the S&P. If we correlate the performance of REITs and their drop in share prices as an indication of lower commercial real estate property values, then we are down 20 to 35 percent from at least three weeks ago. Obviously, REITs focused on gaming and lodging having taken the largest hits, whereas REITs focused on the office, apartments, and industrial sectors being on the lower end of the range. Of course, given panicked wholesale selloffs, these signals need to be taken with a grain of sale. Nonetheless, given where we are in the latter portion of the cycle, real estate pricing likely will moderate and come down, varying by property types.

All of this volatility has highlighted the attractiveness of investing in hard assets like commercial real estate, especially secure triple net leased properties, to high credit tenants. But larger assets like hotel/resorts and malls are likely to be impacted by the virus due to increases in cleaning costs and a drop off in patrons and/or tenants. In addition, offices could be negatively impacted if rent payments get delayed; tenants will cut their space needs, or close their businesses entirely.

The good news? It is possible to adapt and overcome. It is doubtful that we will enter a negative feedback loop as described. This is hopefully a short-term biological pandemic and things are not destroyed. There is not a bubble with excesses to clean up or work through. Things have been halted, but provided there is a quick containment of the virus then all the financial economic stimulus will act as a crutch for the financial markets. The outlook is for lower gas prices, low interest rates, pent-up consumer demand, and positive economic growth buoyed by the huge stimulus by yearend 2020.

Did You Know? July 2018

At the approximate midpoint of 2018 we are seeing local transaction remaining robust. We have summarized notable commercial real property sales located throughout Delaware below that have occurred between May and July 2018. Assets summarized below range from apartments, vacant land, retail shopping centers, office buildings, net leased real investments, industrial buildings, self-storage and special purpose properties. Leased investment sales below indicated cap rates from 5.8 to 9.9 percent with an average of 7.66 and median of 7.85 percent.

– 400 Delaware Avenue – is a one-story, 7,550 square foot former bank branch in Wilmington that sold in June 2018 with a 10-year, lease to Bank of America for $1.7 million, or $225 per square foot.

– The Horseshoe – is six unit duplex student housing complex located on E. Cleveland Avenue in Newark that sold in June 2018 for $1.45 million, or $80,556 per bed.

– 100 Paper Place – is a one-story, 43,185 square foot industrial building on 3.08 acres zoned CR that sold in June 2018 for $2.1 million, or $49 per square foot.

– Northeast Plaza – is a 22,240 square foot, strip shopping center located at 1200 Northeast Blvd, Wilmington that sold in May 2018 for $1,825,000, or $82 per square foot.

– Chateau Orleans Apartments – in Wilmington is a 168-unit, garden-style apartment that sold in July 2018 for $15.6 million, or $92,900 per unit.

– The Elms Apartments – is 24 units in Newark that sold in July 2018 for $1,700,100, or $70,838 per unit.

– The Wilmington Loew’s – in New Castle is 28.7 ground leased acres sold in July 2018 for $5.5 million.

– 86 Albe Drive – is a 9,975 square foot industrial building that sold in May 2018 for $1,025,000, or $103 per square foot.

– 14 Garfield Way – is a 42,305 square foot industrial, refrigerated warehouse building on 2.07 acres that sold in July 2018 for $1,700,000, or $40 per square foot.

– 107 Albe Drive – is a 22,970 square foot, multi-tenant, industrial/flex building on 1.69 acres that sold in June 2018 for $2.1 million, or $91 per square foot.

– Liberty Baptist Church – on Red Lion Road in Bear is 8.12 acres improved with a total of 15,211 square feet of buildings that sold in May 2018 for $2,025,000 million, or $133 per square foot.

– 20 acres in the Westown Business Park – located off Merrimac Avenue in Middletown sold in June 2018 for $4,250,000, or $16,100 per unit for a planned 264 unit, garden apartment complex.

– Bunker Hill Professional Centre – located at 102 Sleep Hollow Drive in Middletown is a two-story, 20,853 square foot office that sold in August 2018 for $3,815,000, or $183 per square foot.

– 1050 Industrial Drive – is a two-story, 20.,160 square foot multi-tenant, office in Middletown that sold in July for $1.7 million, or $84 per square foot.

– Former Safe Haven Animal Sanctuary – in Georgetown, Delaware is an 11,500 square foot vacant animal hospital on 13.23 acres that sold in June 2018 at auction for $880,000, or $77 per square foot.

– Barton’s Grand Rental Station & Mini-Storage – in Seaford, Delaware is approximately a 75,000 square foot mini-storage building and a 10,000 square foot retail showroom that sold in July 2018 for $5,125,000, or $60 per square foot.

Did You Know? April 2018

Nationally, nine years into the expansion economists expect a jump in economic growth in 2018. Real gross domestic product (GDP) growth, which was 2.3 percent in 2017, is forecast to rise to 2.8 percent in 2018.  Higher levels of economic growth are anticipated to continue into 2019 with economists predicting a 2.5 to 2.9 percent GDP growth rate.

  • According to the MBA, 2017s lending volume for commercial and multifamily mortgage loans closed at a record of $530.1 billion, up eight percent over 2016. Nearly a third of that total, or $151.2 billion, reportedly came from commercial banks, while GSEs came in second with $130 billion.
  • Commercial real estate loans at banks are at a record of $4.3 trillion, or 11 percent higher than before the Financial Crisis. According to the Green Street CPPI index commercial real estate prices collapsed nearly 40 percent during the Financial Crisis; then prices more than doubled from the low in May 2009 to the peak in September 2017, when the index was 27% above the peak of the prior bubble.
  • Economic growth and commercial real estate fundamentals overall remain strong. The exception is the retail sector due to changing demographics, the impact of E-commerce and tenant bankruptcies.
  • But the “retail apocalypse” isn’t occurring and facts and figures tell the story: 91 percent of all retail sales in 2017 occurred in a brick-and-mortar stores and physical retail store openings grew by more than 50 percent in 2017 thanks to the hypergrowth of dollar stores.
  • The outlook for commercial real estate in 2018 is positive based upon continued low unemployment and positive economic growth even with the headwinds of rising interest rates.


Locally, we have summarized several larger priced commercial property sales that occurred in the first quarter of 2018 below.


  • One & Two Greenville Crossing – is a 134,389 square foot retail/office complex located in Greenville that sold for $66 million in March 2018.
  • The Alder Park & Pine Grove Apartments – in Dover that total 311 units sold in January 2018 for $20 million, equivalent to $64,102 per unit.
  • Las Casas Apartments – in Wilmington sold for $10.3 million in March 2018, or $85,833/unit.
  • Walgreens in Milford sold in March 2018 for $6.575 million, or a $526/SF and a 5.7% cap rate.
  • 322 Ruthar Drive – is a 120,700 square foot industrial building on 10.67 acres that sold in April 2018 for $6.5 million, or $53.85 per square foot.

Did you know – June 2017…

  • As of the 1st Quarter 2017 CoStar reports Delaware’s retail inventory of almost 30 million square feet operating at a 5.5 percent vacancy rate; this is slightly higher than their reported national retail vacancy rate of 4.8 percent.
  • Hunters Crossing Apartments in Newark, Delaware sold on June 1, 2017 for $52.5 million, or $77,206 per unit for its 680 apartment units.  The seller was Altman Management Company and the buyer was AION Partners out of New York.
  • The 240,780 rentable square foot, 14-story, office building at 802 Delaware Avenue in Wilmington sold on May 24, 2017 for $34 million, or $141 per square foot.
  • A large 10.21 acre commercial tract on Coastal Highway in Rehoboth Beach sold in May 2017.  This parcel was home to Tomato Junction retail produce stand located next to the Tangier Outlets.  It sold for $13.5 million.
  • The Walgreens at 5999 Summit Bridge Road, Townsend, Delaware – is a 9,999 square foot, double net leased property that sold on May 25, 2017 for $4.2 million, or a 6.2 percent going-in capitalization rate.
  • The Walgreens at 28517 DuPont Boulevard, Millsboro, Delaware – is a 12,000 square foot, double net leased property that sold in May 2017 for $3.65 million, or a 6.6 percent going-in capitalization rate.
  • Lidl Grocery – purchased 4.2 acres of land to construct a 36,186 grocery store at 622 E. Pulaski Highway, Elkton, Maryland for $1.55 million on May 5, 2017.
  • 913 N. Market Street, Wilmington, Delaware – is a 12-story, office building in the CBD that settled June 19, 2017 for $1,102,500, equivalent to $13.50 per square foot.

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Did you know – October 2016…

 Commercial Real Estate Market Facts – October 2016

  • The 4-story office building located at 1000 Uniquema Blvdin New Castle sold in early October 2016 for $2.3 million, or about $38 per square foot.
  • Two, suburban office buildings at 242 & 248 Chapman Roadand totaling 143,941 square feet sold in August 2016 for $15.5 million, or $107.68 per square foot.
  • A 485,987 square foot industrial manufacturing facility located at 400 Lukens Drivethat was fully leased to Zenith Home Corp. just sold in August for $27.5 million, or $56.59 per square foot.
  • 222 Lake Drive in Newark sold in July 2016 for $4.5 million, or about $55 per square foot. This industrial flex building totaled 80,075 square feet on 25.47 acres.
  • 701 Pencader Drivein Newark sold in August for a total consideration of $8.34 million for a 151,000 square foot warehouse building that was fully leased to two tenants.
  • 31/32 Trolley Squarea 5,760 square foot, three-story, mixed use unit sold in July 2016 for $1,150,000, or almost $200 per square foot.
  • The TD Bank ground lease in West Chester, Pennsylvania sold in June 2016 at a 5.26 percent cap rate.
  • The Chick-fil-A ground lease in Middletownsold in July 2016 at a 4.25 percent cap rate.
  • The AutoZone ground lease on Kirkwood Highwaysold in July 2016 at a 4.25 percent capitalization rate.