Did You Know – August 2020

The COVID-19 business shutdown was rapid as it spread over the national and local economies throwing them into a recession in the second quarter 2020.  Recessions are typically market resets, but this was an external shock to the system. It poses the question: will a slow and gradual return back to normal be different?

So, what will our local economic recovery look like?  An informal poll taken by the Delaware Commercial Industrial Real Estate Council (CIRC) on their June virtual meeting had 72 percent responding that they anticipated a slow and gradual recovery locally.  The good news is that locally we have a diverse economy with a good, educated workforce that companies desire.  Having a diversified economic base with a talented workforce makes our local economy more resilient to weather the economic downturn.

While most investors have the phrase ‘past performance is not indicative of future results’ memorized, the truth is it can still help to look at the past to understand future performance.  Typically, in periods of market dislocations there are opportunities to deploy capital.  First many investors hoard cash and, if they buy, they search for safety in blue chip, high tenant credit leased investments or make very strategic investments. Below, we have summarized notable commercial real estate sales settling pre-pandemic in January to March 2020 totaling $82.9 million versus those settling post-pandemic in April to June 2020 totaling $100.7 million.

Pre COVID-19 Delaware Sales Examples

  • 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.
  • Former PPG plant – in Dover sold in January for $4.25 million for 176,853 total square feet in two office/industrial buildings on 51 acres. This equates to $24.03 per square foot.
  • 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.
  • 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.
  • Burger King – at 3607 Kirkwood Highway in Newark sold in March for $2,572,293 or $856 per square foot.

Post COVID-19 Delaware Sales Examples

  • 105 Park Avenue – is a 36,000 square foot industrial warehouse in Seaford that sold in April for $2.67 million, or $74.17 per square foot.
  • 824 N. Market Street – is a 10-story, 207,005 square foot office building that was 67 percent leased that sold in April 2020 for $16.55 million, or $79.95 per square foot.
  • 100 Commerce Drive – is a 3-story, 65,605 square foot suburban office building in Newark that sold in April for $5.1 million, or $77.74 per square foot.
  • Renaissance Center – at 405 N. King Street, Wilmington is an 8-story, 189,728 square foot office and adjacent 256-space parking garage that sold to Amtrak in May for $42 million, or $221.37 per square foot.
  • The Rockford Shoppes – is a 18,544 square foot shopping center located in Trolley Square that sold in June for $9.3 million, or $501.51 per square foot.
  • 1604 & 1616 Pulaski Highway – an assemblage of 4.691 acres approved for a 29,089 square foot Lidl grocery store & a 7,200 square foot specialty retail center.  It sold in June for $3.75 million to Lidl U.S. Operations LLC in June.
  • PAM Rehabilitation Center of Dover – is a 42,140 square foot triple net medical office that sold in June for $21.35 million, or $505.57 per square foot.

The local commercial real estate activity, did slow during the shutdowns, but has been steady and somewhat resilient over the past three months.  Our outlook for the local commercial real estate market over the remainder of 2020 will be tied to containing the virus spread via increased testing, the economy via declining unemployment and another round of government stimulus money, plus market liquidity remaining steady.

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