M id A tlantic Real Estate Journal — Year in Review 2022 — December 23, 2022 - January 19, 2023 — 3D Y ear in R eview 2022
www.MAREJ.com
By Christopher Moore, CCIM & Joe Latina of LMT Commercial Realty, LLC The state of the current Greater Philadelphia - New Castle County, DE area CRE market
A
fter an exhilarat- ing few years with activity and trends
causing construction delays. The office sector continues to be the asset class with the
is no exception, with Kastle Systems reporting that the city’s offices were only 41.1% occupied for the first week of December. That is the lowest of the 10 largest U.S. cities for which Kastle monitors office occupancy rates. Conversely, the retail recov- ery is doing quite well, with occupancy rates continuing to rise in the market. While there appears to be a decline from local and boutique retailers that often get shopping centers to fully leased status, that space is getting absorbed by a new type of tenant to retail
– doctors’ offices. We’re seeing dental practices, dermatolo- gists, optometrists and urgent care operators moving into traditional retail locations like never before. It makes sense for these professional prac- tices, as the centers offer easy ingress and egress, plenty of parking and customer access, as well as low-cost marketing – the classic sign above the door. Looking ahead, if the Fed- eral Reserve achieves its mis- sion of taming inflation and transaction volume returns to normal levels, we have reason to be optimistic about the com-
mercial real estate market in our area of the Mid-Atlantic, because the fundamentals are in place for buyers and sellers, landlords and tenants to find common ground on their real estate requirements. Christopher Moore, CCIM & Joe Latina are managing principals at LMT Commercial Realty, LLC. LMT Commercial serves real estate inves- tors, property owners, tenants and restaurant owners and operators throughout the Mid- Atlantic. MAREJ
accelerated by the pan- demic, the commercial real estate market in the Greater Phi ladel - phia-New Castle Coun- ty area is ad-
slowest re- covery. Wilm- ington’s office vacancy rate is hovering around 19%, and net ab- sorption has been negative for the year. Remote and
Joe Latina
Christopher Moore, CCIM
justing to changes spurred by the rapid rise in interest rates, elevated land prices and construction costs. Cash is being squeezed out of the market for investment sales, as potential 1031 Ex- change sellers are reluctant to sell without a replace- ment property to purchase. Exchange buyers are facing higher interest rates as they seek to apply debt leverage against cap rates that remain at historic lows. The good news, however, is if the market is heading for a downturn, at least we’ll be starting from a position of strength. The Delaware multifamily market has a sub-3% vacancy rate, with very little prod- uct available for sale. The industrial market in New Castle County has a sub- 4% vacancy rate and in the Greater Philadelphia area, industrial properties are 94%+ occupied. Industrial leasing rates have more than doubled in recent years, go- ing from $5-6 PSF/YR to as high as $9-$12 per PSF. The Industrial market is tight, as evidenced by a recent client assignment to lease a 100,000 to 125,000 s/f facility with only three clear options in the trade area. Industrial zoned land prices have risen steeply in the past couple of years, going from $100-$200K per acre for unim- proved land without approv- als to over $400K per acre. Site work costs have nearly doubled in the same period. Previously, site work costs were under $100,000 per/ acre while they are now top- ping out at almost $200,000 per acre. Further, approval processes and permitting are taking much longer. While the recently disrupt- ed supply chain is improving, transformers and HVAC com- ponents still have long-lead times for delivery and are
hybrid work’s impact has been felt by all the Central Busi- ness Districts (CBDs) across the country, and Philadelphia
IMITLESS.
RUSTED. OTIVATED. LMT Commercial Realty, LLC professional services include: n Investment Sales n Industrial, Commercial and Residential Leasing n Assisting with 1031 Exchanges n Retail and Restaurants n Land Sales and Development n Life Sciences, Multifamily, Office and More n Property Management n Real Estate/Development Consulting
We service Delaware, Pennsylvania, Maryland and around the globe. For more information on our services please contact us at 302-414-1000 or go to LMTCRE.COM.
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