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.