Over the past month, we’ve faced with a heated presidential election, an administration transition and a second wave of the COVID-19 pandemic. Government’s reaction has been to test more people and restrict movement in an attempt the contain the virus until vaccines can be approved and distributed. At the start of the fourth quarter 2020, macro data suggested that economic activity was showing some signs of improvement, but as more stringent government measures are adopted, we are likely to see slowing economic activity.
Questions remain, like how does the economy rebound, will the government provide additional economic stimulus before yearend 2020, and how will commercial real estate fundamentals and investment fare? The local commercial real estate market is still active thanks to investors and developers having long term faith in the market coupled with the low interest rate market. Below is a snapshot of significant commercial real estate sale activity in Delaware for September through November. It includes a variety of asset types including vacant land, a retail center, a hotel, self-storage building, apartments, modular home park and industrial. The five leased sales below reflect a wide range of cap rates, from 4.7 to 8.76 percent with an average of 6.07 and a median of 6.73 percent.
- Henlopen Meadows – is the sale in September of 60 acres for $3 million (equivalent to $14,925/lot) that is planned for 201 residential homes to be developed by Ryan Homes in Lewes.
- Tower Hill– is a proposed 292-lot single family residential subdivision on 138.06 acres in Lewes that was purchased in September for $12,030,000, equivalent to $41,199 per lot.
- 263 Quigley Blvd and 34 Blevins Road – are two industrial/flex buildings in the Airport Industrial Park totaling 92,901 square feet that sold together as a portfolio in October for $7,350,000, or $79.12 per square foot.
- Blue Diamond Park – 780 S. DuPont Highway in New Castle is 125.02 acres of EX/I industrial land that sold in October for $31.25 million, equivalent to $249,960 per acre in order to build a 1.33 million square foot Amazon fulfillment center.
- Sheraton Wilmington South – is a 192-room hotel at 365 Airport Road that sold at auction in October for $19.5 million, equivalent to $101,563 per room.
- New Castle Storage– located at 4093 New Castle Avenue is a renovated/vacant fully climate controlled 68,807 rentable square foot facility with 753 units that sold in October for $7,050,000, or $102.46 per square foot or $9,363 per unit.
- The Garrison – is a 2019 constructed and fully stabilized 120-apartment units and two commercial tenanted building sold in November for $30.65 million, equivalent to $251,230 per unit.
- The Shops at Limestone Hills – is a 34,710 square foot 95 percent leased neighborhood shopping center that sold in November for $14.425 million, equivalent to $415.59 per square foot.
- Capitol Green Apartments – is a 132-unit rent subsidized apartment complex in located in Dover that sold in November for $19.5 million, equivalent to $147,727 per unit.
- Ridgewood Manor Mobile Home Park – is a 202-lot park on 56.4 acres in Smyrna that sold in November for $12 million, equivalent to $59,406 per lot.
- 300 Executive Drive – in Pencader Corporate Center is a 178,221 gross square foot gutted warehouse on 16 acres sold in November for $7.5 million, equivalent to $42.08 per square foot. It previously sold in May 2017 for $6.5 million.
- 220 Lake Drive – in Pencader Corporate Center is a 178,235 square foot fully leased office/warehouse on 8.95 acres sold in November for $14.2 million, equivalent to $77.50 per square foot.
Additional government restrictions could stymie holiday consumer spending and mute 2020 GDP. Unfortunately, if Congress can’t agree with another round of government stimulus then the risks are to the downside for sluggish growth to start 2021. The hope is that a coronavirus virus approval and distribution in the first half of 2021 will foster market optimism, boost employment, create a positive investment market, and stimulate increased commercial real estate activity complemented by a low interest rate environment. How will vaccine approvals and rollout in 2021 – impact consumption and business investment, and hence growth and inflation? Plus, locally will Delaware benefit from the Biden effect? Our outlook for the local commercial real estate market into 2021 is a positive one with opportunities presenting themselves for investors operating across all risk tolerances.