Challenges facing investors today include navigating the ever-shifting macro-economic environment. However, even with macro-economic uncertainty, commercial real estate fundaments remain on good footing. Market uncertainty is just causing developers & investors to pause in order to recalibrate their strategies.
The local commercial real estate market remains active although sales activity might be slowing. Below is a snapshot of larger commercial real estate sales located throughout Delaware that occurred from July through September 2022. The in-place cap rates ranged from 4.00 to 11.15 percent with a median of 7.58 percent.
- 322 A Street – Wilmington is a 27,000 square foot, 2-story over pedestal parking, office attached to a 72,000 square foot warehouse that sold in September for $16.2 million, or $163.64 per square foot.
- Pine Brook Apartments – located in Newark is a garden-style complex with 308-units that were built in 1971 and renovated in 2005. It sold in September for $63 million or $204,545 per unit. 3.6 percent cap rate based upon T-12
- Seaford Wawa – is a 1.71-acre ground lease that sold in September for $5,494,505, or a $983.80 per square foot of building. 4.55 percent cap rate
- Old Town at White’s Pond – in Lewes is 36.94-acres subdivided into 85 single family lots that sold in September for $14.2 million, or $167,059 per lot.
- Newark Shopping Center – is a 145,416 square foot community shopping center built in 1955/2016 that was 92 percent leased and sold in September for $33.5 million, or $230.37 per square foot. 7.50 percent cap rate
- The Peninsula on Indian River Bay – Phase 11, Stillwater residential subdivision is 79 single family condominium lots on 20.531 acres located in Millsboro that sold in September for $9,480,000, or $120,00 per lot.
- JC Penny – is a 159,878 square foot, freestanding department store at the Christiana Mall sold as part of a five property, $53 million portfolio in September at an allocated price of $15,131,275, or $94.62 per square foot. 7.43 percent cap rate
- 1614 Newport Gap Pike – in Wilmington is a two-level, 58,000 square foot industrial building sold via a 10-year sale leaseback in August for $7,300,000, or $126.72 per square foot. 7.04 percent cap rate
- Tupelo Sands Apartments Land – in Frankford, Sussex County is 20.224 acres approved for a 216-unit apartment complex that sold in August for a total of $5,960,000, or $27,593 per unit.
- 700 N. Broad Street – in Middletown is 16.18 acres improved with a 264,817 square foot industrial, manufacturing building built in phases that sold in August for $6,750,000, or $25.49 per square foot.
- Blue Hen Car Wash – is two tunnel car washes totaling 9,161 square feet located in Newark & Wilmington that sold as a package in August for $7,650,000 (RE allocation), or $835.06 per square foot.
- Sonesta Select Hotel – in Newark is a 152-room hotel that sold in July for $6,000,000, or $39,474 per room.
- 5400 Limestone Road – in Wilmington is a three-building office complex totaling 24,700 square feet on 4.66-acres that sold via a sale leaseback in July for $6.6 million, or $266.34 per square foot. 11.15 percent cap rate
- Middletown Amazon Fulfillment Center – is a 1,015,740 square foot plus mezzanine warehouse distribution center building built in 2013 on 74 acres that sold in July for $118 million dollars or $116.17 per square foot.
- Colony North Apartments and Woodview Apartments– are two complexes located in North Wilmington that total 431-units and were built in 1970-75. They sold in July for $70.3 million or $163,109 per unit. 4.00 percent cap rate
Clearly, we are in for slower growth over the remainder of 2022 and into 2023, however this could be a good thing as it will help rebalance the supply chain, solidify market supply and demand fundamentals and tame runaway inflation. These factors, along with ample market liquidity, should foster a dynamic rebound for investment and development going forward. Any price softening caused by increased borrowing costs will hopefully be offset by rent growth especially considering the lack of additional market supply.
Despite macroeconomic uncertainties and capital markets volatility, not everyone is sitting on the sidelines. Compelling investment and development opportunities are expected to materialize in the near term.