Wilmington Office Market Report shows a jump in vacancies — here’s why

Bracebridge I and III in downtown Wilmington are an office real estate problem waiting for a solution. Purchased by Bank of America when it bought out MBNA in 2005, the properties have been on an off the market for several years.

Now, with Bank of America moving its downtown employees to the suburbs and a long-expected retraction at Bracebridge I and III, the half-million square feet of open office space in the city’s Central Business District (CBD) caused the vacancy rate to rise from 16.1% to nearly 23.0%, according to Newmark Night Frank’s Q2 Wilmington Office Market Report.

Vacancies have been an issue in the CBD throughout the 2010s, between the Ashland, Inc. retraction of Hercules Plaza in 2015 and the Dow/DuPont merger.

The Bracebridge buildings are uniquely challenging. Built amidst the excess of the the MBNA boom in the ’90s, they have very little appeal to businesses today.

“The problem with those offices is that they’re really, outrageously too big,” said Wills Elliman, senior managing director at Newmark Knight Frank. “When they were built they were outrageously too big, and that was in the ’90s. Now they’re just kind of ridiculous.”

One of the original Bracebridge buildings, Bracebridge IV, was donated to the Longwood Foundation in 2012, and is now the Community Education Building, home of Kuumba Academy and Greater Oaks Charter School. With that in mind, it’s possible that thinking beyond office space is where I and III will find use.

Beyond the vacancy jump, there are some bright spots: Economically, they city’s revitalization efforts like BPG’s DECO food hall in the DuPont Building are drawing people to downtown, and hundreds of new residencies, both affordable housing and market-rate, are coming to downtown in the next year. Former office building 1220 N. Market St. was purchased by Florida-based hotelier Driftwood Hospitality Management as a Qualified Opportunity Zone property and is being converted into a hotel.

Overall, according to the report, there is over 500,000 square feet of new development in multifamily and hospitality underway in the CBD.

“[I]t is likely that its quality office supply featuring competitively priced large-block availabilities will eventually attract more companies to participate in the popular live/work/play model,” the report states.

“The suburbs are fairly tight,” said Elliman. “You’re going to start seeing more people leasing office space downtown.”

Anecdotally, it’s already happening: “We’re at a kind of low point in terms of the fact that vacancies are still high,” said Elliman. “Buccini Pollin is moving from down on the Riverfront to the Brandywine Building, taking two floors. That’s going to be a couple hundred people, somewhat young and hip, with the great energy that they add.”

The Mill is adding a second floor of office space in the Buccini Pollin-owned Nemours Builiding, Capital One recently completed a full renovation of its Delaware Avenue office space, unemployment is lower than the national average — and, of course, there’s the fintech boom.

Who knows, maybe the next big fintech thing will be looking for obscenely large offices.