This editorial article is a part of Technical.ly's Office Trends month.
The first thing you learn when searching for Wilmington business real estate numbers is that Northern Delaware is a part of the overall Philadelphia market, listed between the Philly suburbs and South Jersey.
There’s nuance in that kind of annexed designation, for sure, but we at Technical.ly tend to see its upside.
Still, when you find Wilmington’s standalone data and compare it to Philly, the bundling makes sense: As far as real estate prices go, we are in the same realm, part of an affordable pocket of the Mid-Atlantic (which also includes Baltimore) between New York City and Washington, DC.
We looked at the leasing rates per square foot for Class A real estate (that means prime, often new), using data provided by the research arm of real estate firm Jones Lang LaSalle (JLL), as well as stats from New York-based Newmark Grubb Knight Frank (NGKF).
Is Center City Philadelphia more expensive than Wilmington? Yes. But probably not as much more than you might think. Last year, on average, space on the Wilmington Riverfront cost just a dollar or so less per square foot than Market Street East in Philadelphia. However, space in Philadelphia’s Navy Yard (home to a big chunk of companies to the south of the city) averaged almost twice as much per square foot as Downtown Wilmington.
In the third quarter of this year, the average rent in the Wilmington Central Business District (CBD) was about $25. Philadelphia CBD was about $31. The average for the entire Philadelphia area, which includes the Lehigh Valley, Western Montgomery Country and Bucks County, is about $27.
So, while Wilmington isn’t the least expensive town in greater Philly (that would be Allentown), it’s still on the affordable side of average, with the Wilmington suburbs offering even lower asking prices.
“The [Wilmington] suburbs have done very well this year,” said Daniela Stundel, research manager with NGKF. “Unfortunately, when it comes to the city, it’s hampered by the employee headcount tax and the parking tax. It’s an extra expense that businesses may not want to acquire. So if they can find what they need in the suburbs, they may gravitate towards there.”
“The bigger problem is the wage tax,” said Wills Elliman, Wilmington-based Senior Managing Director of NGKF. “The head tax is only $10 per month per employee for $120 a month, that’s no big deal. Wage tax – 1.25 percent – becomes real money. Depending on the income level of the employees and the densification of the space – in other words, how many people are in 1,000 sq feet, for instance – the tax could be two to three dollars per square foot. Parking is seven to 10 dollars per square foot — now you’re getting close to $40 per square foot. The absolute highest price in the suburbs is $30.”
Stundel said over the next couple of years Wilmington will have to reassess its tax structure and the incentives they offer to keep people or bring people back into the city.
Still, Wilmington’s wage tax is lower than Philly’s, which is 3.89 percent for city residents (Philly does not have a headcount tax). That can add up, but Philly still remains dramatically less expensive than New York and D.C., which average about $60 per square foot. before taxes.
So, businesses can save a little money choosing Wilmington. But what does the city, as a subset of Philadelphia, offer prospective businesses for the price?
- It’s not a major city. Technical.ly Delaware stakeholders have told us that for some businesses and jobseekers, the fact that Wilmington is “not New York” is a draw – not everyone wants a big city, and Wilmington manages to offer both an urban and a small-town vibe.
- It’s convenient to the whole East Coast. Wilmington’s a hub. Need to do in-person business with New York on Tuesday and DC on Wednesday? Totally doable, no flights needed.
- Some pretty awesome architecture. From the vintage Nemours and DuPont buildings to the shining Hercules Building.
- Wilmington is basically just as close to all of the Philly colleges – and it’s in close proximity to Delaware colleges, too.
- Growth potential with fewer immediate competitors (ie: You can be a big fish in a small pond)
All in all, Wilmington might just be the Mid-Atlantic’s center in more ways than one. It’s not too cheap, not too expensive; not in the boondocks, not too fast-paced; close to everything but still packing its own identity.
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