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Banking & Finance

Office Market Now Has Big Empty Spaces Across Town

By Jason Frye, posted Apr 15, 2011

As Wilmington braces itself for the closing of the Wells Fargo Mortgage-Wachovia offices in Mayfaire and the addition of 250-plus to the unemployment lines, another concern stemming from this job loss has emerged. While closing doors, Wells Fargo Mortgage-Wachovia adds an additional 90,000 square feet of Class-A office space to an already saturated market.

This 90,000 square feet will only be part of what one leasing agent called “a dangerously overloaded” market. At least four more Class-A office spaces above 20,000 square feet sit vacant, one of which is the former PPD building on the corner of Independence Boulevard and South 17th Street. Here more than 60,000 square feet sit waiting to be leased.

According to Grayson Powell, broker and managing partner at Coldwell Banker Commercial Sun Coast Partners, the advantage the PPD and Wachovia buildings have is available parking.

“These two buildings are ready for a high-volume user,” he said. “Both have ample parking for employees and clients, large meeting rooms and plenty of floor space.”

But who are these high-volume users? Powell said companies that require massive amounts of square footage – like technical support, customer service or collections call centers – would find many of these spaces, particularly the Wachovia building, ideal.

“The biggest advantage the Wachovia building has over other Class-A space is its location. Mayfaire is a hot ticket and desirable locations tend to go fast,” he said.

Certainly the ease of access and ample opportunities for lunchtime dining would be great perks for a company moving into Mayfaire-area office space, but is the combination of location and availability enough to entice clients to assume the lease on an office?

The catch with a large office space is finding that high-volume client to utilize all or most of that space. Steve Hall, a commercial real estate broker with Maus, Warwick, Matthews & Co., said the Wachovia building would be a costly project to subdivide into spaces suitable for mid-scale users.

“To upfit that building for 15,000 square foot users, you’d be looking at spending $15-$20 a square foot. I’m not sure how many users of this size would be willing to spend that kind of money when there is other space available that may suit them just as well,” Hall said.

“The size is the upside and downside of that building. Since it was built for one tenant, subdivision will be pricey, but in our area it would be easier to find six or eight smaller tenants as opposed to one large tenant.”

Finding a large tenant for the Wachovia building isn’t out of the realm of possibility, though. Hall reports that he and other commercial brokers in Wilmington have been fielding more calls from Texas, Ohio and California inquiring about large office space suitable for call centers.

In truth, the downward pressure the added 90,000 square feet will bring to bear on the Wilmington market is hard to gauge. Hall says to fairly compare the Wachovia building with others you have to divide the list and look at suitable spaces. As things stand in Wilmington at the moment, this building represents one of the largest, if not the largest, areas of contiguous office space in the area. In that respect, the number of comparable lease office properties close to that size is small – with the 63,000 square foot PPD office being the next one in line. The possibility of subdividing the Wachovia space is where the downward pressure is generated.

“[T]he Wachovia building will only affect other properties with 10,000+ of contiguous square feet,” Hall said. “Also you have to break it down by what’s existing and location. To come out of the ground with a new building in today’s market, at least 50 percent will need to be preleased and expect 12-18 months minimum for construction.”

Grayson Powell sees some potential in the situation, though. “If Wilmington’s influencers – Wilmington Downtown, Inc., the city, county, developers and commercial realtors – can get a plan together to draw in new businesses suitable for these large spaces or begin to get creative with alternate uses for these offices, we can come out of this OK. The question is how creative, flexible and aggressive we are with seeking out the right companies and the right answers.”

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