By Joe Latina, Principal, Patterson-Woods Commercial Properties/CORFAC International
The biggest news about Delaware retail is the expansion of Christiana Mall in Newark, DE and an equally ambitious re-development that is adjacent to the aforementioned mall – The Colonnade at Christiana. Everyone in the Mid-Atlantic knows that Delaware does not have retail sales tax, thus the driver of Christiana’s expansion and the new projects is simply shopping demand and a geographically dense population base that draws from more than 20 million people in nearby states including Pennsylvania, Maryland, New Jersey and even New York. It’s one thing to save $4 when you spend $50 but the money gets real when you can save $80 on a $1,000 shopping tab (the example is based on 8 percent sales tax that you’d pay in Philly, which is about 30 minutes from Wilmington and has over 4 million people in its MSA).
Christiana’s expansion (to 1.1 million square feet) and the adjacent, 915,000-square-foot The Colonnade is made possible by construction improvements to the I-95 and Route 1 interchange that will give drivers and shoppers better access to the existing and refurbished retail centers. The Colonnade was previously called the Christiana Fashion Center and is being re-developed by Frank Acierno and his company, Allied Properties.
Christiana Mall is owned by Chicago-based General Growth Properties, which is adding to its existing center and anchored by Macy’s, JC Penney, Costco, Target, Barnes & Noble, Forever 21, The Cheesecake Factory, H&M and a host of smaller shops. Outdoor retailer Cabela’s is new to our market and will be anchoring the expansion of Christiana Mall with a new 109,000- square-foot store.
An estimated 50 percent of Christiana Mall shoppers come from out-of-state to enjoy the retail- tax free status in Delaware. As a result, average sales in the food court run a whopping $1,380- per-square-foot, according to mall’s owner, compared with average sales for other food courts at $823-per-square-foot, according to the International Council of Shopping Centers. General
Growth considers Christiana Mall to be one of its best-performing assets in the country. The expansion includes a new 17-screen Cinemark theater and Nordstrom Rack.
The region’s economy is healthy enough for a variety of new projects. For example, local developer Joseph M. Capano is developing a mixed-use project called Brandywine Pavilion and located on Naamans Road, which connects U.S. Route 202 with I-95. It will have 36,000 square feet of office space, 18,250 square feet of retail and 18,250 square feet of corporate apartments,
Other noteworthy trends with Delaware retail are:
?The overall vacancy rate in New Castle County is approximately 7.5 percent, which combines community centers, neighborhood centers and power centers. Statewide, overall vacancy is nearly 10 percent, but this is a deceiving number.
The Concord Pike corridor starts in Wilmington and goes north all the way to Bangor, ME. The section from Wilmington to Southern Pennsylvania, which includes Market Square and Brandywine Town Center in Wilmington, is one of the hottest submarkets in the state. Both properties are owned by the REIT, Arcadia Realty Trust, and current rents generally start at $25 and go up from there. Shop space garners some of the highest rents in Delaware at $45 or greater per-square-foot.
Demand along the Concord Pike Corridor is so high that a gas station on 0.37 acres recently sold for $850,000, with the buyer assuming responsibility for any environmental issues associated with redeveloping the site.
The next hottest submarket is Main Street in Newark, which is home to the University of Delaware and sports rents north of a $30 a foot. It wasn't long ago that a retailer could have secured a rental rate in the low-$20s and even the high-teens in this college town.
The Class-A markets typically have vacancy of only 5 percent or so, and prime locations are being bid up. In contrast, B and C Space is difficult to market, demand is sluggish and the vacancy rate is closer to 15 percent, on average.
For years Sussex County was called 'slower Delaware' because of its farms and beach resorts. In recent years, the southern section of the state has become a destination for baby-boomers to retire and a plethora of retail space was built up to support the year-round population.
Outside of core shopping centers and malls, retail expansion is mostly from food, especially quick service retailers such as Dunkin Donuts, Starbucks, Subway, Jake's Wayback Burgers, the other burger shops like Five Guys and independent restaurant owners.
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