The Wilmington area is still recording some of the lowest office vacancy rates in the country, according to market researchers.

The latest report from CoStar showed an office vacancy rate of about 1.4% for Wilmington in the second quarter of this year.

“It’s really the supply issue more than the demand issue from my perspective, just the lack of inventory in the market,” said Lindsey Hess, senior vice president at Wilmington-based real estate firm Cape Fear Commercial. “And we lack new supply coming online … a lot of these other bigger markets had spec buildings coming out during COVID, and we just don't have any of that.”

A report by analytics firm Flatworld Solutions shows Wilmington having the lowest office vacancy rate in the country at nearly 1.5% in the first quarter of this year, with Savannah (No. 2), Myrtle Beach (No. 3), Hickory (No. 4) and Asheville (No. 5) rounding out the top five.

According to the Flatworld Solutions analysis, “The regions with the higher (vacancy) rates are well-established economic hubs. The cities with lower vacancy rates have probably more limited supply and are facing higher demand.”

Many of the office buildings under construction in the Wilmington area are build-to-suit projects that already have tenants, said Hess, who specializes in the local office market.

“When I’m trying to tenant rep or buyer rep, there’s just not much out there,” said Hansen Matthews, partner in Wilmington commercial real estate firm Maus, Warwick, Matthews & Co. 

Cal Morgan, owner of Wilmington-based appraisal firm JC Morgan, said he includes an explanation about why the Port City isn’t experiencing the double-digit vacancy rates for office properties seen in other parts of the country. A couple of reasons include the fact that some larger buildings in downtown Wilmington aren’t as much of a factor anymore, specifically the 12-story former PPD headquarters on North Front Street and a former Bank of America building on Third Street.

The purchases of the PPD office campus by the city of Wilmington and the former bank building by the county for Cape Fear Community College “have enabled us to maintain a lower reported vacancy rate than it could have been,” Morgan said.

Even with such caveats, “the risk level associated with a 5,000-square-foot office based in Wilmington is not the same as the risk level in other places,” he said.

An example: Two years ago, his firm appraised a downtown office tower in Charlotte for a tax appeal. “It was 80% empty,” Morgan said. “It was a ghost town down there.”

In Wilmington, accounting firm Sharpe Patel LLC is preparing to move into 3,000 square feet in Bradley Creek Station, an office building in the 5800 block of Oleander Drive that was completed in 2020.

The firm needed a more modern and bigger space, said Jay Sharpe, a CPA and one of the company’s owners. 

“We've been trying to grow, so we made sure we have ample space to grow into,” said Sharpe, whose company is expected to move into its new space in October.

Hess helped Sharpe find the new space. She said she prefers having five or six potential options for a client, but in this case, “There were only a couple things that I had to show them. They just happened to love this, and it worked out really well.”

Commercial real estate brokers see the demand for office space, particularly new, modern space, in Wilmington remaining high in the near future.

“We’re not at a crisis level by any means, but there’s not a lot of new inventory in the pipeline,” Matthews said. “And when people do build new inventory the prices for that space are probably going to be a base rate of $25 to $30 a square foot. A lot of long-term tenants in this town are just now getting used to rates that are $15 to $16 a foot for second- or third-generation space."