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Richmond’s Trajectory is Still in the Early Innings

This article originally appeared in the “2022 SREB Market Outlook” in the December issue of Southeast Real Estate Business

Richmond continues to solidify its position as a high growth Mid-Atlantic market and one of the top secondary markets in the country for inbound corporate and real estate investment.

The Richmond MSA, totaling nearly 1.4 million people, has been one of the true beneficiaries of the COVID-19 pandemic due to its historical performance during economic distress, in-bound millennial and corporate migration from larger peer markets, quality of life and affordability, diversified economy, educated workforce, pro-business environment and the city’s central East Coast location.

With such broad and fundamentally important characteristics, Richmond will continue to attract both domestic and global corporations and capital alike.

The continued growth of Richmond’s diverse economy and workforce, fueled by its core industries including healthcare, manufacturing, industrial and technology, and further supported by its federal (Federal Reserve Branch and 4th Circuit Court) and state capital underpinnings, has generated a bullish sentiment on the economic growth prospects for 2022.

As of fourth-quarter 2021, Richmond’s unemployment currently sits at 4 percent, representing a consistent decrease since the start of 2021 and well below the national average of 5 percent.

City’s Industrial Sector is Taking Off
Richmond’s highly coveted Interstate 95 corridor location and $300 million Port of Richmond expansion has fueled robust industrial investment in the region, which is the major headline of 2021.

As of the fourth quarter, 10 million square feet of new development is underway, more than three times the previous highwater mark of 3.5 million square feet. Six million square feet already have commitments and current industrial vacancy sits at a record low 3 percent.

Notable Richmond industrial commitments include Hillwood’s 2.5 million-square-foot Amazon facility and Lowe’s 1.2 million-square-foot distribution facility. Current average asking lease rates in Richmond are $5.58 per square foot triple-net, presenting a highly economical option relative to the Northern I-95 markets where base rents exceed $10 per square foot. Richmond has seen a 7.5 percent increase in industrial sector jobs since the spring of 2020.

Richmond Growing as a Corporate Hub
As corporate office users in larger peer markets look to reimagine the needs of their workforce, Richmond has proven itself to be an efficient and desirable solution as a regional hub.

Notable 2021 office transactions include VCU Health’s 615,000-square-foot outpatient facility in the Central Business District; CoStar Group’s (headquartered in Washington, D.C.) expanded footprint to 250,000 square feet in Riverfront with plans for future expansion; Simplisafe’s (headquartered in Boston) 60,000-square-foot lease in the Midtown submarket; and CarMax’s relocation of its 117,000-square-foot Innovation Center in the Putney Building along the Broad Street Corridor.

Richmond’s office capital markets transactions volumes were up 350 percent year-over-year with several notable portfolio trades. Brookfield’s West End Office Portfolio (totaling 567,000 square feet) traded in December to a joint venture between New York-based Jack Sitt Investments and Dubai-based Gulf Islamic Investments for $87 million (or $153 per square foot).

Earlier in the year, the Midtown Portfolio (totaling 150,000 square feet) sold to a New York-based family office for $19.25 million (or $128 per square foot). Both trades were in the Glen Forest submarket, Richmond’s highest performer across occupancy, rent growth and historical fundamentals. As of December, office investment sales transactions totaled $925 million, which illustrate capital’s flight to safety in stable secondary markets with clear growth potential.

View the original article here.

Related Experts

Will Bradley

Executive Vice President

Richmond - North

Will Bradley is an Executive Vice President for Colliers International specializing in investment sales across the country. With over 15 years of experience and $1+ billion in sales, Mr. Bradley brings a holistic strategic approach to his client’s goals and needs facilitated through a highly sophisticated and creative process that provides unparalleled results and long-term, multi-transactional relationships. 

Mr. Bradley’s relationships with a wide composition of capital from institutional to high-net-worth and experience transacting across a variety of asset types including office, industrial and flex assets provide him a unique perspective in today’s capital markets. Prior to joining Colliers International, Mr. Bradley spent a decade with CBRE where he grew from the region’s sole analyst to its #1 producer.

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Mark Williford

Senior Vice President

Richmond - North

Mr. Williford specializes in investment sales transactions nationally with a primary focus on the Mid-Atlantic and Southeast and brings an unparalleled level of passion and expertise to the business. With 10 years of commercial real estate experience, he has successfully represented private, high-net worth and institutional clientele in the successful disposition of industrial, office, retail and mixed-use assets totaling over $1.2 billion across 10 states. 

Prior to joining Colliers International, Mr. Williford was a Director at HFF in Denver, Colorado, one of the largest and most successful commercial real estate capital intermediaries serving the United States and Western Europe. Prior to joining HFF, Mr. Williford was a leasing broker with SullivanHayes focused on tenant and landlord representation, where he completed more than 500,000 square feet of lease transactions. 

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