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.
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