The industrial real estate market in Hampton Roads has been stagnant compared with the development boom seen in Richmond. Most of the containers coming into the the Ports are immediately shipped out to other locations, so there’s not as much need for additional warehousing space in the area, even though the vacancy rate is well below five percent. Demand for “last mile” distribution space is creating opportunities for developers to redevelop or replace older facilities within urban markets with new product. That type of industrial space is more expensive to redevelop, but users are willing to pay higher rates to be closer to their customers.
This quarter we are beginning to see more parcels of land being marketed as industrial build-to-suit uses, most likely a response to the extensive lack of supply. Many tenants in the market are looking at multiple cities-port users, for example, are also searching for sites in Baltimore or Charleston.
Growth in investor demand for industrial properties continues to surpass all other property types, nationally and locally. Investors are continuing to pour into secondary and tertiary markets because of the availability of product to purchase and a significant increase in occupier demand. We are also continuing to see the trend of local developers purchasing and converting obsolete industrial buildings into apartment uses.
Looking ahead, we can expect the industrial sector to continue to benefit from supply chain modernization for the forseeable future. Despite the fear of future trade wars with China, at this time, cargo volumes at U.S. ports are expected to remain strong and heighten demand for warehousing.