The Richmond VA Industrial market ended the first quarter 2018 with a vacancy rate of 4.2%, up over the previous quarter. Net absorption was positive at 45,285 square feet. Triple net rental rates ended the fourth quarter at $4.85, a slight decrease from $4.92 in the previous quarter. 

The retail market's pain is industrial's gain: the rise of e-commerce has created demand for "last mile" fufillment centers to meet consumer's needs for fast product delivery. This new model requires distribution centers that are compatible with online purchases, complete with state-of-the-art technology and high ceilings, and located near population centers. 

With industrial product remaining scare, the market continues to favor landlords, who are enjoying increasing property values and increasing rents, and are offering few or no concessions to tenants. As far as sales, there is little to no velocity concerning industrial Class A product. Cap rates remain around 7% for Class A and 8% for Class B product. 

Over the next two quarters, we will start to see more spec buildings, mostly distribution space. We are already beginning to see new product in Hanover County and along the I-95 corridor and will continue to do so. 

Trade policy is among one of the greatest risks to the industrial market. While all eyes remain on global trade, it will remain an important driver of logistics and warehouse demand, and the overall performance of the U.S. economy will be critical for industrial demand and investment performance.