The Richmond, Virginia, Industrial market ended the second quarter 2018 with a vacancy rate of 3.9%, down over the previous quarter. Net absorption was positive at 110,342 square feet. Triple net rental rates ended the fourth quarter at $5.15, an increase from $4.85 in the previous quarter.
The industrial market continues its slow and steady growth with vacancy rates continuing to decline. Demand across all industrial types remains strong, and flex product is especially seeing a high amount of activity. Absorption remains positive due to buildings that are being torn down or converted to other uses, putting pressure on existing inventory.
The continued surge of online sales and the need to get products to consumers quickly are forcing retailers and wholesalers into more facilities and rapidly changing supply chain strategy. Locally, a handful of distribution-oriented space is underway, with projects by the airport, along I-95 South, and Hanover. In March, ABC announced their relocation to the intersection of Pole Green Road and I-295 in Hanover within the next 2-3 years. Also in Hanover, Blue Bell Ice Cream is returning to Richmond, beginning construction on a new 14,000-square-foot distribution center that is expected to open in 2019. In June, PepsiCo confirmed that it had closed on +/- 170 acres of land east of I-95 on Willis Road. Construction of the 220,000-square-foot facility is expected to be finished by the end of the year.
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.
Q2 2018 Industrial Market Snapshot
Author: Statia Gibson
Date Published: 07/18/2018