MARKETBEAT
MARKETBEAT
Industrial Snapshot 3Q 2016
Richmond, VA
Richmond, VA
Industrial Q3 2017
RICHMOND, VA INDUSTRIAL
Economy
Inflation remained below the Federal Reserves 2% target despite a low
Economic Indicators unemployment rate. Economists expect one more hike to the federal
12-Month
Q3 16 Q3 17 funds rates in 2017. The 30-year fixed rate mortgage and 10-year
Forecast
Richmond Employment 666k 682k treasury have remained stable throughout 2017 despite the rising rates.
Richmond Unemployment 4.1% 3.8%
The Institute for Supply Management (ISM) reported an expanding
manufacturing sector in September with 17 of the 18 industries surveyed
U.S. Unemployment 4.9% 4.4%
reporting growth. The Richmond metro area added 16,200 jobs from
August 2016 to August 2017. Richmonds employment in the
construction sector grew by 5.8%.
Market Indicators (Overall, All Property Types)
Q3 16 Q3 17
12-Month Market Overview
Forecast
Richmonds industrial fundamentals remained exceptionally strong with
Vacancy 6.9% 4.8%
declining vacancy and increasing rents. Overall vacancy declined by 210
Net Absorption 76k 415k
basis points from Q3 2016 to Q3 2017 and, at 4.8%, limited functional
Under Construction 216k 726k
availabilities exists for tenants. Industrial vacancy tightened most
Average Asking Rent $4.67 $5.03 dramatically in the Northeast and Southeast quadrants of the metro area
declining by more than 400 basis points in both. Overall industrial asking
*Rental rates reflect net asking $psf/year
rents increased by 6.6% year-over-year. Manufacturing rents increased
Net Absorption/Asking Rent
by 13.6%, warehouse/distribution rents increased by 10.8%; and flex
4-QTR TRAILING AVERAGE
asking rents increased by 4.8%. A positive 1.4 million square feet has
1,000,000 $5.00 absorbed through Q3 2017.
750,000
Construction activity ticked up from a year ago but will not alleviate
500,000 $4.50
supply constraints. Of the 726,000 square feet (sf) of industrial space
250,000 under construction, 91% was preleased. Panattoni Development,
$4.00
0 purchased 62 acres at 4701 Commerce Drive from Philip Morris with the
-250,000 intent to construct two 462,000-sf warehouse buildings in two phases.
$3.50
MDH partners purchased the 618,229-sf Interport Business Center for
-500,000
$29 million. Local developers Rebkee and Fountainhead partnered to
-750,000 $3.00
2012 2013 2014 2015 2016 2017 purchase the Sears distribution store on Tomlynn Street for $6.2 million
or $32 per square foot (psf). Additional transaction activity included Rich
Net Absorption, SF Asking Rent, $ PSF
Uncles purchase of the 100% leased flex building at 8575 Magellan
Parkway for $7.4 million ($143 psf). Temperpack Technologies leased
Overall Vacancy 133,487 sf in the Northeast quadrant as well as 71,250 sf in the
Southwest quadrant. Need Supply leased 60,000 sf at 540 Eastpark
12.5% Court. In early Q4 2017, Facebook announced plans to build a $1.0-
billion, 975,000-sf data center in White Oak Technology Park.
10.0%
Outlook
7.5% Historical Average = 8.9%
Industrial brokers state that tenants are renewing in-place at higher rents
primarily due to the lack of functional availabilities in which to relocate
5.0%
them. The brokers further report that speculative development activity is
constrained by the cost of labor and limited financing for projects without
2.5%
lead tenants. Rents will continue to increase and vacancy will decline in
0.0% the near term. Tenants that need to expand will become the lead for
2012 2013 2014 2015 2016 2017 development activity.
thalhimer.com
MARKETBEAT
Richmond, VA
Industrial Q3 2017
OVERALL
OVERALL YTD NET OVERALL OVERALL OVERALL
YTD LEASING AVAILABLE UNDER
SUBMARKET TOTAL BLDGS INVENTORY VACANCY OVERALL WEIGHTED AVG. WEIGHTED AVG. WEIGHTED AVG.
ACTIVITY VACANT CNSTR
RATE ABSORPTION NET RENT (MF) NET RENT (OS) NET RENT (W/D)
SPACE (SF)
Downtown 6 277,266 0 0 0.0% 0 0 N/A N/A $6.00
Northeast 166 10,865,025 348,126 227,256 2.1% 205,772 258,393 $4.95 $10.94 $4.22
Northwest 313 19,425,037 406,508 800,748 4.1% 316,830 372,653 N/A $9.16 $6.01
Southeast 146 18,860,130 426,640 555,717 2.9% 410,810 0 N/A $7.53 $4.71
Southwest 411 44,830,430 864,883 2,919,950 6.5% 497,452 95,000 $4.09 $6.53 $4.03
Richmond, VA Totals 1,042 94,257,888 2,046,157 4,503,671 4.8% 1,430,864 726,046 $4.26 $8.98 $4.40
Real rates reflect asking $ psf/year MF = Manufacturing OS = Office Service/Flex W/D = Warehouse/Distribution
Only includes buildings 20,000 SF and larger
Key Lease Transactions Q3 2017
PROPERTY SF Tenant PROPERTY TYPE SUBMARKET
4447 Carolina Ave. 133,487 Temperpack Technologies Warehouse/Distribution Northeast
1700 Jefferson Davis Hwy 71,250 Temperpack Technologies Warehouse/Distribution Southwest
540 Eastpark Court 60,000 Need Supply Warehouse/Distribution Southeast
1900 Ruffin Mill Rd 48,448 Animal Health Warehouse/Distribution Southwest
Key Sales Transactions Q3 2017
PROPERTY SF SELLER / BUYER PROPERTY TYPE PRICE / $ PSF SUBMARKET
Interport Business Center 618,229 MDH Partners / Manekin Warehouse/Distribution $29,000,000 / $45 Southeast
4100 Tomlynn Street 195,728 Sears Holding / Rebkee Warehouse/Distribution $6,200,000 / $32 Northwest
2510 Bellwood Road 91,000 AIC Ventures / Honsador Lumber Warehouse/Distribution $5,675,000 / $62 Southwest
8575 Magellan Pkwy 51,800 Rich Uncles / Fernau LeBlanc Warehouse/Distribution $7,400,000 / $143 Northeast
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