12C — September 29 - October 12, 2017 — Fall Preview — M id A tlantic
Real Estate Journal
By Clifford B. Porter, CCIM, SIOR, Porter Realty Company, Inc./CORFAC International Richmond’s Low-Vacancy Industrial Market Reflects National Trends
ndustrial vacancies in Richmond are at their lowest point in more than
According to the U.S. Bu- reau of Labor Statistics, Rich- mond’s civilian employment increased by 27,000 jobs in the six months ending in July. Richmond’s 4 percent unemployment rate is slightly lower than the 4.3 percent national average, which itself represents a historic low point. And vacancies are likely to decrease rather than increase over the next year. Market consensus suggests that “the latter half of 2017 may ben- efit from a release of pent-up demand,” according to a recent report from NAIOP. Market
fundamentals are likely to im- prove as the economy expands, and “rising construction prices and labor shortages will likely moderate generation of new supply.” These trends are evident in Richmond, where industrial net absorption surpassed 1.2 million s/f in just the first half of 2017, compared to about 700,000 s/f of space under construction. Most new speculative buildings have filled up quickly as companies seek to expand or consolidate operations in modern, efficient space.
A case in point is Premier Store Fixtures’ 216,000 s/f, full-building lease at Becknell Industrial’s Airport Distribu- tion Center. Premier took oc- cupancy in the second quarter, but the lease was negotiated in September 2016, before shell construction was complete. Premier needed the space to complement its existing manu- facturing location in Henrico County, and also to consolidate and upgrade its operations for future expansion. The Premier Store Fixtures lease repre- sented about 15 percent of all Richmond-area net absorption
in the first half of 2017, and was recognized as the best industrial lease deal of 2016 by the Greater Richmond As- sociation of Commercial Real Estate (GRACRE). Porter Realty Company, Inc. represented both Premier and Becknell in the transaction, and is handling marketing of the remaining sites at Airport Distribution Center. A 153,000 s/f building in the final stages of completion is already 75 per- cent preleased to one tenant, and additional large tenants in the market are interested in the developer’s plans to start construction of the third and final building at the site, totaling 202,000 s/f. With large users leasing new buildings faster than develop- ers can build them, what op- tions are open to other tenants looking to expand? Fortunate- ly, there are still well-located spaces that can accommodate small and medium size users, albeit at a higher cost than they might like. In addition, some modern buildings are owned or leased by third-party logistics (3PL) companies that sublease spaces to end users. And in many cases, one com- pany’s move to state-of-the-art space opens up a great redevel- opment opportunity for other space users. Richmond’s central location in the heart of the Eastern Seaboard, with close proximity to the Port of Virginia, makes it a magnet for distribution and other industrial users. Demand for space may out- pace supply at the moment, but there are still good solu- tions for companies seeking to grow and modernize their operations. n Clifford B. Porter, CCIM, SIOR, is executive vice pres- ident and a principal broker at Porter Realty Company, Inc./CORFAC International in Richmond. He holds dual designations as office and in- dustrial specialist with the Society of Industrial and Of- fice Realtors (SIOR) as well as the Certified Commercial Investment Member (CCIM) designation. Cliff has served as president of the Virginia SIOR chapter and as a member of SIOR’s National Research & Publications Committee. He has received top producer awards from the Richmond Association of Realtors and the Commercial Investment Exchange.
a d e c a d e , and all signs point to an even tighter market f or the next year or two. But thi s i s not just a local t r end . The
Clifford B. Porter
supply-and-demand factors driving industrial real estate in Richmond can be seen in high job-growth cities across the country.
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