Economy: Regional Growth Drivers Accelerate
Richmond continues to strengthen its position as one of the mid-Atlantic’s most dynamic growth markets, backed by major economic development wins, infrastructure investments, and expanding talent attraction. Richmond International Airport (RIC) was recognized as North America’s most efficient airport serving fewer than 5 million passengers, while LinkedIn ranked the region second as the fastest-growing metro area for jobs and new talent. Pharmaceutical giant Eli Lilly closed on the purchase of 227 acres in Goochland County, marking a major milestone toward construction of its $5 billion manufacturing campus in West Creek Business Park. Colonial Heights approved a $180 million sports and entertainment complex with a mix of hospitality and retail components, and VCU Medical Center was named the top hospital in Virginia by U.S. News & World Report. Collectively, these investments and accolades highlight the region’s expanding industry mix and strong momentum across multiple sectors.
Supply And Demand: Balanced Fundamentals
Year-to-date (YTD) leasing activity has topped 3.6 million square feet (msf), an increase of 20% compared to the same period last year. Overall net absorption surpassed 2.7 msf through the third quarter with speculative (spec) deliveries nearing 1.3 msf. With the addition of several large blocks of sublease space, overall vacancy closed the quarter at 4.1%, an increase of 30 basis points (bps) quarter-over-quarter and 10 bps YOY, and direct vacancy has dropped 70 bps QOQ to 3.1%. Both the former Coca-Cola facility in Chesterfield County and the Mondelez facility in Henrico have been vacated, adding almost 800,000 square feet (sf) to the sublease inventory collectively.
The construction pipeline remains active with 3.7 msf of spec space underway and limited preleasing activity to date. Prospect activity remains steady, supported by sustained demand for modern distribution space and an influx of manufacturing requirements from both expanding and new-to-market occupiers.
Pricing: Rent Growth Stable
Overall quoted lease rates remained effectively flat YOY with asking rates for Class A product landing in the mid $9 per square foot range. While typically not published, market rates for new construction continue to range higher. Sales activity was bolstered in the third quarter by a five-building portfolio sale from Lexington Realty Trust to Boston-based Rockpoint, the second acquisition in the region for that group. Initially developed for Altria subsidiary Philip Morris, the 1 msf complex traded for $108 million.
