Human, Financial Capital Transform Richmond, One of the Country’s Oldest Cities
Strategically located within a day’s drive of 50 percent of the U.S. population, the Richmond metropolitan area has experienced immense growth driven by increased millennial demand, arterial connectivity, a pro-business environment, low cost of living and overall high quality of life, cementing its position as one of the leading Southeastern U.S. markets for employment and capital investment alike.
The Richmond market’s strong trajectory is attracting interest from new to the market capital sources, including Brookwood Capital, TPA Group and Ashley Capital, as well as significant corporate investment from the likes of Dominion Energy, Kinsale Insurances and Altria Group.
The industrial market in particular has seen robust growth with reported user demand doubling year over year to nearly 6 million square feet as of July 2019 — an all-time high according to Colliers International research. The strength of user demand has resulted in the market’s high bay vacancy rate receding to 5.6 percent and significant speculative and build-to-suit development, including Panattoni’s recently completed Virginia’s I-95 Logistics facility that was 100 percent preleased during construction to Brother International and Amazon. With no shortage of user demand, Richmond’s industrial market is expected to remain a highly desirable market to invest as noted in CoStar’s recent industrial report that highlighted Richmond as one of the top 10 growth markets in the country.
The industrial sector’s growth is only one facet of Richmond’s trajectory. Continued investment in the Richmond office market across all sizes and by an array of capital sources is driven by strong office demand, historically low unemployment, continued millennial population growth and the excellent quality of life Richmond provides. Investors continue to demonstrate unwavering interest in the Richmond market during the first half of 2019 with multiple sizeable office and medical office transactions totaling over $100 million in total volume.
Additionally, there is continued rehabilitation of historic buildings for creative office space in the Scott’s Addition neighborhood and projects such as at the Saur Center near Virginia Commonwealth University (VCU). Several of Richmond’s largest corporations and institutions are investing back in their local campuses, including:
• Dominion Energy’s two new corporate headquarter towers totaling 1.2 million square feet in downtown Richmond;
• Kinsale Insurance’s new 147,000-square-foot corporate headquarters in the Northwest Quadrant;
• Altria Group’s renovation and 170,000-square-foot expansion of its corporate headquarters in the Northwest Quadrant;
• Facebook’s new $2 billion data center near Richmond International Airport;
• VCU Health System’s expansion with multiple new medical facilities in its downtown campus; and
• Commonwealth of Virginia’s new General Assembly Building in downtown Richmond
The regional growth and dynamics in the office market are attracting additional investment from existing investors and a significant increase in new-to-market capital from across the country.
Richmond’s growth and market fundamentals are expected to continue to attract regional and national investment across all product types. This activity combined with sizeable local corporate investment proves the future is bright for one of the country’s oldest cities.
— By Will Bradley, Senior Vice President, Mark Williford, Vice President, and Garrison Gore, Associate/Financial Analyst at Colliers International. This article originally appeared in the August issue of Southeast Real Estate Business.