Q1 sees stronger industrial, mixed office space demand

Cushman & Wakefield | Thalhimer has released Q1 highlights in commercial real estate for several Virginia regions, including Roanoke, Fredericksburg, Hampton Roads, Richmond and Charlottesville.

Here are some of the regions’ “fast facts” for the first quarter of 2021:

• Roanoke’s unemployment rate reached 5.1%, an increase from the fourth quarter but still below the national rate of 6%.
• Overall office vacancy rate increased to 6.2% in the Roanoke region, and more than 800,000 square feet of industrial development activity was announced.
• The former GE Drives and Controls plant in Salem introduced 760,000 square feet of available industrial/office space.
• In the Fredericksburg region, employment is down 1% from the same period last year, compared to a 5.9% decline nationwide
• The overall office vacancy rate decreased from 10% in Q4 to 9.1% in Q1.
• Almost 800,000 square feet of industrial space is under construction around Fredericksburg.
• In Hampton Roads, the 2021 GDP is predicted to increase by 4.4%.
• Overall office vacancy rate remained steady at 8.5%, and the industrial vacancy rate stayed below 3% for the 11th consecutive quarter.
• Overall office asking rents surpassed $20/square foot for the first time in the region, and industrial asking rents increased 5% over the past year.
• According to LinkedIn’s Economic Graph, Richmond was the third top destination for new residents during the pandemic.
• With nearly $260 million in sales, office investment around the Richmond region logged the largest quarterly total since 2018.
• Nearly 1.5 million square feet of warehouse space is under construction and set to be finished this year in the region.
• More than 71,000 square feet of retail space was absorbed to begin 2021 in Richmond.
• Charlottesville’s unemployment rate is 4.8%.
• Overall office asking rent exceeded $26/square foot for the first time, and more than 100,000 square feet of office space and nearly 85,000 square feet of retail space were absorbed in the region in Q1.

Also, Colliers Virginia released Q1 reports on industrial and office real estate in the Norfolk and Richmond markets, reporting that Chesapeake’s Summit Pointe development finished its second phase, adding 170,000 square feet of Class A office space to the market. There are more than 70 tenants looking for 800,000 square feet of office space around Norfolk, and there are currently two properties under construction with more than 90,000 square feet expected to finish in Q4.

As for industrial space around Norfolk, there is high demand, with 130 users looking for more than 10 million square feet of space, and rents are higher as a result. Currently there are six projects under construction totaling more than 5 million square feet.

In the Richmond region, there is less demand for office space, and asking rates have decreased 2.2% quarter-over-quarter at $20.84 per square foot, with every submarket decreasing in the period. However, there is more demand in Richmond’s suburban market, in which user demand grew 71.5% quarter-over-quarter to 693,000 square feet.

The region’s industrial real estate market is stronger, following a record year in 2020 with nearly 1.8 million square feet delivered and 10 million square feet in the pipeline. Vacancy rates are still below 3%, as they’ve been since 2019. Asking rents increased by 6.3% quarter-over-quarter to $5.43/square foot. Net absorption fell into the negative for the first time in two years, with Q1 closing with 16,784 square feet of negative absorption, although 12-month net absorption is just above 1 million square feet.