Report: Richmond region faces shortages of Class A office space
Prime Class A office space in Richmond is difficult to find, according to Cushman & Wakefield | Thalhimer’s second-quarter market report for the area.
Overall office vacancy dropped to 6.7 percent during the second quarter. “Prime Class A office space is difficult to find, with companies focusing more on amenities to attract talent in a competitive labor market,” Thalhimer’s report states.
The report cites a study by the Greater Richmond Partnership that said the market faces a “critical shortage of Class A office space.”
The report says overall Class A office space rent increased 1.1 percent from the previous year.
Ninety-two percent of the 896,896 square feet of office space under construction is Class A office space.
The report expects higher rental rates. “Steel tariffs, scarce labor and demand for concessions, provide upward pressure on rents. Landlords remain confident and will continue to demand higher rental rates in order to offset rising construction costs and provide quality space for tenants.”
Both retail and industrial markets in the Richmond area also show strong activity, according to Thalhimer’s reports.
The current retail vacancy rate is near a record low of 4.6 percent, according to the report. That’s despite major closings by big-box retailers Toys “R” Us, Sears, Macy’s and Kmart.
In response to demand, there is more than 575,000 square feet of retail space currently under construction.
“Quality retail space continues to be difficult to find throughout the Richmond market…” the report states. “Retailers will be keen to enter the market, but landlords may be selective of their occupants to ensure they have an adequate tenant mix that will attract shoppers in the digital age.”
In Richmond’s industrial market, limited supply is fueling an increase in rental rates.
The vacancy rate was 3.5 percent in the second quarter, and the average asking rent for industrial space grew 7.7 percent over the previous year.
More than 1.7 million square feet of industrial space is under construction.
“New inventory will provide much needed, quality supply in Richmond,” the report says. “Industrial landlords should expect rental rates to continue to raise and vacancies to remain low in the second half of the year.”