Commercial real estate market on the upswing in Richmond while Hampton Roads remains flat
- January 6, 2011
The commercial office market in Richmond continues to improve, according to a report from Jones Lang LaSalle. By the end of the fourth quarter, rent rates had stabilized, leasing activity picked up and large blocks of space had disappeared.
The activity boosted total net absorption to 630,936 square feet, which drove down the overall office vacancy rate to 11.7 percent, the lowest since the first quarter of 2009.
One of the best performing submarkets has been Innsbook. While it currently has the highest vacancy rate at 23.3 percent — a drop from 28 percent in the first quarter of 2010 — it also is seeing the highest level of activity, with nearly 500,000 square feet of space under contract. By mid-2011, Jones Lang forecasts a further possible decline in the range of 17 percent. “We expect more and more tenants to head out there,” said Nicholas Politis, a market research analyst for Jones Lang LaSalle in Richmond.
The report also says that several tenants are currently shopping the market, including a worldwide specialty insurance company. It’s looking for 250,000 square feet of suburban space, with a deal expected to close soon, said Politis. “Richmond is a market that has bottomed out and is showing strong signs of recovery.”
In Hampton Roads, conditions were stagnant in the fourth quarter. While the region saw more tenants touring space, fewer deals were executed during that quarter than at any other time during 2010. The overall office vacancy rate remained steady at 14.6 percent, and rental rates remained flat.
Jones Lang said uncertainty following the impending closure of the United States Joint Forces Command caused tenants and investors to step back. However, now that some operations of the command are expected to continue, those fears have waned. In about 60 days, the vacancies created in the Northern Suffolk submarkets, where JCOM is located, are expected to subside. “I’m working on transactions now that would virtually backfill all of that space,” said Gregg E. Christoffersen, a vice president in the company’s Hampton Roads office.
“It is lagging a bit behind Richmond, but it’s still outperforming many of the larger markets in the U. S. which are still seriously bottoming out,” observed Politis.
Jones Lang LaSalle, a professional and financial services firm that specializes in real estate, has 180 corporate offices, including locations in Richmond, Hampton Roads and the metropolitan region of Washington, D. C.