Commercial Real Estate in Virginia – White Paper from Offices.net

Introduction

The market for commercial real estate in Virginia has three major centers, with smaller centers elsewhere in the Commonwealth:

• Northern Virginia, including Arlington, Fairfax, Loudoun and Prince William counties and the city of Alexandria.
• Richmond and surrounding Henrico county
• Tidewater

Northern Virginia and Arlington

Northern Virginia is the largest concentration of commercial, office and retail real estate in the Commonwealth. There are concentrations along the primary transportation routes, specifically including locations where there are stations along the Metro "subway" system.

There are approximately 180 million square feet of office space in the entire area. About 36 million square feet of that space is located with Arlington County, the closest community to the District of Columbia. Across the entire region there is currently a vacancy rate of 14.0%, with a somewhat lower rate in Arlington at 10.1%.

Lease rates for Class A space averages $33/foot across the entire area, with an average of $41/foot in Arlington. Retail space across the area is mixed with large malls and many neighborhood locations with rent rates varying widely with some space reaching more than $60/foot. The largest malls are in Fairfax, including Tyson's Center & Galleria, Fair Oaks, Springfield, Landmark and Reston Town Center. The most unique retail space is Old Town Alexandria where stores and restaurants are located in buildings that predate the American Revolutionary war.

There are approximately 43 million feet of warehouse and 27 million square feet of flex industrial space in the area. About 1 million feet of that space is located in Arlington. The overall rate for this space is slightly less than $9/foot for the warehouse space and $11/foot for the flex space. Space in the suburbs further out is somewhat less.

Overall, the market for commercial space, including office space, has stabilized with both rates and vacancies improving slightly. A large percentage of the businesses that live in the area are contractors to the various departments of the US Government, which has created a more stable environment than in many other areas of the country. A high quality of life and exceptional education systems make it easy to attract key personnel to the area.

There are a variety of support programs for businesses moving into the area. Several larger firms have recently been attracted to the area with these government sponsored programs. Fairfax County is particularly aggressive – any firm thinking about relocation to the area should contact the Economic Development team of Fairfax County or the similar department at one of the other jurisdictions.

Richmond and Henrico County

Richmond and its surrounding suburban areas create the second largest market for commercial real estate in the Commonwealth. With a state government, major Universities and headquarters for five of the fortune 500, Richmond is an area with significant business entities and a deep commercial real estate market.

There are 26 million square feet of office space with vacancy rate of 17% and an average rental rate of $18/foot. The largest area for office space is northwest of the city, including the area around Glen Allen.

Retail space is coming off several quarters of positive absorption. The most unique area for retail and dining space is in Shockoe Slip in downtown Richmond where many old warehouse and industrial spaces have been gentrified into chic establishments.

The most aggressive programs to attract new business have been in Henrico County.

Summary

Virginia has not been as hard hit by the recent economic slowdown. The unemployment rate statewide has run 2-3% below the national average. Further the top three local jurisdictions for household income in the entire US are in Northern Virginia. These statistics have helped the Commonwealth to weather the financial downturn during the last several years. The outlook for the area remains bright.

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