SOUTHEAST SNAPSHOT, AUGUST 2007

Richmond, Virginia Industrial Market

One major trend in the Richmond market is the noticeable higher sale prices for existing Class A and B industrial product, particularly for buildings up to 50,000 square feet.

Airport Distribution Center has a 115,000-square-foot, high-bay multi-tenant facility currently under construction, which is the first speculative building to be built in the airport area in more than 7 years. Its projected availability is in first quarter 2008. This will provide units of 10,000-square-foot bays, which is not readily available in Richmond’s airport area at the present time.

Philip Morris USA just announced the consolidation of its North Carolina manufacturing operation, which will join the Richmond location in 2010. The Richmond location currently contains a 1.6 million-square-foot manufacturing complex, consisting of six buildings on a 200-acre site. Richmond also serves as its corporate headquarters.

Of the 2,500 current employees at the Cabarrus, North Carolina location, most hourly and many salaried employees will be offered employment in Richmond. The company plans to invest about $230 million into the Richmond plant. This will include moving high-speed manufacturing equipment. The impact anticipated on the Richmond economy will be significant.

Philip Morris USA is also opening a 450,000-square-foot research and design/office complex that will cost an estimated $350 million in the Virginia BioTechnology Research Park in downtown Richmond.

The majority of large industrial development in the Richmond market is taking place at Airport Distribution Center as mentioned previously. Continued warehouse developments are also taking place at Northlake, located in the northwest and southwest quadrants of Interstate 95 and Lewiston Road. Finally, SouthPoint Business Park in Prince George County, located near I-295 and Route 460, continues to provide several opportunities for speculative and existing buildings to tenants and users alike. Plenty of land is available in those areas that offer quick access to Interstate 95 corridor in an upscale industrial park setting.

First Potomac, a Maryland-based REIT, has been in market for several years but continues its acquisition and expansion both in the flex and industrial sector by recently completing the balance of its purchase from Liberty Property Trust in River’s Bend, located at the northwest quadrant of Route 10 near Route 295 in Chesterfield County, Virginia. Meanwhile, Weingarten Realty Investors, a Texas-based REIT, just purchased a 2.5 million-square-foot industrial portfolio from Devon, a regional industrial developer.

Quoted rates for existing industrial market include Class A rates at $4.50 to $4.85 per square foot, and Class B rates at mid $3’s per square foot and above. The Porter Report for 40,000 square feet and above reports a vacancy rate of 18 percent through second quarter 2007.

— Richard Porter is executive vice president of Porter Realty Company/CORFAC International in Richmond, Virginia.


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