Abstract
The Richmond industrial market closed 2025 with another strong performance, reinforcing its position as one of the most competitive markets in the country. CoStar ranked Richmond the number one market in the United States for small-bay industrial leasing activity and the number three market for big-box industrial, a testament to the depth of demand across product types. Vacancy rates remained tight at 4.7% for smaller product and 4.2% for larger, while under-construction pipelines expanded significantly — up 96% and 138% year over year for small and large product respectively — signaling developer confidence in the market’s continued trajectory.
The most notable dynamic of 2025 was the tension between surging institutional demand for large distribution and big-box product and a growing undersupply of smaller industrial space serving local and regional users. Out-of-town developers dominated the big-box pipeline, drawn by Richmond’s infrastructure fundamentals and land availability. But the focus on large distribution centers left contractors, service businesses, and smaller regional companies with limited options — a gap the market is only beginning to address. Commonwealth’s own Pony Farm Industrial Park development illustrated the depth of pent-up demand in this segment, with approximately 75% of parcels sold before site delivery.
Looking ahead to 2026 and 2027, the Richmond industrial market faces a nuanced set of conditions. Rental rates are expected to continue rising, though at a more measured pace as affordability constraints and new supply begin to exert normalizing pressure. Development is shifting outward to Prince George and New Kent counties as closer-in jurisdictions resist rezoning, elongating entitlement timelines and sustaining supply-side pressure in core locations. Elevated construction costs, Chesterfield County’s zoning reboot, and a growing data center pipeline across Central Virginia add further complexity — but also opportunity — for owners, investors, and users navigating the market in the years ahead.
