Abstract
The Richmond industrial market delivered another strong year in 2024, demonstrating the resilience of a market built on diversified local demand, strategic east coast geography, and disciplined supply fundamentals. After a big-box leasing slowdown in the first half of the year, the market rebounded sharply in Q2 and Q3 with over 2.4 million square feet of new leases and renewals signed across the Richmond MSA. By year end, Class A and B vacancy across all product types settled at 4.2%, well below the national average of 6.7% and a testament to the depth of demand underpinning the market.
The most notable divergence of 2024 was the performance gap between large-box and smaller industrial product. While macroeconomic headwinds slowed big-box leasing and new construction starts in the first half, smaller industrial and flex assets experienced no such pause. Deal velocity remained high and rents continued to climb, with the market base rate for functional smaller-bay product with above-average ceiling heights and versatile loading now firmly established at $12 or more per square foot NNN. Capital markets activity pulled back from record highs earlier in the cycle, but a strong Q4 surge in large investment sales, including three transactions exceeding $75 million, provided a positive signal heading into 2025.
Looking ahead, Richmond’s fundamentals position it well for continued outperformance. Out-of-town investors and developers remain highly motivated when opportunities are priced correctly, driven by construction costs, a normalized interest rate environment, and persistent supply constraints from limited zoned land with utility availability. Demand from data center users and their supporting ecosystem added a new dimension to the market in 2024, and Commonwealth expects that interest to grow. For sellers and landlords, the combination of strong absorption, limited supply, and intensifying outside interest creates favorable conditions heading into 2025.
