MARKET INSIGHTS
April 25, 2018

Andy Little

RICHMOND TIMES-DISPATCH

by Andrew Little, Special Correspondent

Curtis Mayfield and The Impressions could have been talking to the Richmond area’s commercial real estate industry in the band’s 1965 hit “People Get Ready” in reference to the huge industrial development renaissance taking place in the region.

It makes sense for city and county planners to get on board and embrace the new developments, which can add to and help balance tax assessment bases.

The Richmond area has always had geographic advantages that make it a strong distribution choice for many companies.

It has relatively cheap costs of utilities and rent and a highly educated workforce. The transportation system is quite good and, according to the Greater Richmond Partnership, 45 percent of the country’s population can be reached by truck within one day.

When combined with its proximity to Hampton Roads and one of the largest ports in the world, that makes for a good place to stage distribution.

Amazon clearly saw the advantages when the online giant built two huge warehouses in 2012 in Chesterfield and Dinwiddie counties.

The region has started to attract larger tenants and national developers.

Matt Anderson, a senior vice president with commercial real estate firm CBRE-Richmond, said the area attracted smaller tenants ranging from 25,000 to 50,000 square feet before Amazon built its two fulfillment centers.

Now, he said, the Richmond region is attracting much larger tenants in the 125,000- to 500,000-square-foot range.

A list of active projects is impressive and seems to indicate the Richmond region is at an inflection point in the market for large industrial users.

Vacancy rates remain very low for Class A distribution space and absorption is strong.

This is a perfect time to get ready for the next wave of users.

Here are some large warehouse distribution projects planned or underway:

  • Newport Beach, Calif.-based Panattoni Development Co., is building a state-of-the-art distribution center on Commerce Road just south of the Bells Road-Interstate 95 interchange. This is the first phase of a 1 million-square-foot project. Phase I will be a speculative 461,700-square-foot Class A building that is expected to be ready in about four months. Anderson, who is handling leasing for the project, said market activity is strong.
  • Becknell Industrial, the Indianapolis-based developer of warehouse distribution centers across the nation, has developed and leased several facilities in the Airport Distribution Center. It now is considering developing a four-building site totaling 807,440 square feet at 6101 S. Laburnum Ave. — on property across the street from the Mondelez International plant.
  • A developer has submitted an application, dubbed “Project Goliath,” to build a 611,520-square-foot building for warehousing and distribution for an undisclosed tenant in Chesterfield. The building would be on 40 acres once eyed by Tranlin Inc., the Chinese company that planned to build a paper manufacturing plant and never delivered.
  • Devon USA, a Richmond-based real estate developer, has continued to build projects in the region. It developed a 320,853-square-foot building at the Enterchange at Northlake Industrial Park in Hanover County last year and leased it to Amazon.com. The company now is planning a building in Chesterfield that is identical in size and scope to one it developed in Hanover. Construction should begin soon on the warehouse facility in the James River Logistics Center, located off Bellwood Road near I-95.
  • Hourigan Development, the Richmond-based commercial real estate development firm, acquired the former Alleghany Warehouse Co. property in South Richmond with plans to tear down the buildings to make way for what now is being called the Deepwater Industrial Park. Redevelopment plans for the 110-acre property along I-95 calls for about 1.5 million square feet of built-to-order, high-bay space for warehousing, distribution and manufacturing.
  • Armada Hoffler Properties Inc., the Virginia Beach-based real estate investment firm, is developing and building a 220,000-square-foot distribution facility for Pepsi Beverages Co. off Willis Road in Chesterfield.

John B. Levy & Co. partner and investment banker Andrew Little can be reached at alittle@jblevyco.com.