Saturday, January 31, 2009

GVA Shows 2008 Office Market Results in Richmond, VA

RICHMOND, VA--Perry H. Moss, (top right photo) regional director of research, GVA Advantis, Richmond, offers this analysis of the Richmond office market in 2008:


We would all love to forget about 2008, put it behind us and move on. As 2008 fades into 2009, we will continue to see bumps in the road. Conditions will improve, however, the market has a cleansing period that it will have to endure before the stability of fundamentals is realistic.


Let’s get two things said and out of the way: the last 2/3’s of 2008 was extremely challenging, and 2009 will most likely be a continuation. Vacancies, particularly subleases are up and will rise. Development, leasing velocity, sales activity, rental rates, and absorption are all likely headed down. Major layoffs have been announced at MeadWestvaco, Genworth, LandAmerica, and Circuit City to name a few.

Yet, in this sea of despair, there are pockets of tremendous opportunity. Well positioned tenants will have great leverage in procuring or re-negotiating their leases. Landlord concessions will not be petty.

Well capitalized investors will be able to acquire properties are bargain basement prices. Cap rates will continue to climb as owners will be hungry for cash infusions.

The development cycle will stall and allow for equilibrium to return to the asset market. And owner-occupants with on-going business concerns will line up for the inevitable rush of sale leaseback offers as capital will be the ultimate motivator for businesses and landlords.


While the quantity of leases was on par historically in 2008, the square footage volume dropped significantly. A clear indication of tenants opting for smaller leases leaving little probability for potential sublease space. Expansions are decreasing while renewals are increasing. Landlords do not have the luxury of turning down small lease offers as the larger ones are extremely sparse.


It is difficult to find the silver lining in these graphs, however, they do exist.

Well capitalized investors or those positioned well enough to procure financing will have their choice of assets at multi-year low prices with elevated cap rates.

An interesting debt note is that even though the fed has dropped interest rates to record lows, commercial lenders have actually raised their rates due to the scarcity of funds.

Contact: Perry H. Moss, Regional Director, Research, 804 644 4066,

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