GVA Presents Richmond, VA Industrial Market 2008 Wrapup

RICHMOND, VA--Perry H. Moss, regional director, research, GVA Advantis, presents the 2008 review of the Richmond, VA industrial market:

MARKET SUMMARY

The market survived 2008, not the most pleasant of years. 2009 will be a continuation of last year.

The leasing market may show signs of continued sluggishness in 09 as the economic lag catches up to the industrial base.

The sales market on the other hand, which had a steep decline in 2008, will continue on the same path with the possibility of reaching a bottom by late 09.

MARKET REVIEW
2008 is over, it was challenging, and introduced market issues we haven’t seen in a long time.

The reliance of major corporate institutions upon federal funds and a virtual freezing of the credit market are two conditions that are rare, but far-reaching.

The industrial market suffered in the last 2/3’s of 2008, albeit not to the same degree as the office market.

It would be great to say that we’ve made it through 2008, and now the market can pull itself together and get back on a positive track.

2009 will be another challenging year. All market participants need to be prepared for a turbulent year.

Recurring trends for next year include: a continued shift in negotiating leverage towards tenants; willingness of landlords to make concessions to secure occupants; sale leaseback activity rising considerably; further declines in asset price points; and gradual deterioration of key fundamentals such as vacancy, absorption, and rental rates.

LEASING MARKET

Tenants are opting for renewals and shorter terms while pushing harder for concessions such as free rent and tenant improvements.

In 2009, landlords will be more willing to accept slightly lower rental income in order to provide occupancy to their assets. They will need the capital.

If owners attempt to tap into the near zero rate debt market, they will need evidence of their ability to re-pay the loan. This would be highly unlikely without a reasonable and reliable net operating income stream

SALES MARKET

2009 will be a great opportunity for well capitalized investors, those able to get financing, and bargain hunters.

Continued erosion of REIT and portfolio purchases will hold down volume for the next several quarters. Landlords will pay very close attention to the offer of sale leaseback opportunities as the infusion of capital will be of paramount importance.

Prices will fall in 2009, while cap rates rise. A mitigating factor for rising cap rates will be an erosion of operating income as reliable, long-term tenants will carry a tremendous premium due to their scarcity.

Contact: Perry H. Moss, Regional Director, Research, 804 644 4066, pmoss@gvaadvantis.com