Abstract
The Richmond industrial market continued its strong run through the first half of 2025, maintaining one of the lowest vacancy rates in the country for markets over 150 million square feet. At 4.2% for smaller product and 8.4% for larger distribution space, vacancy remained well below the national average of 7.5%, positioning Richmond among the top 15 industrial markets in the United States by occupancy. The first half of the year was marked by several significant large-box transactions, headlined by LEGO’s 2 million square foot distribution facility commitment at 8800 Wells Station Road in Prince George County and Hill Phoenix’s 505,068 square foot lease at Axial Gateway 95 in Chesterfield.
Two emerging trends defined the mid-year narrative. Shallow-bay industrial product, typically under 75,000 square feet and often multitenant, gained significant momentum as developers recognized the opportunity to achieve high rental rates on smaller zoned parcels — a format that serves the growing base of contractors, service businesses, and regional companies underserved by the large-box pipeline. Simultaneously, Industrial Outdoor Storage continued its post-COVID expansion, attracting both local and institutional capital. Out-of-town developers and institutional investors intensified their pursuit of Richmond opportunities as lease comparables and investment sale exit cap rates consistently outperformed underwriting assumptions, validating the market’s fundamental strength to outside capital.
Looking ahead, Richmond’s industrial market is well-positioned for continued outperformance. The Richmond MSA outpaced Northern Virginia in population growth for the second consecutive year, supporting sustained demand across product types. Supply-side constraints remain a structural feature of the market — limited zoned land with utility access, slow infrastructure expansion, and restrictive zoning in closer-in jurisdictions are keeping upward pressure on rents and values. The surging data center pipeline across Central Virginia adds another demand catalyst, expected to generate incremental absorption from the contractors, suppliers, and service providers that support that ecosystem.
