Emerging Industrial Markets: Richmond & Norfolk, Virginia

Demographics

More than 3.4 million people—24% aged 18 to 34—live within 50 miles of Richmond and Norfolk. Occupiers can reach 40.4 million consumers within 250 miles—more than Chicago (37.5 million), Atlanta (29.5 million), and Los Angeles (28.4 million).

The cities’ combined local warehouse labor force of 34,442 is expected to grow by 13% by 2032, according to CBRE Labor Analytics. The average salary for a non-supervisory warehouse worker is $16.83 per hour, roughly equal to the national average of $16.90.

Location Incentives

Over the past five years, there have been 175 economic incentive deals totaling over $166 million at an average of $6,717 per new job in metro Richmond and Norfolk, as reported by fDi Intelligence.

CBRE’s Location Incentives Group reports that the top incentive programs offered in Virginia include the Major Business Facility Job Tax Credit, a program providing income tax credits to businesses that establish a new facility or expand an existing one. To qualify, businesses must create at least 50 new full-time jobs. Companies that locate to an economically distressed area or enterprise zone must create 25 new full-time jobs. They receive a $1,000 credit per new job created in excess of this qualifying threshold. The non-refundable credits are provided in equal installments over two years.

Another program available in Southern Virginia is the Virginia Economic Development Incentive Grant (VEDIG), a discretionary grant encouraging companies to invest and create jobs by locating significant headquarters, administrative or service sector operations in the state. VEDIG eligibility requirements include:

• If locating to a 300,000+ population metro:
  • Create 400 new full-time jobs with average salaries at least 1.5 times the local prevailing average wage
  • Create 300 new full-time jobs with average salaries at least two times the local prevailing average wage
  • Make a capital investment of at least $5 million or $6,500 per job (whichever is greater)
• If locating elsewhere in Virginia:
  • Create at least 200 new full-time jobs with average salaries at least 1.5 times the average local prevailing wage
  • Make a capital investment of at least $6,500 per job

Logistics Drivers

Virginia has over 57,000 miles of state highways, the nation’s third-largest highway network. Richmond and Norfolk are connected by Interstate 64. I-64 spans six states, extending as far west as St. Louis, Missouri and as far east as Chesapeake, Virginia. U.S. Routes 58 and 460 are most heavily used by logistics operators because of Hampton Roads Bridge Tunnel and I-64 congestion. There are planned infrastructure improvements to expand the bridge tunnel and widen I-64 from two to three lanes each way.

Richmond and Norfolk contain many logistics drivers, fueling demand for warehouse and manufacturing space requirements. The Richmond International Airport (RIC) serves the region by air, handling an annual average of 140 million pounds of cargo by four dedicated air cargo carriers. The RIC’s location allows for goods to reach 50% of the U.S. population in under 24 hours. The Norfolk International Airport is another regional airport, shipping around 60 million pounds of air cargo annually.

Port of Virginia is known as North America’s most automated port, and the World Bank’s 2021 Container Port Performance Index ranked it as the most efficient. The port’s five-year container volume growth was significant: 30% since 2018 and 5% since 2021, handling a record 3.7 million TEU containers in 2022. The port’s current water depth is 50 feet but channel deepening and widening will extend this to 55 feet, making it the U.S. East Coast’s deepest port. The project is due to complete by the end of 2023 and will allow for two-way traffic of ultra large container vessels. The port also has direct access to two Class I railroads (CSX and Norfolk Southern), holding 30 miles of on-dock rail with intermodal container transfer capabilities. There are 10 freight railroads throughout Virginia, according to the Association of American Railroads.

Supply & Demand

Richmond and Norfolk have 150 million sq. ft. of existing industrial warehouse space. The markets had a combined average asking rent of $7.39 per sq. ft. NNN by the end of Q1 2023. The average asking rents are slightly higher in Norfolk, at $7.95 per sq. ft. This is a 6.4% quarter-over-quarter increase and 54.1% higher than in 2019. In comparison, Richmond’s average asking rents were $6.82 per sq. ft. NNN, a 10.7% quarter-over-quarter increase and represents 30.8% growth since 2019.

Nearly 7.5 million sq. ft. of warehouse product was delivered in Richmond in 2022, a record-high that has more than doubled in ten years. Manufacturing demand continues. Construction will begin shortly on a global toy maker’s 1.7 million sq. ft. building in Chester, VA, its first North American manufacturing facility. Richmond and Norfolk remain buoyant and will continue attracting industrial occupiers and investors due to their extensive transportation network, population growth, port accessibility and accessibility to the central mid-Atlantic region.