November 28, 2023 - Dominique Fair
Office markets around Virginia continue to experience more vacancies and a drop in net absorption. This reflects cooling demand for office space amid growing economic uncertainty and continuation of hybrid work arrangements. Despite the dip in demand, office rents continue to inch up statewide, there was only one MSA market that had lower office rents compared to last year (Roanoke). Office supporting job sectors are also contracting, though overall unemployment remains low.
Virginia’s retail market continues to grow, but the pace of growth has moderated. Net absorption of retail space remains positive but is much lower than it was a year ago. This reflects moderation in consumer spending in recent months. Consumers are still spending, but they are spending less than they were as lingering inflation and rising interest rates have taken a toll on consumer sentiment. Retail rents continue to climb across much of the state, but this is being driven by smaller/neighborhood retail spaces rather than larger/big box spaces.
Virginia’s industrial market continues to outpace other commercial sectors in absorption, rent growth, and new deliveries. This reflects strong demand in the market for warehouses driven by e-commerce activity. While industrial vacancy rates have edged up in several MSA markets, the vacancy levels remain lower than other commercial sectors.
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