CBD vacancy (square feet) for Class A and Class B office

Source: JLL Research

Active space requirements by target geography

Source: JLL Research

YTD leasing volume by industry

Source: JLL Research

Delivery of Gateway Plaza boosts vacancy in the CBDThe delivery of the CBD’s newest tower placed over 50,000 square feet of Trophy space space on the market after delivering 81.2 percent preleased. The anchor tenant, McGuirewoods, in turn will vacate 244,000 square feet at One James Center, a neighboring Class A tower. In addition, MeadWestVaco’smerger with Rock-Tenn in Atlanta raised questions regarding its future footprint in the CBD. MeadWestVaco, now WestRock, occupies 310,950 square feet in a riverfront Trophy tower (501 S 5th Street) and any future discounted sublet availabilities would place added pressure on both Class A and Trophy landlords Downtown.

Several large suburban requirements will tighten NWQ vacancy furtherRichmond’s largest tenant in the market, nearly 250,000 square feet, was rumored to have signed a letter of intent for the last full-building vacancy in the NWQ. If executed, one deal would contract total vacancy to 10.2 percent in this quadrant (currently 12.2 percent) and cut Class B vacancy nearly in half. This expected lease transaction bodes well for suburban developers by eliminating all vacant Class A or Class B blocks over 100,000 square feet in the NWQ while three additional suburban-oriented tenants with requirements over 90,000 square feet currently tour the market.

Financial firms’ expansions fuel leasing volume YTDHarris Williams executed the largest financial-services deal in the market this quarter, expanding by 27,413 square feet in its current Trophy tower, Riverside on the James, a footprint growth of 33.4 percent. Other significant leases included Wealthcare Capital Management’s 12,172-square-foot expansion and relocation to the Edgeworth Building in Shockoe Bottom, a 34.3 percent footprint increase. Downtown also commanded the largest share of the finance sector’s leasing, contributing 17.2 percent of the total deals signed in the Richmond market year-to-date.

Large suburban requirements fuel leasing pipeline

2,257

Office Insight

Richmond | Q3 2015

25,001,056Total inventory (s.f.)

155,820Q3 2015 net absorption (s.f.)

$18.82Direct average asking rent

0Total under construction (s.f.)

14.5%Total vacancy

331,752YTD net absorption (s.f.)

4.5%12-month rent growth

0.0% Total preleased

100,000 s.f.

167,000 s.f.

1,046,000 s.f.

Market wide

Downtown

Suburbs

413.

5

417.

0

426.

2

420.

0

431.

3

442.

0

414.

1

361.

0

356.

5

308.

8

305.

0

339.

2

340.

1

342.

0

311.

0

435.

0

420.

4

438.

7

438.

9

458.

7

483.

4

413.

1

413.

1

411.

2

416.

4

397.

6

397.

6

390.

6

366.

9

698.

6

0

200

400

600

800

1,000

1,200

2012 Q1 2012 Q3 2013 Q1 2013 Q3 2014 Q1 2014 Q3 2015 Q1 2015 Q3

Squ

are

feet

in th

ousa

nds Class A Class B

51.7%

15.8%

14.8%

5.8%

5.0%4.8% 2.2% Banking finance insurance

Accounting consulting research strategy

Architecture engineering construction design

Law firm

Government

Technology

Healthcare

Current conditions – submarket Historical leasing activity (s.f.)

Source: JLL Research Source: JLL Research

Total net absorption (s.f.)

Source: JLL Research

Total vacancy rate (%)

Source: JLL Research

Direct average asking rent ($ p.s.f.)

Source: JLL Research

-180,949

705,133521,431

-1,301,365

316,115 268,135

-28,386

539,545

90,548331,752

-1,500,000

-1,000,000

-500,000

0

500,000

1,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 2015

$17.21 $17.46

$18.00

$18.53

$18.03 $17.88

$17.58 $17.46

$17.81

$18.82

$16.00

$16.50

$17.00

$17.50

$18.00

$18.50

$19.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 2015

14.2%

12.0% 12.7%

18.0% 17.5%

15.0%16.6%

14.5% 14.4% 14.5%

0.0%

5.0%

10.0%

15.0%

20.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 2015

Land

lord

leve

rage

Tenant leverage

Peaking market

Falling market

Bottoming market

Rising market

NWQ

SWQ

2,909,519

1,374,928

1,960,2451,712,857

1,114,344

0

1,000,000

2,000,000

3,000,000

4,000,000

2011 2012 2013 2014 YTD 2015

CBD

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