Office Insight

Richmond | Q3 2015

Large suburban requirements fuel leasing pipeline

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

Several large suburban requirements will tighten NWQ vacancy further

Richmonds 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.

Active space requirements by target geography

Financial firms expansions fuel leasing volume YTD

Harris 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 Managements 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 sectors
leasing, contributing 17.2 percent of the total deals signed in the Richmond
market year-to-date.

2012 Q1

2012 Q3

2013 Q1

2013 Q3

2014 Q1

2014 Q3

366.9

340.1

342.0

2015 Q1

311.0

397.6

390.6

339.2

416.4

397.6

308.8

200

414.1

400

305.0

413.1

411.2

483.4
442.0

356.5

458.7
431.3

413.1

438.7

438.9

426.2

420.0

435.0

420.4

600

417.0

800

Class B
698.6

Class A

1,000

361.0

1,200

413.5

Square feet in thousands

Delivery of Gateway Plaza boosts vacancy in the CBD

The delivery of the CBDs 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, MeadWestVacos
merger 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.

2015 Q3

Source: JLL Research

Suburbs

1,046,000 s.f.

Downtown

167,000 s.f.

Market wide

100,000 s.f.

Source: JLL Research

YTD leasing volume by industry

4.8%

2.2%

Banking finance insurance

5.0%

Accounting consulting research strategy

5.8%

Architecture engineering construction design

14.8%

51.7%

Law firm
Government

15.8%

Source: JLL Research

2,257

Technology
Healthcare

25,001,056

155,820

$18.82

Total inventory (s.f.)

Q3 2015 net absorption (s.f.)

Direct average asking rent

Total under construction (s.f.)

14.5%

331,752

4.5%

0.0%

Total vacancy

YTD net absorption (s.f.)

12-month rent growth

Total preleased

Current conditions submarket

Historical leasing activity (s.f.)

NWQ

Peaking
market

SWQ

Tenant leverage

Landlord leverage

4,000,000
Falling
market

Bottoming
market

Rising
market

3,000,000

2,909,519
1,960,245

2,000,000

1,114,344

1,000,000
0
2011

CBD

Source: JLL Research

1,712,857

1,374,928

2012

2013

2014

YTD 2015

Source: JLL Research

Total net absorption (s.f.)

1,000,000

705,133

539,545

521,431
316,115

500,000

331,752

268,135

90,548

0
-500,000

-28,386

-180,949

-1,000,000
-1,500,000

-1,301,365

2006

2007

2008

2009

2010

2011

2012

2013

2014

YTD 2015

14.5%

14.4%

14.5%

2013

2014

YTD 2015

Source: JLL Research

Total vacancy rate (%)

20.0%
18.0%

15.0%

16.6%
15.0%

14.2%

10.0%

17.5%

12.0%

12.7%

2007

2008

5.0%
0.0%
2006

2009

2010

2011

2012

Source: JLL Research

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

$19.00

$18.82

$18.53

$18.50

$18.03

$18.00

$18.00
$17.50

$17.88

$17.46

$17.81
$17.58

$17.46

2012

2013

$17.21

$17.00
$16.50
$16.00
2006

2007

2008

2009

2010

2011

2014

YTD 2015

Source: JLL Research

For more information, contact: Geoff Thomas| geoff.thomas@jll.com

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