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Retail and Industrial Vacancy Rates in the Fredericksburg Region Hit 7 Year Low

For the first quarter of 2015 the commercial real estate market in the Fredericksburg Region continued to show signs of recovery.

Retail Vacancy Rates Hit Sub 5%

Overall retail vacancy in the Region declined by slightly in the first quarter of 2015, but a milestone was reached. The overall retail vacancy rate dropped to 4.8%, this is the first time the rates have hit  sub 5% since 2008.  For every county/city in the region the retail vacancy is below 6%, with King George (3.5%) and the City of Fredericksburg (4.2%) holding the lowest.

Long time vacant strip centers are filling up, some that have been over 80% vacant for the past five years

Retail development slowed in the wake of the Great Recession, but is starting to resume and set to continue. Over 97,000 SF of retail space was completed & delivered in the first quarter bringing the regional retail inventory to 20,982,957 SF

As new construction increases and vacancy drops rental rates will continue to increase and provide better returns for landlords.


Industrial Vacancy Rates Continue to Decrease

The industrial market continues to improve as vacancy rates dropped again in the first quarter of 2015. This marks over 7 years of continuous decline in vacancy rates which reached an all time high at 20.2% in 2008 to the current rate of 12.5%. Pre Recession rates inched as low as 5.5% in Q1 of 2007, which was followed by a steep climb.

The current vacancy rates in the industrial market are the lowest the Fredericksburg Region has seen in 30 consecutive quarters.

Though there has been a slump in construction activity, the trajectory of net absorption has not followed suit. The first quarter 2015 enjoyed the highest positive net absorption in the past 6 quarters at over 90,000 sq. ft. This represents 170% increase over the previous quarter which witnessed negative net absorption, and a 31% increase over the same quarter in 2014.

The retail and industrial markets are continuing to improve in the Region however the office market is remaining fairly stagnant for now.

Office Vacancy Rates Up-and-Down

Click Here for Full Q1-2015 Market Report

The Fredericksburg Region office market saw a  slight increase in vacancy and minor decrease in rental rates in the first quarter of 2015.  The national averages are witnessing the opposite as overall vacancy dropped by 10 basis points to 16.6%, its lowest level since 2009 according to REIS. National asking and effective rents witnessed its eighteenth consecutive quarter of growth.

While the national office market continues to improve statistics for the Fredericksburg Region still remain fairly stronger as vacancy sits over 2% lower than national averages.

In the first quarter of 2015 office vacancy rates slightly rose 40 basis points to 14.2%, an increase of 50 basis points from the same quarter 2014. Vacancy rates have been slowly climbing but inconsistent over the past 5 years where vacancy rates were 12.9% Q1 2010. The rates have jumped up and down from quarter to quarter and year to year. In 2012 vacancy declined over 50 basis points before jumping back up through 2013-2014.

One of the key issues for the market will be employment growth. Will employment growth continue to recover? Since 2010, employment in Northern Virginia has increased year after year and is continuing to trend upward. As employment growth continues so will the need for space, but with companies shifting to smaller floor plans absorption will continue to fluctuate.

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