Commercial Property Sales in Richmond VA

I have updated the commercial property sales history I have been tracking since 1995 and you can see the data and print the charts at this link to my web site. Additionally, you can download or print the PDF files for Industrial, Office, Retail and Combined property sales charts. Please note that 2009 has not been settled as the data only goes through September and many transactions will not show up in the electronic records until as much as several months following their recording. Even so, 2009 may go down as the lowest sales volume year since 1995.

Much is being said about how financing availability is impacting the sales environment. This can be graphically seen when looking at Richmond's activity in the combined sales volume chart below:

Three years, 2005 - 2007, account for 44% of the total combined commercial real estate sales volume that has occurred in the Richmond MSA since 1995. I believe much of this is attributable to very low interest rates, which in turn reduced cap rates to historic lows. Why this financing/cap rate relationship occurs can be found at my earlier post Commercial Real Estate Valuation Example.

The largest share of the combined sales volume from 2005 - 2007 can be attributed to locally owned portfolios being sold to REITs, or REITs selling to different REITs. In the office market, state government and corporate users played a major role in 2008.

As examples of these sales, a local office developer sold their entire office portfolio of 11 buildings containing 600,000 square feet for $115 million. A local industrial developer sold most of their distribution portfolio containing nearly 2.5 million square feet for $138 million. Both of these sales occurred in 2007, and considering how savvy both are, they saw at that point a probable once-in-a-lifetime chance to maximize value and returns and they smartly took it.

As to 2008's activity, the Commonwealth of Virginia bought two office buildings for $55.3 million in 2008, while Dominion Resources bought the 8th & Main Building for $34.4 million that year. These three sales accounted for 47% of all office sales volume in 2008.

When you review the prices per square foot being paid for the various product types, remember they do reflect averages and in some years, there was a heavier influence of higher quality class "A" buildings as opposed to other years where there were older assets. This particularly applies to office.

The big jump in 2006 for office prices per square foot is largely influenced by Riverfront Plaza's sale at $308.47/SF. Medical office buildings are also impacting sales prices with quite a number trading in the $185 - $300 per square foot range over the past several years.

Since the cut-off for tracked building sales prices is $1,000,000, very few condo sales qualify, but these have begun to show up in larger sizes/prices and may also have a minor impact on prices per square foot calculations, although likely only in lower volume years.

Mike Lowry