IRR-Richmond Mid-Year Viewpoint 2015 Local Market Report - Multifamily
The Richmond market is on the precipice of a significant expansion of multifamily supply, as a new wave of suburban construction is beginning that will rival the ongoing expansion of the urban market. There are currently over 7,000 units in the development pipeline, equaling roughly 10% of the existing supply. For the first time in several years, the majority of these units are in the suburbs. While it appears likely that a continuation of past absorption levels will permit the "build it and they will come" mentality to persist a while longer downtown, the rapid build-up in suburban units will require accelerated absorption to maintain rent growth.
It is likely that the suburban market will be in for a very competitive few years until the new units can be absorbed, with increased concession in the areas directly competing with new supply. In town, the Manchester and Scott's Addition neighborhoods are seeing the bulk of the current development and thus may be the most susceptible to supply outstripping demand.
New development in the Arts District and around VCU should perform well. While Richmond is finally seeing its first trades of Class A adaptive reuse properties in the urban core, there have been limited recent sales of Class A suburban properties. Cap rates for apartment properties have continued to trend downward slightly, but should stabilize—or perhaps even increase, particularly for suburban Class B/C properties in the face of significant new supply and a potentially higher interest rate environment.
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IRR Mid-Year Viewpoint 2015 comprises a National Overview report and 300+ two-page Local Market Reports for all key property types as well as additional resources, including metrics methodology, graphs, and tables; these free reports may be downloaded from IRR’s site here.