Norfolk Industrial Market Figures Q4 2022

The Norfolk industrial and logistics market faced supply issues in 2022 as warehouse vacancy rates remained at historic lows, ending the year at 1.2%--a 50 basis decline year over year. Warehouse asking rates rose to $7.47 per sq. ft. per annum on a triple net basis, as supply limitations enabled landlords to push rents up. Despite the lack of availability and rising rental rates, tenant demand remained strong, driven predominately by third party logistics (3PLs) and the Port of Virginia’s smooth operations. The port processed 3.2 million twenty-foot equivalents (TEUs) in 2022 as of December and it remains apace to break the prior record of 3.5 million TEUS set in 2021.

The Norfolk market recorded 4.7 million sq. ft. of gross leasing transactions, a 29% decline from the previous year. 3PLs signed 14 leases for 1.9 million sq. ft. and accounted for 41% of leasing activity by volume. Aided by a record 1.5 million sq. ft of warehouse deliveries, the market recorded 1.8 million sq. ft. of positive net absorption, a 64% uptick above the ten-year average of 1.1 million sq. ft., but still a 14% decline from the previous year.

A total 4.2 million sq. ft. of warehouse construction remains underway, though economic headwinds may slow new construction starts in 2023. To help compete against other states, Governor Glenn Youngkin has proposed increasing the budget for the state’s site readiness program to $500 million. The program brings sites to within 12-18 months of delivery. The Coastal Virginia Commerce Park—a 1,400-acre site, recently rezoned farm in Chesapeake and potential mega site—could be a beneficiary of such funding.