daytime aerial view from the james river waterfront of downtown richmond commercial real estate virginia office buildings with a long freight train on elevated waterside train tracks in the foreground

Virginia has been repeatedly listed as one of the best states for business nationwide. In addition to proximity to Washington D.C., low unemployment rates, and excellent infrastructure, the state is known for the availability of a highly educated workforce, access to STEM talent, and a business-friendly environment.

Virginia is also renowned for its leading research institutions and global outlook. A growing focus on innovation and a convenient location make the state a very desirable base for businesses in a variety of industry sectors, as reflected in the growing amount of small and medium-sized companies based here, which exceeded 766,000 in 2022.

In addition, Virginia made it to the list of top 10 best states for startups and entrepreneurs, with a particularly high density of innovative ventures in Fairfax County, where more than 14% of all state startups are headquartered.

The state's economy stands out for having one of the highest concentrations of high-tech corporations in the United States, with more than 430,000 workers employed in this sector and a total worth in excess of $60bn. The strongest tech sub-sectors are cybersecurity, data centers, and software development.

Other key industries include:

Office Market in Virginia

Office Space in Northern Virginia

Activity in this market has been traditionally led by the government sector. This continues to be the case, but contraction and downsizing in this sector have led to a slight decline in performance, reflected in negative absorption numbers and increasing vacancy rates.

On the other hand, the weight of the government sector as a key occupier of office space means that long-term leases and renewals are common, which gives the market stability. Other common occupiers are companies involved in aerospace, defense, and technology.

Concession packages exceed $120 after consistent increases during the past decade, which has had a compressing effect on net rents. Average gross asking rents go from $35 / psf for direct leases, to $31 for subleased properties.

Average vacancy rates exceed 21% and are more or less in line across the state except in Prince William County, where they are significantly lower.

The outlook includes an expectation that sublease availability will continue to increase, as space consolidation requirements become clearer. New developments are underway in Rosslyn, Bethesda CBD, and Tysons.

Office Space in Richmond

The Richmond market has a better performance due to the abundance of corporate headquarters in the area. With a total inventory of 55 million square feet, the highest density of office space is in the CBD, Innsbrook, and Glenside.

Overall vacancy rates average 8%, although office space is extremely limited in Ashland, Northside, and West Creek.

Asking rents for all classes average $20 / psf, and $22 for Class A.

Office Space in Norfolk

Norfolk is the main office hub in southern Virginia. After a couple of years of subdued activity, rental values and absorption levels started to increase in early 2022, and demand has since been stronger for Class A properties in suburban locations.

Sales activity is in line with the 10-year average, although it appears that square footage requirements are becoming smaller.

Vacancy rates average 12%. Class A asking rates average $23 / psf (FSG).

Overall, market fundamentals in Norfolk are expected to remain healthy, given that this market doesn't have a construction pipeline that anchors key indicators and avoids oversupply.

Retail and Industrial Market in Virginia

In Richmond, the retail market is partly dependent on footfall from corporate offices, but has also benefited from growing median household income figures and from the migration of young professionals with disposable income to the city.

Overall vacancy rates are barely above 3% and in no case reach double-digit figures. Asking rents have experienced moderate but steady growth and now average $16 / psf, going up to the mid and high $20s in Willow Lawn, East End, and Midlothian Village.

The industrial market is driven by the Port of Virginia, a major economic engine in the region. Performance is also boosted by the expansion of the local manufacturing sector. All key indicators have recently followed meteoric rises, from historic low vacancy rates below 2% to double-digit annual rental rate increases. Asking rates range from $4.5 in the southeast to more than $8 / psf in the northeast

Hampton Roads is the second biggest industrial market in the state, with more than 80 million square feet. Competition for best-in-class assets is fierce, and in some areas availability for these units has dropped to 0.

Delays in new deliveries have strained the market even further, pushing total vacancy rates below 2% and increasing direct asking rents to averages of nearly $6.5 / psf. This market is mostly favorable to large occupiers due to the ongoing cost increases across all asset classes.

Tax Breaks, Incentives and Business Support

Virginia is well known among investors and entrepreneurs for having a regulatory environment that is supportive of businesses, whether they are startups or established companies.

The state's tax structure is mostly defined as equitable, since corporate tax rates have not increased for decades, and they’re applied at the same level to all businesses, irrespective of location.

Some of the most important business incentives include:

More information is available from Virginia's Economic Development Partnership.