Thanks to its proximity to Washington D.C., high income, low unemployment levels, and excellent infrastructure, Virginia has been repeatedly listed as one of the best states for business nationwide. This eastern state is home to a diversified economy, although it particularly stands out for having one of the highest concentrations of high-tech corporations in the United States, as it is only preceded by California and New York. Virginia is also known for its leading research institutions and global outlook. A growing focus on innovation and a convenient location make Virginia a very desirable base for businesses in a variety of industry sectors.
Vacancy rates are at a record high in Northern Virginia (especially along Route 28), as virtually no new developments have been delivered in this part of the state and existing office stock does not meet the needs of occupiers. The Dulles Technology Corridor is the exception to the rule, as demand is high for office space in this area, especially among defence and IT businesses. The average vacancy rate for office space in Northern Virginia is 18.3 per cent, one percentage point higher than in 2014. This has led to a drop in direct asking rates, which now average $34.49 / sq ft for Class A space, $29.31 for Class B space, and $25 for Class C properties. The best performing sub-markets in Northern Virginia are Falls Church, Prince William County, Reston, Herndon, and Fairfax, where vacancy rates can be half the state's average. Rental values are at their highest in Springfield ($39.25), Tysons Corner ($37.10), the R-B Corridor ($43.26), Arlington County ($42.18), and Pentagon City ($41.53).
In Richmond, demand for office properties remains stable, with vacancy rates, which currently average 10 per cent in the CBD and less than 12 per cent for suburban properties. The healthcare sector is the main driver of growth in Richmond. According to researchers at Colliers International, medical office developments are set to keep increasing in number and size in the city, particularly around Route 288, along Broad Street, and in dedicated facilities like the West Creek Medical Park. With regards to rental values in Richmond, Class A downtown properties command average rates of $24.42 / sq ft. Prices are also above average in eastern Richmond ($24.50). The lowest rates can be found in Tricities ($14.19) and in the southwest of the city ($17.98).
In the Norfolk area (including Virginia Beach and Chesapeake) the office market continues to grow strong with high absorption levels and decreasing vacancy rates, which currently average 14 per cent. In this area, the key tenants are in sectors like logistics, business services, and tourism.
Click here for office space in Alexandria, Richmond and Reston.
The retail real estate market has been experiencing growing demand in Richmond, particularly among investors looking for large properties. During the first quarter of 2015, vacancy rates went down to 5.8 per cent for general retail floorspace and to 9.7 per cent for space in shopping centers. Other key indicators that evidence an upward trend include absorption figures, rental rates, and construction levels. Nearly 400,000 square feet of space was completed during the first three months of 2015, and average rental rates are 14.5 per cent. Rents are higher in NW Richmond metro ($15.71 / sq ft), Amelia County ($15.35), and downtown Richmond ($14.49). Rental values are set to keep increasing as a result of a growing imbalance between demand and supply.
Incentives and Tax Breaks
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. A 2014 survey by the Kauffman Foundation revealed that the state is among the top 5 most business friendly locations in the US. In their responses, business owners cited aspects like favorable business regulations, the availability and quality of training schemes, and low licensing fees. Business tax rates have remained stable for over 4 decades, and local businesses benefit from a variety of incentives and tax breaks that are in place to help them boost their competitiveness. Some of the most important business incentives include:
- General property tax exemptions: the state does not tax manufacturer's inventory or furniture, intangible property, pollution control equipment/facilities, and equipment used to generate and store thermal or solar energy. In addition, partial tax exemptions apply to companies involved in R&D, biotech, computer hardware, and certain manufacturing sectors.
- The Virginia Economic Incentive Development Grant, offered to businesses who have proven their ability to perform well and create employment. The grant can be used to acquire property and to expand the operative range of eligible businesses
- Enterprise Zone Property Investment Grants, applicable to new builds, commercial, industrial, and mixed-use property
For a full list of all incentives available in Virginia, please click here.