Richmond has long been regarded as one of the strongest midsized real estate markets in the United States. Steady population growth, a resilient job market, diverse employers, and relatively attainable housing costs have positioned the metro as a favored target for both institutional investors and smaller private landlords. For years, multifamily acquisitions in Richmond delivered predictable occupancy, moderate rent growth, and stable long-term returns.
Those years created a belief that strong cash flow could be achieved almost immediately after purchase with only minimal investment. That environment has changed. Competitive leasing conditions now require assets to be well prepared, appropriately modernized, and supported by structured capital planning. Properties that are not positioned to meet current expectations face prolonged vacancy, reduced rent growth, and weaker long-term performance. The market increasingly rewards investors who approach multifamily assets with long-term planning rather than short-term assumptions.
Richmond is now navigating a period of transition shaped by new development, shifting renter expectations, the influence of institutional ownership, and the challenges facing older housing stock. Understanding this transition requires a clear view of the region’s development cycle, submarket variation, and the structural forces shaping performance for Class B and Class C properties. These are the types of assets PMI James River manages across the region, and this article aims to calibrate expectations and help investors prepare their properties for long-term success.
1. Why Richmond Became a Prime Multifamily Market
Richmond’s fundamentals remain strong. Several characteristics continue to make the region attractive for both institutional and private investors:
a diversified employment base across finance, government, healthcare, logistics, education, and technology
steady inflow of residents from Northern Virginia, Washington DC, Hampton Roads, and out-of-state metros
continued expansion of VCU, the University of Richmond, and regional medical systems
a vibrant food, arts, and brewery culture
lower operating costs and taxes compared to many competitive markets
These fundamentals supported sustained rental demand for more than a decade. During this period, vacancy commonly ranged from 95 to 98 percent occupancy, and rent growth often exceeded national averages. This backdrop shaped investor expectations and influenced underwriting norms that persisted until recently.
Those fundamentals remain intact, but the operating environment has shifted.
2. The Scale of Richmond’s Recent Construction Boom
Richmond is undergoing one of the largest multifamily construction cycles in its modern history. Key indicators highlight the magnitude of the expansion:
more than 4,500 multifamily units delivered in 2023
approximately 2,500 delivered in 2024
2025 deliveries projected above 2,700
Thousands more units under construction for delivery through 2026 and 2027
Richmond’s rental inventory now exceeds 107,000 multifamily rental units
vacancy has risen to approximately 9 percent, compared to historic averages closer to 5 percent
Rent growth has slowed to 0.6%, well below the 10-year average of 3.8% annually.
Multiple independent reports confirm the same pattern: elevated supply, rising vacancy, slower rent growth, and heightened competitive pressure. Richmond is not simply cooling; it is absorbing one of the largest delivery cycles in its history.
Institutional investors have already recognized the shift, slowing new acquisitions and recalibrating expectations. The environment still holds significant opportunity, but the dynamics now require more structured, disciplined asset planning.
3. How Submarket Dynamics Influence Performance
The construction surge is not evenly distributed. Submarket variation plays a major role in how competitive pressures unfold.
Downtown, Shockoe, Scott’s Addition, and Manchester
These areas represent the highest density of new development and large-scale renovations. Concessions, modern amenities, and heavy marketing activity in these corridors raise renter expectations for all surrounding properties.
Southside Richmond
Redevelopment along Hull Street, Hopkins Road, Midlothian Turnpike, and Jefferson Davis Highway has increased supply and upgraded finishes in many competing units.
Chesterfield County
Midlothian and the Route 288 corridor have seen sustained development of modern garden-style communities, which intensifies pressure on older properties.
Henrico County
Short Pump and Innsbrook continue to attract new construction, raising expectations for interior quality, amenities, and unit readiness.
Hanover County
Less new construction creates relative stability, but deferred maintenance becomes more visible due to fewer renovated competitors.
Submarket realities must shape pricing, renovation planning, and leasing strategy.
4. How Renter Expectations Have Evolved
Even though Richmond remains a strong rental market overall, an abundance of new or newly renovated units has changed the standard renter comparison set. Modern renters now expect at least some of the following:
in-unit laundry
updated kitchens with quartz or granite surfaces
LVP flooring
pet-accommodating layouts
package lockers
fitness access
fiber internet
parking convenience
keyless entry or smart features
When renters view multiple properties in a single tour cycle, these features create a benchmark. Class B and Class C properties that previously leased easily now face direct comparisons to newly built units. Even if older assets offer larger floorplans or lower rents, the perceived value equation has shifted.
5. The Increasing Importance of Pet-Friendly Housing
Pet accommodation has become a core leasing variable. With over 70% of renters owning at least one pet, buildings without clear pet policies or accommodating layouts reduce their prospective resident pool significantly. New developments routinely advertise pet amenities. Even modest offerings, such as predictable pet policies and durable interior materials, can materially improve leasing velocity. Today’s renters often treat pet acceptance as a baseline requirement rather than a preference.
6. The Influence of Institutional Investors
Institutional investors have played a major role in shaping the competitive environment. Their advantages include:
access to low-cost capital
capacity for large-scale renovations
data-driven pricing and analytics
professionalized marketing and operations
These strengths enable institutions to deploy concessions at a scale smaller landlords cannot match. Common offerings include:
one to two months free rent
waived administrative or application fees
reduced deposits
discounted parking
These concessions stabilize occupancy for large operators, but they also influence pricing signals across surrounding submarkets. Smaller landlords must navigate a landscape where institutions can temporarily reduce effective rents without compromising long-term financial performance.
Side Note: PMI James River is in fact enrolled in a security deposit waiver program. However, with deposits being one of the strongest instruments to hold renters accountable, we have not employed this option.
7. The Problem With Seller-Agent Rental Comps
Investor expectations are often shaped during the acquisition phase, where rental projections provided by seller agents can be optimistic. These analyses frequently rely on rental comps that:
include newly renovated units with modern finishes
feature stainless appliances, LED lighting, or updated flooring
incorporate amenities absent in older properties
reflect promotional pricing from Class A competitors
A 1970s property with dated finishes cannot reliably achieve the same rental rates as a fully updated home. Accurate rental forecasting requires condition-matched comparisons, not simply geographic proximity and bedroom count. Misinterpreted comps lead to unrealistic expectations and underfunded renovation plans.
8. The Legacy of the 2015–2022 Underwriting Era
Many current expectations stem from the environment that defined multifamily investing between 2015 and 2022. Low interest rates, rapid rent growth, and limited supply created a belief that cash flow was readily achievable with minimal upfront investment.
Underwriting practices during that period normalized assumptions tied to unique economic conditions. Today’s environment demands a recalibrated approach based on renovation needs, competition, renter expectations, and true operating costs.
9. The Deferred Maintenance Challenge
Deferred maintenance remains a central issue for older multifamily buildings. Common challenges include:
roofs nearing the end of their functional life
aging plumbing prone to leaks
outdated electrical systems
original windows with poor insulation
aging HVAC systems
dated interiors
older mechanical components
Deferred maintenance affects resident satisfaction, operating expenses, rent positioning, and valuation. In a competitive environment, it also directly impacts leasing velocity.
10. How Class B and Class C Assets Can Remain Competitive
Older multifamily properties can still perform well, but they require a structured and disciplined approach to asset positioning.
Reset Underwriting and Pricing Expectations
Accurate rent projections must compare like-condition properties. Owners should:
disregard inflated rental estimates tied to renovated comps
evaluate concessions in nearby properties
budget for necessary modernizations
adjust expectations to current supply dynamics
Renovate With Intention
A full renovation is rarely needed. Instead, owners should focus on:
LVP flooring
lighting upgrades
cabinet refinishing
updated bath fixtures
ensuring mechanical reliability before updating finishes
The goal is coherent modernization, not exhaustive reconstruction.
Ensure Units Are Fully Prepared Before Listing
Unit readiness is now critical. Showing a partially prepared unit reduces early momentum and leads to unnecessary vacancy.
Adopt Pet-Friendly Policies Strategically
Allowing pets meaningfully expands the applicant pool and improves rent potential.
Strengthen Operations
Older buildings can outperform through:
rapid maintenance response
predictable communication
structured renewal processes
proactive condition management
Improve Leasing Velocity and Marketing
Success requires:
professional photography
transparent listing descriptions
clear pricing
responsive showing processes
Retain Residents Through Predictable, Fair Systems
Retention now drives profitability. Renewal-friendly practices reduce exposure to competitive market conditions.
Partner With Experienced Property Management
PMI James River supports owners with:
data-driven pricing
renovation planning
leasing strategy
operational excellence
resident relations
long-term capital forecasting
Older properties can compete effectively, but the path requires specialized management and a realistic understanding of market conditions.
11. Long-Term Investment Outlook
Richmond’s fundamentals remain strong. Population growth, employment stability, and affordability constraints in the for-sale market support long-term rental demand. As new construction slows, the market should gradually rebalance.
Owners who adopt disciplined planning, competitive pricing, and strategic modernization will be positioned to benefit most from the next cycle.
12. Conclusion
Richmond remains a compelling multifamily market, but the environment is more complex than in previous years. New construction, institutional pricing behavior, shifting renter expectations, and deferred maintenance challenges create pressures that disproportionately affect Class B and Class C properties.
With informed planning, modernization, and strong operational systems, these assets can still deliver stable and competitive performance. PMI James River provides investors with tailored strategies to support long-term success across Richmond, Chesterfield, Henrico, and Hanover.
FAQ
Why is Richmond experiencing higher vacancy rates?
Elevated new construction between 2021 and 2025 expanded supply faster than renter demand, increasing competition and raising vacancy.
Are Class B and Class C properties still good investments?
Yes, but performance depends on correct pricing, modernization, and disciplined operations.
Why do rental comps overestimate achievable rents for older units?
Many comps include renovated or amenity-rich properties that are not condition-matched to older homes.
How do institutional investors affect small landlords?
Institutions can offer concessions at scale, influencing pricing signals across submarkets.
Which Richmond submarkets are most competitive?
Scott’s Addition, Manchester, Shockoe, Downtown, and high-growth corridors in Chesterfield and Henrico.
How important is pet-friendly housing?
Pet acceptance significantly expands the resident pool and improves leasing velocity.
What role does deferred maintenance play?
It affects desirability, operating costs, leasing speed, and long-term valuation.
Can older properties still raise rents?
Yes, when renovations are targeted and pricing reflects the competitive landscape.
What should investors prioritize when acquiring older multifamily properties?
Modernization planning, accurate rent projections, capital budgeting, and professional management.
