Outside investors come calling
Virginia's location and growth attract commercial development

by Rod Belcher
for Virginia Business
June 2007

Virginia is attracting more outside real estate developers. A New York company plans to build a skyscraper in downtown Richmond. A Charlotte firm has two projects in the works. And the Florida-based Adler Group has already spent nearly $40 million acquiring commercial property in downtown Norfolk.

Is this a mere flirtation or is Virginia winning more long-term commitments because of its rising national profile as a good place to do business?

For Charlotte-based Crosland Inc., the decision to build in Virginia was easy. The diversified real estate company took notice of the state’s high rankings in national polls. Last summer, Forbes.com, the Web site of the national business magazine, named Virginia the best place in the country for doing business. Virginia picked up another No. 1 ranking this spring by Pollina Corporate Real Estate Inc. in its annual survey of Top 10 Pro-Business States. The year before, Virginia came in at No. 2.

Such national visibility — as well as proximity to the urban Washington, D.C., corridor, and the state’s employment and population growth — works in Virginia’s favor as commercial real estate developers come calling.

Since 1999, Crosland has done more projects outside its home state of North Carolina, and that trend led them to the commonwealth. “Crosland views Virginia as a strong growth market that fits our company’s strategic expansion plans,” says Vice President James Downs. “Both Richmond and Hampton Roads fit our growth model identified through extensive market research.”

Crosland is developing two large projects in the Richmond area; Rutland Commons Shopping Center in Hanover County and Chippenham Place in Chesterfield County. The Rutland development will include 111,000 square feet and will be anchored by a large supermarket.

At Chippenham Place, Crosland is offering $9.2 million to buy the 83-acre Cloverleaf Mall, which it plans to remake into a mixed-use project. Besides 200,000 square feet of commercial office space, the project includes a retail anchor — a 115,000-square-foot supermarket — and 382 residential units. They will range from apartments to town homes, condos and single-family residences.

In Virginia’s more rural areas, Crosland also is involved in preservation-based projects such as the Homestead Preserve community in Hot Springs and Bundoran Farm, located outside of Charlottesville. Both are upscale residential communities designed to have minimal impact on the natural beauty of the surrounding area. “We’re very focused on further expansion in Virginia,” says Downs. “We’re looking at more resort-oriented projects in rural areas and looking for commercial prospects in larger areas like Richmond. We’re also looking for opportunities in areas like Roanoke and Charlottesville.”

Certain regions of Virginia seem to draw the lion’s share of attention from commercial developers. At the top are Northern Virginia and the suburban Washington area. “The Northern Virginia economy is very attractive,” says Marc A. Louargand, managing director of Cornerstone Real Estate Advisors LLC, based in Hartford, Conn. “It’s been one of the strongest economies in the U.S. for several years now.”

Developers are mostly focused regionally and nationally now, says Louargand, and generally, the money goes to markets where the trends look best. “Most investors are seeking projects to get involved in that will produce positive outcomes,” he says. “There is a very positive outlook for the Virginia market. It’s in the right place as far as population movement, and it’s near a major urban-industrial corridor, the D.C.-Baltimore corridor.”

Projects that remain popular for out-of-town investors, he adds, include multi-family residential developments and multi-office complexes. These projects draw local investor interest, and developers can quickly enter and exit them.

While Louargand considers Northern Virginia a magnet for investors, New York-ba sed Goodstein Development Corp. sees Virginia’s commercial potential farther south. “ Northern Virginia and D.C. are much more mature markets,” says Leonard Bayer, Goodstein’s senior vice president. “It’s a little too mature for us. It seems overbuilt. However, Richmond, Norfolk, Hampton Roads and Virginia Beach all show tremendous growth potential.”

Goodstein is developing Centennial Towers in downtown Richmond — a 20-plus story, mixed-use project that will include retail, a hotel, office space, restaurants, luxury condos and a spa. Bayer expects construction to begin in four to five months with an estimated completion date of late 2009 to 2010. “ Richmond is positioned for growth,” notes Bayer. “While the rest of the nation’s real estate market is poised to stabilize or lose ground, Richmond and St. Louis are both positioned for growth.”

Meanwhile, Norfolk is also drawing suitors. The Adler Group Inc., based in Miami, wants to acquire more than $300 million in commercial properties in its home state and in Norfolk. The company likes the Norfolk area because of its similarities to certain areas of Florida, says Vice President Matthew Adler. “The strong military presence there, the large port and the signs of diversification of the economy … It fits our Southeast investment profile and we are targeting that area.”