Richmond’s 2010 commercial real estate market expected to improve
- February 16, 2010
Real estate experts expect a slow, but steady improvement in Richmond’s commercial real estate market in 2010. Following a year of corporate bankruptcies that flooded the market with office space, a panel of industry representatives today predicted better days ahead.
“The bleeding has stopped,” Mac Wilson, a specialist in office brokerage for Thalhimer’s Richmond office, told a gathering of 280 real estate professionals during the seventh annual market review sponsored by the Greater Richmond Association of Commercial Real Estate (GRACRE).
The event was held at the Westin Hotel at Reynolds Crossing. The hotel industry provided one of the few bright spots during 2009, noted Brett Womack McNamee, a senior vice president with Divaris. Four new properties opened in Richmond over the last 12 months, including the Westin, a new Hilton Hotel & Spa and Sierra Suites in Short Pump and an Aloft Hotel in the West Broad Village development.
Many of the statistics rattled off during the review showed how bad things got in 2009: 30 area restaurants closed, 10 major retail projects were shelved and by year-end, the region had a negative net absorption of 1.3 million square feet.
The hardest hit office submarket in Richmond was the Northwest quadrant in and around Innsbrook, which saw the departure of Circuit City and LandAmerica, after they filed for bankruptcy. At the end of 2009, the Richmond region’s office vacancy rate stood at 12 percent, and rental rates for Class A space dropped to $19.54, said Wilson.
Many deals, though, could be had at rates even lower that that, he added.
One of the positives then and now, Wilson said, is that “it’s a great time to move. Landlords are offering incentives at an all-time high, with sublease opportunities.” That activity was part of the reason Richmond saw 1,699,886 square feet of space leased last year despite the economic downturn.
Still, overall volume was way down. John Gentry, a senior vice president with Grubb & Ellis/Harrison & Bates said that in 2007, the area saw more than $1 billion worth of sales. “In 2009, we were down to $133.5 million, about an 87 percent decline and a mirror image of what was happening nationally.” In terms of real estate investment, Gentry expects another tough year. “Volume will be up due to distress and foreclosure. And we can expect more of this pretend and extend from the lending folks in an effort to avert foreclosure.”
On the bright side, Richmond is attracting some new retail players. HomeGoods, Petco and Hhgregg have all opened stores, said McNamee, and Kroger continues to be an anchor tenant. It plans to open a third new store, and is expanding two others at the Belgrade Shopping Center in Chesterfield County and in Carytown.