By Paula C. Squires
For the latest assessment on Richmond’s commercial real estate market, the place to be Tuesday was the Jefferson Hotel for Bisnow’s inaugural event in the capital city. Nearly 300 real estate professionals turned out for what was billed as a major networking opportunity before and after two panels of some of the region’s top real estate executives weighed in on how the market is performing.
As people filed into one of the hotel’s ballrooms to the loud, pulsing music of the Allman Brothers, company co-founder Mark Bisnow called the event to order with a cowbell. He said the Washington, D.C.-based digital media company was glad to add Richmond to its list of about 20 major metro cities across the U. S. where it hosts local business events. Bisnow also is the country’s largest publisher of daily commercial real estate e-newsletters.
In Richmond, it lined up some of the area’s best-known real estate veterans who staffed two panels: one on office and industrial properties and another on multifamily projects. The good news? Activity is picking up in the office sector and multifamily projects continue to be hot as more people pursue a live-work-play lifestyle that speaker Richard Souter referred to as “urban living without the grit.”
Souter is a partner with WVS Cos., the developer of Rocketts Landing, a mixed-use project on the banks of the James River near downtown Richmond. According to Souter, young professionals and empty nesters are renting apartments there where amenities include retail, the Boat House Restaurant and a marina. “Over the last year, we sold over $8 million in condo space,” he added. That represented about 30 units, which sold for an average of $260,000 each, although some of the larger units were more in the $500,000 to $600,000 range.
“I don’t think it’s all that long before the condo market makes a comeback,” Souter said, particularly among empty nesters looking for a more carefree lifestyle. “It’s an underlying trend that got stalled and will make a comeback.”
Most of the action, though, among the Richmond region’s 70,000 multifamily units has been in apartments, with many new projects in the Manchester and Shockoe Bottom areas. Speakers said the key to success on these projects has been financing from government-supported mortgage companies and historic tax credits.
Dwight Dunton, founder of the Bonaventure Realty Group in Arlington, said his company is seeing a “tale of two worlds” in the apartment universe. There are renters by necessity — tenants who have been hurt by the economic recession through job cutbacks or reduced hours, and renters by choice. The by-choice tenants have kept their jobs. After living with their parents during the recession, they are ready to go out on their own.
Asked by panel moderator Charlie Polk, managing director of Jones Lang LaSalle in Richmond, if the supply of new apartments is starting to outstrip demand, Dunton said no. “I see demand coming in the more high-end urbanized project.” Yet, there are some storm clouds on the horizon, he added. “Parking will become more of an issue,” in places like downtown Richmond. “Older, vintage warehouse conversions didn’t come with parking. I think the parking will become expensive, and it will change the economics of development.” Also, he said, downtown urban dwellers want more city services such as grocery stores.
In terms of what’s in the pipeline, Drew M. White, a principal with McLean-based ARA, a company that brokers the sales of apartment projects, said, “Our company has $400 million in the pipeline of deals under construction in the Tidewater area and several hundred million in the Fredericksburg area. We’re seeing higher demand for Richmond right now than we’ve seen in the last 24 to 36 months. “
Going forward, both of the panels’ executives said job growth would be key. Richmond has been fortunate in recent years to see growth from local companies such as Capital One Financial Corp., SnagaJob and Allianz (formerly Mondial Assistance.) The growth has brought office expansions and new hires, particularly in the northwest quadrant near Innsbrook.
Paul Kreckman, vice president of Highwoods Properties, which owns many of the buildings in the Innsbrook Corporate Center, said the vacancy rate in the center is down to 8 percent for all classes of properties (compared to 16 percent for the entire Innsbrook submarket and 11 percent for the Richmond region.) “While we’re not back to the historical levels of 4 or 5 percent, we have recovered very nicely,” he said.
Overall, some tenants are still taking a long time to close deals due to lingering uncertainty over the economy while others are seeking early lease renewals, before rental rents return to higher levels. Tony Beck, a vice president with First Potomac Realty Trust, said that a “true flight to quality over the last two to three years in the Class A office market is starting to benefit the whole market.” As Class A space tightens, rents begin to edge up and tenant concessions are expected to drop.
There are no comments for this entry