Commercial Real Estate Quarterly
2005 brings expansion and repositioning

Virginia Business
December 2005

This year brought expansion, outside interest and a reshuffling among the players in Virginia’s commercial real estate market. Despite a rash of hurricanes, which bumped up already escalating construction prices, 2005 was a strong year with mixed-use projects taking center stage. “It seems like the commercial game has moved to a mixed-use game, which includes residential. You’ve got to have some condo to go with the retail, and if you want people to be able to walk to work, you have to have the office,” says David H. Downs, the Alfred L. Blake Chair and Professor of Real Estate at Virginia Commonwealth University.

This 21st century spin on New Urbanism is evident in downtowns across the state. In Norfolk, Richmond, Lynchburg and Roanoke, downtowns are being reborn as developers renovate old buildings and build new mixed-use centers.

Throw in Northern Virginia’s job growth, the bustling Port of Virginia in Hampton Roads, a lower cost of doing business than in some other states, and “you’re in good shape,” concludes Ray Torto, a principal with Torto Wheaton Research, a real estate advisory firm in Boston. “The reason Virginia is of interest to a lot of outside investors is because of its growth aspects,” says Torto who spoke at a recent statewide real estate conference sponsored by VCU’s Real Estate Center.

As more New York and Washington, D.C., investors buy in cities such as Richmond and Norfolk, local players are getting priced out of the market, says Downs. So, they’re looking west to places such as Staunton for new development. “We’re seeing a reshuffling of the action by various players on the board, a repositioning,” adds Downs.

Looking ahead to 2006, he cites Portsmouth as another city ripe for increased development. “There’s lots of good stuff going on in Norfolk, and they’re going to look across the river and see that there are some great opportunities in Portsmouth.”

In terms of market size, Northern Virginia continues to be Virginia’s leader in office space with 166.8 million square feet of space, according to CoStar Group Inc. There’s strong demand by federal agencies and contractors for much of its new space, with the General Services Administra-tion recently occupying more than 300,000 square feet at Liberty Center, a new mixed-use project in Ballston. (See story on page 80.)

Richmond has the largest industrial market in the state at 100.5 million square feet, fueled by companies wanting facilities close to Interstate 95. On the retail side, Hampton Roads has experienced robust growth, with its market now at 82.5 million square feet (CoStar’s figures) as restaurants, entertainment venues and shopping centers continue to come on line in this popular tourist destination.