Retail activity picks up in Virginia with a push from grocers and restaurants.
- November 27, 2013
Virginians do not live by bread alone. They live on sub sandwiches, ribs, doughnuts and frozen yogurt. When they opt for slow food, they want a buffet of grocery shopping options.
Restaurant and grocery options are expanding in Virginia as the retail development market continues to recover. While some major retailers, including Sears and JCPenney, are struggling, restaurant chains, fast-food outlets and major grocers are acting as anchors for small- and large-scale developments.
As is the case across the nation, renovation is more prevalent than new construction, according to Jesse Tron of the International Council of Shopping Centers. That means vacant space left over from leaner economic times is slowly being absorbed, so better times should lie ahead.
“We’re seeing a big difference,” says Brett Womack McNamee of Divaris Real Estate Inc.’s Richmond office. “Developments that were in the pipeline are starting. It’s not crazy, but it’s almost back to normal.”
In Richmond, Cushman & Wakefield|Thalhimer reports that the retail vacancy rate went from 7 percent in the second quarter to 6.8 percent in the third, with rental rates rising from $13.40 to $13.61. The biggest project under construction in the capital area: A Kroger mega store — expected to come in at more than 120,000 square feet — at Staples Mill Marketplace in Henrico County.
In Northern Virginia, Costar, a commercial real estate information company, reports that the retail vacancy rate dropped from 4.9 percent in the second quarter of 2013 to 4.6 percent in the third, with average rental rates rising slightly, from $23.55 to $23.78. The largest delivery of new retail space there: a 143,416-square-foot Costco in Southeast Fairfax.
The story repeats throughout the state. Wegman’s, Martin’s, Whole Foods, Harris Teeter, Fresh Market and Wal-Mart are either establishing a presence in Virginia submarkets or expanding the number of outlets. Restaurant and fast-food chains, including Zoe’s Kitchen, Panda Express, Chipotle, Potbelly, Noodles Express, Five Guys, Skinny Dip, sweetFrog, Café Rio and Chili’s also are proliferating.
Another trend: many of Virginia’s major malls, including Potomac Mills in Woodbridge, recently have undergone major updates, so expect some new looks and tenants during the holiday shopping season.
In brief, here’s a look at the major activity in Virginia’s retail submarkets.
When the economy took a hit in 2009, retail in Central Virginia didn’t feel as much of an impact as other areas, says John Nielsen of Cushman & Wakefield|Thalhimer. “There was no bubble to pop. We were never oversaturated,” he says.
The biggest new grocery store development in Charlottesville is — no surprise — a Wegman’s, which will anchor the 80-acre, Fifth Street Station shopping center near Interstate 64 just south of town. Groundbreaking is scheduled to begin late this year. Another new player in that market is California-based Trader Joe’s, an anchor at the Shops at Stonefield, a 230,569-square-foot, mixed-use development at U.S. 29 and Hydraulic Road. Trader Joe’s is open along with a boutique hotel and other retailers.
In Lynchburg, another grocer, Fresh Market, opened a store this fall. It will anchor a shopping complex projected to include Petco, Panera Bread, Mattress Warehouse and Smoothie King. Nielsen says the arrival of Fresh Market shows that additional growth is sustainable in the Ward Road corridor, which already is home to a Wal-Mart Supercenter and a Kroger’s.
Besides the Kroger’s at Staples Mill Marketplace in Henrico County, McNamee says, Martin’s will open a 74,000-square-foot grocery store at Midlothian Turnpike and Charter Colony Parkway in 2014.
Next year, Golfsmith, a Texas company, plans to enter the Richmond market with a 24,000-square-foot store at West Broad Village, while a Dick’s Sporting Goods opened last summer at Southpark Mall in Colonial Heights.
Village Center in South Richmond is poised to make an announcement on a major new anchor, McNamee says, and construction has begun on Libbie Mill, a mixed-use development in Henrico County that will include 160,000 square feet of office and retail space. Its first tenant is a new player in the market, gourmet food store Southern Season. It will open in mid-2014.
Lots of casual restaurants either are coming to town or expanding, McNamee says. They include American Tap Room (already at Willow Lawn), Firehouse Subs (already has three in Richmond), Moe’s Southwest Grill (all over the place), Which Wich (at Willow Lawn), Chuy’s (at West Broad Village), Saladworks (Short Pump) and Travinia Italian Kitchen (not due until early 2014).
“Lenders are lending again, so franchises can get loans,” says Connie Nielsen of Cushman & Wakefield|Thalhimer. “Richmond is strong as a second-tier market.”
This region is home to the most prominent example of the trend toward mixed-use development, the reimaging of the near-derelict Springfield Mall as a Reston-style town center. The first phase of Vornado Realty Trust’s $200 million redo, which includes a health club, movie theaters and a food court, is scheduled to open next year.
Forest City Washington also hopes to go the mixed-use route pending county approval for upgrading its 580,000-square-foot Ballston Commons Mall in Arlington. The redevelopment would add street-facing retail and residential towers.
A 250,000-square-foot retail space called Tysons West opened at Tysons this year and is anchored by an 80,000-square-foot Wal-Mart, which includes grocery. Next year, in addition to the Costco coming into the area, a new Wegman’s will be the centerpiece of a 350,000-square-foot retail and office development on Richmond Highway near Fort Belvoir.
After several quiet years, the market in the Interstate 81 corridor has improved, says Tim Reamer, a broker with Cottonwood Commercial in Harrisonburg. Just like in other parts of the commonwealth, food is the main retail driver, with fast casual and quick service outlets such as Texas Road House and Firehouse Subs debuting in the region.
In Harrisonburg, construction of the Southeast Connector, a 5-lane, 6-mile stretch of highway, has inspired a 105-acre, mixed-use development called Stone Port. Reamer says Stone Port likely will be anchored by a yet-to-be-announced supermarket and will feature restaurants, hotels and “Main Street”-style shops. He expects the project to break ground in 2014.
In Waynesboro, Reamer says, modest new development will mostly be in the form of strip malls of 12,000 to 18,000 square feet that will be home to national brands such as Dunkin’ Donuts and Verizon.
In Roanoke, Richmond-based WVS Co. has broken ground on The Bridges, a mixed-use development that eventually will encompass 1 million square feet of retail, entertainment, office and residential on the city’s riverfront.
The big news in this part of the state: two developments five miles apart in the Tri-City area. In Bristol, Tenn., work is underway on The Pinnacle, a one-million-square-foot-plus shopping, dining and entertainment complex from Johnson Commercial Development. Steve Johnson says his project eventually will encompass 500 acres straddling the Tennessee-Virginia line. Phase 1 focuses on the 250 acres on the Tennessee side of the state line, and it will be anchored by Bass Pro Shops (opening in mid-2014) and Belk’s department store (spring 2015). Johnson believes The Pinnacle will draw shoppers from “halfway to Nashville. It will be a “smorgasbord of retail like they’ve never seen before,” he says.
Meanwhile The Falls, at Exit 5 off I-81 in Bristol, Va., is on a similar track for development. Mike Nidiffer of Interstate Development says that a Cabela’s sporting goods store should open there next year. Other announced tenants for the planned one-million-square-foot shopping center include casual restaurants Smoky Mountain Brewery, Zaxby’s and Calhoun’s.
Rob Wright of the commercial real estate company Katsias says grocers and fast casual restaurants also are driving development in Hampton Roads. Kroger’s opened one of its large Marketplace stores in Virginia Beach last summer and plans additional outlets for the booming Harbor View area of Suffolk and Portsmouth (2014). Wal-Mart is going into Virginia Beach and Williamsburg. Harris Teeter opened a store in Portsmouth in 2012 and in 2014 hopes to open two more stores, one at Ward’s Corner in Norfolk and the other at Sandbridge Commons in Virginia Beach.
Gerald S. Divaris, chairman and CEO of Divaris Real Estate Inc. which is headquartered in Virginia Beach, adds that a Fresh Market is going into downtown Norfolk in 2014, and that Whole Foods, after opening a store in Virginia Beach in 2012, plans another store with a 2015 opening in Newport News.
“Suburban development is driven by grocers,” Divaris declares. For a retail market that recently went through some lean times, that reality is a welcome bit of nourishment.