GreeneHurlocker’s commercial real estate attorneys, Andy Brownstein and Jared Burden, along with more than 200 real estate industry colleagues, attended the Greater Richmond Association for Commercial Real Estate (GRACRE)’s 2020 Real Estate Market Review on February 18, 2020. What’s the verdict on the health of the local commercial real estate market in the Richmond MSA? Good, with few reservations.
Among the six speakers we heard plenty of optimism about the area’s ability to absorb more commercial real estate space, including apartments, office, industrial and hospitality. However, a consistent them was that is both finite demand, given the middle-market nature of Richmond’s business environment, and finite supply, given the lead time (up to 36 months) in developing commercial property. As a result, given shifting interests rates and other financing considerations, projects will have to be carefully planned and developed.
News coverage in the Richmond Times-Dispatch of the event is here.
Richmond’s rise in the Metropolitan Statistical Area ranking (now 45th) due to its population growth (1.3 million), of which 54% are of prime working age, along with relatively constant rates of space absorption, suggests commercial development has not reached saturation. Even older office developments, such as Innsbrook, are getting seeing good demand rents due to redevelopment and improvement of old commercial stock.
If there was one property class that is especially hot, it would be multifamily. Eric Phipps of SNP Properties cited properties in Scott’s Addition and Manchester as continuing to be in very high demand. He also suggested that the West Broad Street corridor and Jackson Ward to be ripe for future commercial development, and that Richmond could consistently absorb 1,500-2,000 a year for the next few years.
Nick Patel of Kalyan Hospitality discounted the potential for multiple casinos to be developed in Virginia in the short term, even if the proposed development in Richmond goes forward, but said he felt up to 1,000 additional rooms could be built in the greater Richmond market. He did not believe the downtown hospitality market would not see any luxury hotel development until average room rates approached $200, up from approximately $150 today.
While retail is still a challenging asset class, there are a number of exciting projects underway in the Richmond area, including the redevelopment of Regency Square and Virginia Center Commons, Carytown Exchange and the Sauer Center, showing that there is still an appetite for retail development under the right circumstances. Nikki Jassey provided a window into the shifts created by the rise of Amazon and different approaches taken by retail tenants and developers.
Finally, there remains a strong demand for industrial properties, especially along the interchanges of Interstates 295 and 64 and Interstates 295 and 95. We have benefited from strong local transportation infrastructure as well as the growth of data center demand without the downsides of locating in Northern Virginia.
It sure was good to run into a number of our friends and colleagues in the real estate business and hear some promising news about the future at GRACRE. If you would like to know more about what we learned, or discuss commercial real estate opportunities in Richmond or other parts of Virginia, contact Andy (804.864.1100) or Jared (703.258.2678) or any of GreeneHurlocker’s Virginia real estate attorneys.