Written by | Lory Markham
Now that most of the “good” historic buildings with any scale have been developed using the state and federal historic tax credit programs, what’s next? Is the new wave of development in the City going to be re-rehabs of the historic rehabs? Or is it more likely to be new, ground-up construction taking the place of the smaller scale buildings or filling in the surface parking lots and overgrown hillsides?
As millennials, baby-boomers, and even young families continue to flood into the City, the demand for new housing in our urban core and surrounding neighborhoods is not slowing down. There are currently over half a dozen new mid-rise to high-rise developments either planned or under construction in a variety of neighborhoods throughout the City that showcase the fact that supply has not kept pace with demand.
With the recent rezoning of Scott’s Addition and West Broad Street, mixed-use development at a much greater scale is now permitted as a matter of right. Believe it or not, new development in the city is becoming easier due to proper zoning being put in place by the City. Even though the stock of historic properties eligible for the tax credits has become slim, the good news is that there are still plenty of opportunities for ground up construction – from surface parking lots in Shockoe Bottom, Monroe Ward and Jackson Ward to infill lots in Manchester, Church Hill and Union Hill. There are even a few lots left for development on Monument Avenue.
The opportunities are out there, but finding the perfect site at the right price can be a challenge. Pricing comes down to potential number of units, per square foot of dirt, or potential development square footage. We have seen the market in Richmond consistently running between $15,000 to $25,000 per potential apartment unit depending on the neighborhood and site constraints; dirt runs somewhere between $60 per square foot to $125 per square foot, also depending on the zoning, neighborhood and condition of the site.
The key to finding value in these development sites is knowing their potential and being familiar with the political landscape that can determine their potential. At One South Commercial, we can assist with that by working with sellers and buyers to maximize development potential and value. Recently, we had a seller approach us about selling their property around the same time the City was considering rezoning Scott’s Addition. We were able to advise the seller to have his property included in a zoning district that increased the development potential of the property by four times just before taking the property to market.
We have also successfully worked with buyers to maximize development potential on sites that are not currently zoned. These deals have required a seller that is willing to wait and some level of certainty that the buyer has the team and capabilities to acquire the zoning and perform on the contract.
At 2901 Monument Avenue, we saw the potential for three homes on a single lot and worked with the buyer through the zoning and subdivision process to gain approval and provided the seller with assurance that the due diligence was progressing. Our expertise with this somewhat complicated and convoluted due diligence process provided certainty for both the buyer and seller that the deal could be done. An added bonus to this deal was that throughout the development project, our residential team was there to help guide the design of the homes and make sure the end product would be as marketable as possible, maximizing the value to the buyer of the development lot.
While historic rehabs in the City have run their course, development opportunities are far from over thanks to the availability of opportunities and the assistance of zoning changes. One South Commercial has several development opportunities on the market right now. See a few of the options listed below, and contact us for more opportunities.