Written by | Ann Schweitzer Riley
Richmond is experiencing one of the most pronounced citywide neighborhood revitalizations it has ever seen. From Church Hill to the Broad Street corridor to Shockoe Bottom to Manchester, virtually all of Richmond’s districts are seeing an accelerating collective momentum unsurpassed in recent memory. While the commercial development and redevelopment may seem unprecedented, the catalysts for this wave of activity are both “old” and “new” agents of change in any thriving city landscape — based on both product and end user.
Understanding these factors and how they influence development and market velocity in our various submarkets plays a paramount role in how One South Commercial views commercial real estate, how we evaluate opportunity, and how we impact neighborhoods. In our commercial practice, we seek to better understand how the market generates and interprets these factors in a big picture context.
Rule #1 – It’s all about the product.
Richmond City as a whole is comprised of an incredible volume of contiguous historic building product — ranging from the French Revival office building in Monroe Ward to a mid-century masterpiece commercial mixed-use renovation in Scott’s Addition to a 19th century post and beam tobacco warehouse apartment building in Shockoe Bottom. The impressive existing architectural fabric of Richmond provides an array of unique market opportunities to develop projects with an authentic sense of place and identity. It also means that these properties have long-term market sustainability and legacy as enduring local “icons” and landmarks in our building inventory. They are major contributors in defining and reconstructing the city’s respective neighborhood identities.
While many historic buildings have long been recognized as ideal for redevelopment and adaptive reuse projects by local developers, particularly for residential apartments, they have recently attracted a much broader pool of end users. Much of the neighborhood “trail-blazing” we are seeing, however, is not based purely on market demand. The demand is born and created in part by the tremendous outcomes of the product delivery — unique, “evergreen” in design features and finishes, and oftentimes, simply stunning restored buildings. Extrapolating the trajectory of these redevelopment efforts lies at the heart of our practice and is the underpinning of recommending successful investment and development strategies to our clients. Whether you are looking at how to bring a historic building back to the marketplace or trying to determine what sort of new product makes sense in a historic neighborhood, we are experts in product development.
Rule #2 – It all about the end user.
While a comprehensive catalogue of historic or uniquely modern landmark buildings may be the foundation for moving Richmond “up-market”, the opportunity to generate commercial activity and a burgeoning neighborhood depends largely on demand by end users. The multitude of renovation and infill projects across all neighborhoods has shown that the demand for city office, retail, and maker/production space is finally here in RVA and growing. This newer group of end users is diverse and includes new local business owners, restaurateurs, entrepreneurs, start-ups, creatives, and corporate users. Office users in the Richmond CBD are up almost 10% above pre-recession levels, and Richmond’s employment growth has increased every year since 2010. Over the last 7 years, the city’s population alone has grown 9.3%, with another 2.9% increase forecasted by 2020. Millennials comprised 15% of the population growth between 2010 and 2015. In fact, the city’s median age is currently 33.4. City residents age 20-39 make up the largest population segment at 37%. There is no question that the Millennial population will be a major economic driver and will build, re-shape, and occupy much of the city’s commercial real estate in the years to come.
In addition, Richmond’s start-up and tech scene has gained traction and visibility over the last 5-6 years in national publications such as The Atlantic, Forbes, and Entrepreneur. While Richmond’s venture capital community is still growing, some of the city’s highest profile international and national corporate players such as Capital One, Carmax, and Dominion Power are already redirecting investment back into the Richmond’s CBD via real estate projects and economic development. Other powerhouse corporate office users such as CoStar Group, Thomson Reuters, and ICMA-RC have all recently selected Richmond as their corporate headquarters location.
Rule #3 – It all about the use
With both the City’s proverbial “supply” and “demand” ideally positioned to mobilize economic growth and diversification, converting these market forces into a real estate context is critical for long-term sustainable growth for the city and its neighborhoods. In many cities and counties across our country, municipalities, real estate developers, business owners, and a range of community stakeholders and residents are rapidly confronting the challenge of how to transition existing building inventory successfully to the next generation of users.
A successful approach means employing a wide-angle lens to understand all opportunity where the use of real estate is concerned. One South Commercial’s practice is to address these factors through that wide-angle lens, leveraging both commercial and residential real estate market data to identify the “best case” scenarios for a wide range of development opportunities. Is a for sale product or for lease product more marketable? Who is the most likely end user — and what is their market viability? What is the local market going to look like in 5 years? In 10 years? What will the landscape look like then? The One South Commercial practice is focused on comprehensively identifying the best use, market positioning, and development solutions for our clients.\