COVER STORY, DECEMBER 2004

CREATING A TOWN CENTER
Started as an idea nearly 30 years ago, The Town Center of Virginia Beach is an example of how public-private partnerships are changing the face of cities nationwide.
Randall Shearin

The Town Center of Virginia Beach. Courtesy of CMSS Architects

Although the city of Virginia Beach, Virginia, created its central business district in 1976, no real progress was made in its development until the mid-1990s. In early 1984, an influential group of business and community leaders created the CBD Association to begin the process of getting the city and its citizens to focus on a plan to develop The Town Center of Virginia Beach at one of the most heavily traveled intersections in the state, the corner of Virginia Beach and Independence boulevards. In the mid-1980s, the plan consisted of an innovative mix of office, retail, hotel, cultural and residential space. At that time, though, the city wasn’t ready for every aspect of the plan’s completion. The first stage, an 11-story Class A office tower known as One Columbus Center, was developed and opened in 1983 with typical downtown tenants.

Virginia Beach-based Divaris Real Estate Inc.’s chairman/CEO, Gerald Divaris, has been a strong advocate — and later one of its developers — of the Town Center since its inception. He is acknowledged as the person most responsible for the original vision and for keeping it alive for 20 years.

An aerial photo of The Town Center of Virginia Beach. Courtesy of Advertising Visuals, Inc.

After developing the first office tower, the Town Center went into a planning and entitlement mode as new parcels of land were acquired and zoning was attained for the project. In the late 1990s, with demand for new office space — and an incredible pent-up demand for retail space — outpacing development, the time was right for more development at The Town Center of Virginia Beach. In 2001, construction began on a 22-story office tower, 1,300-car parking garage and 36,000 square feet of street retail. In late 2003, a business class, seven-story Hilton Garden Inn was completed, as well as an 84,000-square-foot, two-level Galyan’s with 17,000 square feet of adjacent retail and a 500-car parking garage. Also, in late 2003, ground was broken for a luxury 342-unit high-rise apartment building with parking and retail space. The new buildings contain ground floor street retail and, in some cases, second-story retail space. Construction on two new blocks, one with retail on two levels and one with two levels of office space over retail, were also started in late 2003. Not part of the Town Center, but located directly across Virginia Beach Boulevard, Pembroke Mall also is in the process of being redeveloped.

Retail plays a huge part in the success of the Town Center. Galyan’s and an adjacent Circuit City superstore face Independence Boulevard, while Barnes & Noble, Bed Bath & Beyond and Regal Cinemas are on Virginia Beach Boulevard and Constitution Drive.

A key element in this development is the public/private partnership with the city of Virginia Beach. This partnership has resulted in the city’s Development Authority building and owning the parking garages, which provide free parking to tenants and their customers. The city also owns the streets and public plazas.

The Armada/Hoffler Tower is home to many of the area’s top office tenants. Photo credit: Mike Pennello

The Armada/Hoffler Tower, a new 22-story office building, was successfully leased before it was opened. Today, nearly 2 years after opening, the office building is home to many professional firms, as well as the city of Virginia Beach’s economic development authority and Armada/Hoffler, which, along with Divaris, are the primary developers of the Town Center. Other tenants include Atlanta law firm Troutman Sanders, Morgan Stanley, Mass Mutual, Legg Mason, Williams Mullen, the local CBS affiliate and the offices of U.S. Senator George Allen. The television station also has its studios and a newsroom in the building, and the tower atop allows it to broadcast from the building.

For Armada/Hoffler, the attraction to the site was the energy it would bring to the region. When the company agreed to join forces with Divaris and become the Town Center’s developer and contractor, it also decided to move its headquarters from neighboring Chesapeake and anchor the tower as a key office tenant.

Block 3 has office with retail on the ground floor. Courtesy of CMSS Architects

“Once we got into the project, we could see that there were tenants and that the city was really behind the project,” says Lou Haddad, president and CEO of Armada/Hoffler Holding Company. “We have a strong history of doing public-private joint ventures across the Southeast, so it was a natural fit for us to jump in. Moving here has given us a much bigger presence locally. It has catapulted us into a premier position; this is the largest economic development play in Hampton Roads.”

Retailers that have opened at the Town Center include The Cheesecake Factory, P.F. Chang’s China Bistro, California Pizza Kitchen, Red Star Tavern, Men’s Warehouse, Sumatra Day Spa, Cold Stone Creamery and Stanley Adams Stationery.

The street retail, which will open this month, will house Ruth’s Chris Steakhouse, Bravo! Cucina Italiana, Ann Taylor Loft, Keagan’s Irish Pub and Funny Bone Comedy Club, among others. This space will also be home to an impressive piazza-type open-air plaza. The piazza alone will cost approximately $2 million, with most expenses due to fountains, special paving, furnishings and landscaping used in its construction. It has been wired so that the television station can broadcast live events from the piazza. An existing shopping area, which is now considered part of the Town Center, has been partially renovated and there are now plans for its complete redevelopment. Tenants include Barnes & Noble, Planet Music, Bed Bath & Beyond, PetsMart, Storehouse Furniture, Thomasville Furniture, Silver Diner, Starbucks Coffee and a Regal cinema complex. Overall, there are approximately 500,000 square feet of retail space already existing (not including Pembroke Mall).

A Hilton Garden Inn opened in 2003 at the Town Center. Photo credit: Mike Pennello

Divaris reports that, at first, retailers were skeptical about Virginia Beach as a location. But upon seeing the area’s demographics firsthand, and visiting the area and looking at the lack of competition, most were wowed by the prospect of locating at the Town Center. There are only a few national upscale restaurants in the area, outside of what now exists in the Town Center. Retailers that were in the area were reporting higher than average sales. The Sears at Pembroke Mall, for example, is one of the best in the chain. A nearby Best Buy is also in the top 10 percent of the chain, according to Divaris. The Barnes & Noble at the shopping center adjacent to the Town Center has been a top performer from its opening. The combination of Barnes & Noble’s sales with those of adjacent Planet Music creates higher volumes than most of the chain’s stores in New York City.

“We asked all retailers not to pre-judge the market,” says Divaris. “Instead, we asked them to come and see the vibrancy of this market. If they then made up their minds not to locate here, we were off their case. Thankfully, so far all those who came to see have committed to open.”

California Pizza Kitchen is one of the restaurants that represents the street retail found at The Town Center of Virginia Beach. Photo credit: Glen McClure

The Cheesecake Factory at the Town Center is one retailer that changed its mind after seeing the market. The company’s unit at The Town Center at Virginia Beach is beating its average location by up to 20 percent.

“The Cheesecake Factory never thought that Virginia Beach, which was thought to be a second tier market for them, could support a store such as this, with this kind of volume,” says Divaris.

The high-rise luxury apartment building, now under construction, will also contain street retail. The building is unique to the area, as there are not many high-rise, urban-style apartments. And there are none that are co-located with such a great mix of retail and restaurants. The multifamily building will have 342 apartments, 850 free parking spaces and retail space on the ground floor. Ranging from $900 per month for a loft to $2,750 for a three-bedroom unit, the apartments have the highest rents in the entire metropolitan area. Even though they will not be available until spring 2006, there is already a waiting list. Newport News, Virginia-based Drucker & Falk is a partner with Divaris and Armada/Hoffler in the apartment complex.

A performing arts center is planned for the Town Center, adding to its civic nature. The $50 million city facility will contain three auditoriums. One auditorium will have 1,200 seats and include an orchestra pit. There is also an indoor/outdoor facility that seats another 450 people. The design of the building is European in nature, and will help to add to the destination nature of the Town Center. The city will own the performing arts center, but there is some private investment involved. Construction is scheduled to begin in 2005, and is slated to open in the spring of 2007.

A central park, which is also planned for development over the next few years, will accommodate an amphitheater. The amphitheater will be used for “Shakespeare in the Park,” Theater in the Round, and it will showcase the comedians appearing at the Funny Bone Comedy Club.

Another block at the Town Center is being designed to accommodate a 220-room, four-star hotel, which the developers, along with partner Crestline Hotels, plan to announce in the near future. Above the hotel, 150 exclusive condominiums are planned, which will be fully serviced by the hotel. Again, there will be retail along the four fronts facing the streets, a parking garage and a 100,000-square-foot office building.

In two other blocks, the developers hope to build a third large office tower, similar to the Armada/Hoffler Tower. The developers are currently in negotiations with several large firms that hope to relocate divisions of their businesses to Virginia Beach. Any new office building developed at the Town Center, says Divaris, would also contain retail space at ground level. A nationally known, upscale department store has ordered and received a favorable market study. It is considering a 130,000-square-foot department store on one of the remaining blocks.

In addition to what has been developed, there is plenty of room for future development. The creation of The Town Center of Virginia Beach has inspired nearby properties to renovate, rebuild and reuse existing space, as well as spawned some peripheral new mixed-use development. Already announced by other developers are projects that include a village-like lifestyle center that is coupled with multifamily space, and a 400-unit townhome development. A 300,000-square-foot office tower is also planned nearby.

In developing The Town Center of Virginia Beach, the developers studied other main street projects like Reston Town Center in Reston, Virginia, Kierland Commons in Phoenix, and Easton Town Center in Columbus, Ohio. They liked the energy that these places offered visitors — and the traffic that they offered retailers.

 

Finding Hidden Treasure With The Town Center of Virginia Beach, Divaris Real Estate, Armada/Hoffler and their partners built in the middle of a thriving market. The city has a dynamic residential market. Virginia Beach, the largest city in the state of Virginia with 440,000 people, also has the fourth highest median household income in the country. Adjacent to Virginia Beach is Norfolk, the state’s second largest city with 236,000. Today, nearby Chesapeake — population 196,000 — slightly edges out Richmond as the state’s third largest city. The entire Hampton Roads area, which stretches from Williamsburg to the North Carolina border, has 1.6 million people. It is the second largest metropolitan statistical area in Virginia, behind only the Northern Virginia/Washington, D.C., area. Virginia Beach has 51 square miles of waterfront, and most of the waterfront in Virginia Beach is residential. Most of the housing near the waterfront are high-end homes, valued between $1 million and $6 million. The area spends about $10,887 per person on retail goods; nationally that figure is about $8,287. But there is a hidden gem to Virginia Beach’s household income. A substantial portion of the area’s population is retired from the military. These are early retirees who finish their service after a 20-year enlistment in their late 30s or early 40s. They then re-enter the workforce, earning a salary as they collect their military pension. The military pension, however, is virtually tax free, creating high disposable income. The difference in the numbers from national demographics services to actual Total Personal Income is nearly 30 percent, according to Divaris’ research department. — Randall Shearin

©2004 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.