CITY HIGHLIGHT, NOVEMBER 2005

RICHMOND CITY HIGHLIGHTS
Rob Black, Suzanne L. White and Charlie Polk III

Retail market

The Richmond, retail market has been very active this year with a host of new developments opening and many more in the pipeline. During the past few years, when the office and industrial markets dipped, the Richmond retail market held strong with the openings of the Stony Point Fashion Park and Short Pump Town Center — the only two lifestyle centers to open in the country in 2003. Most of the activity today has been centered on the main business corridors in the northwest and southwest quadrants of Richmond.

Much of the activity in the northwest quadrant has centered around Forest City's Short Pump Town Center, a lifestyle center anchored by Nordstrom, Dillard's, Hecht's and Dicks Sporting Goods. Forest City is in the process of expanding the center. Space originally reserved for Lord & Taylor, which backed out as a fifth anchor, has been filled by the likes of The Cheesecake Factory, Orvis and Saxon Shoes. Parc Place, a new, 90,000-square-foot center anchored by Petsmart, recently opened on the loop road of Short Pump Town Center. Also, a free-standing Bowl America recently opened adjacent to Parc Place.

A couple of major sites are in play along West Broad Street. The 125-acre Liesfeld tract, located at the intersection of Interstate 64 and West Broad Street, is arguably one of the best tracts in town. Unicore is working on a mixed-use deal that could have a corporate headquarters, a Class A office component and approximately 40 acres of retail fronting Broad Street. The Breeden Company has closed on a large tract next to Short Pump Town Center and plans to build the 120,000-square-foot Towne Center West, which will have restaurant sites and small-shop space in a town center concept. Junior anchors may be incorporated into the development.

Another new center called Shoppes at Twin Oaks is under construction on Cox Road, close to the Innsbrook Office Park. The 40,000-square-foot center will consist of several restaurants and small shop spaces and should open this fall.

Another deal of note in the northwest quadrant is a freestanding Best Buy, located on U.S. Route 1 near the Virginia Center Commons Mall. The development also includes some small shop space.

Blackwood Development is bringing The Home Depot to NorthCross, located at the new Sliding Hill Road Interchange near Virginia Center Commons. The developer is working on an additional phase of 180,000 square feet with anchor tenants and expects to deliver in late 2006.

Richmond's southwest quadrant also has seen activity in a number of areas. Midlothian Turnpike, the main business corridor on the southwest side of town, has experienced healthy activity. There has also been extensive growth along the Hull Street Corridor at Route 288, which effectively gives the southwest quadrant two business corridors.

Philadelphia Management is trying to reposition the old Cloverleaf Mall site, which encompasses 83 acres at the intersection of Chippenham Parkway and Midlothian Turnpike, as a mixed-use site.

North of the Cloverleaf site on Chippenham Parkway, The Shoppes at Stratford Hills, a 250,000-square-foot center, recently opened with a new Ukrop's Supermarket, Target, Office Depot, GameStop, Moe's Southwest Grill and Jason's Deli, along with some small shop space and a number of pad sites.

Further west on Midlothian Turnpike, the 78-acre Woodlands tract is under contract to a developer with plans for a retail center and multifamily units. The site is located on the loop road of the Chesterfield Town Center mall adjacent to Lowe's Home Improvement Warehouse, Dick's Sporting Goods, Bassett Furniture and Best Buy.

Edens & Avant recently closed on 33 acres at the intersection of Charter Colony on Midlothian Turnpike. The company plans to do a neighborhood grocery-anchored center.

James Doran recently closed on another large tract, located at Midlothian Turnpike and Winterfield Road, and plans to develop a main street concept, mixed-use center with multifamily and retail.

Zaremba is working on a large power center with a main street element on a 125-acre tract located at the intersection of Midlothian Turnpike and Route 288.

Further south along the Hull Street Corridor, just west of Route 288, the Breeden Company recently opened Woodlake Commons, a 60,000-square-foot, unanchored retail center. Small tenants include Five Guys, Chens and Virginia Paint Company.

The 24,000-square-foot Harbourside Centre also opened recently on Hull Street. Tenants include Glory Days Grill, Movie Stop and several others.

A number of car dealers have also positioned themselves in the Hull Street Corridor. Haley Toyota along with Pearson Automotive has purchased sites in the area for car dealerships.   More dealers will probably follow.

Just east of Route 288, Ashley Furniture is opening a 50,000-square-foot store in the Victorian Square Shopping Center. The retailer is replacing Kroger and will be the center's new co-anchor along with K-Mart.

Expect the Richmond market to continue to grow due to continued residential growth. The MSA is home to 1.2 million people and eight Fortune 500 companies. There is a housing shortage in Washington D.C. which should continue to drive growth further down the Interstate 95 corridor towards Richmond. The Washington MSA has already engulfed Fredericksburg, which is only 45 minutes from Richmond. Washington-area new homes magazines now include listings from Louisa County, which is only one county away from Richmond. More retail opportunities for neighborhood-grocery anchored sites follow new planned residential communities. Thus, Richmond retail is well positioned to continue to grow with the rest of the market.

— Rob Black is vice president of retail services with Richmond office of CB Richard Ellis.

Richmond Downtown Market

New cranes jut up along the James River among buildings that date back to the early 1700s. With more than $600 million in new development either planned or under construction, it's clear that for a place so rooted in its past, Richmond's waterfront is anything but marooned.

The waterfront became a bustling point of trade in the late 1600s and early 1700s with ships docked at the James River, and buyers and sellers converging on 17th Street in Shockoe Bottom. At times in the city's early history, ships along the James River carried tobacco to England, and brought fish and seafood to the city's markets.

The 17th Street Farmer's Market remains today a hub of commerce. But the growth of entertainment and new residential projects was held back due to infrequent but devastating floods. A $135 million floodwall constructed in 1995 brought a much needed layer of protection and stability to the area, and new construction has since followed.

Developers have embraced the historic landscape of Richmond's waterfront. Two of the largest projects are Riverside on the James and Rocketts Landing. Riverside on the James is a roughly $86 million, mixed-use project on Brown's Island, developed by Daniel Corporation in conjunction with the city of Richmond. The project incorporates a 100-year-old power plant, and includes 76,000 square feet of new retail space, 240,000 square feet of Class A office space, and 122 luxury condominiums.  

Rocketts Landing, being developed by The WVS Companies, will run from Richmond into Henrico County. The $400 million project will include 1,400 residential units, retail and office space. The site is the former port of Richmond where President Abraham Lincoln arrived to tour Richmond after it was captured by the Union during the Civil War.  

Richmond's waterfront area was known at times as the “grain-belt of the south,” not to mention the seat of tobacco production. But yesterday's flourmills and tobacco warehouses are today's mixed-use residential complexes. Canal Walk Lofts, formerly a Philip Morris factory, is a 120-unit upscale development with groundfloor retail. The River Lofts at Tobacco Row is a $27 million, 850-unit renovation of a former tobacco warehouse by Forest City, which was delivered in 2001. Also, George Stanley and Stanley Shields LLC converted the Pohlig Box Factory, a former tobacco warehouse and military hospital at 2411 E. Franklin St., into an $11 million, 64,190-square-foot, 65-unit apartment building. And Fulton Hill Properties is converting the former Virginia Paper Company and Lady Bird Hat Factory building into 48,000 square feet of restaurants, retail and office space.

— Suzanne L. White is an office leasing associate with Thalhimer/Cushman & Wakefield.

Richmond Office Market

Speculative office development is alive   again in Richmond, particularly in the suburbs. Projects currently under development with substantial pre-lease commitments include the 106,000-square-foot Stony Point IV in the southwest quadrant, and the 77,000-square-foot Westerre III and 75,000-square-foot Paragon III   in the northwest quadrant.

Medical office also has been hot, with the best example being the newly completed St. Francis Medical Office Building. The project was originally planned as a three-story, 75,000-square-foot building, but demand propelled it to six stories and 150,000 square feet in total.

One reason for the increase in suburban office development was the completion of Route 288 at the end of last year. Commuters can now travel easily between the West End (Henrico) and South Side (Chesterfield) in a toll-free 20 minutes.

Suburban office condos are still popular, although development has slowed   due to a slight over-saturation.   This cautious, prudent development indicates that despite the current favorable conditions, developers have not forgotten the high vacancies and lack of demand that existed from 2001 through early 2004.

New development downtown consists largely of mixed-use properties including Daniel Corporation's Class A Riverside on the James with 230,000 square feet of office space. The Troutman Saunders law firm has moved from the Bank of America building into Riverside, occupying 110,000 square feet on the top five floors. There is currently just more than 20,000 square feet of space left vacant at Riverside.   The CBD Class B market, on the other hand,   has seen more vacancies, such as 70,000 square feet of space in the 700 Building and 39,800 square feet of space in 600 East Broad, as city and state government tenants continue to consolidate.

CBD Class A properties still command the highest rent in the market, with rates ranging from $20 to $26.50 per square foot. Class B rates in the CBD drop to between $13 and $18 per square foot due to the higher vacancy rate. Rates for suburban Class A space are between $17.50 and $21 per square foot, and suburban Class B ranges between $14.50 and $17 per square foot.  

The Class A office market in both downtown and the suburbs will remain very strong for remainder of the year, and look for next year to be an exceptional time for both areas.

— Charlie Polk lll, SIOR, is executive director with Richmond-based GVA Advantis.

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