This year is shaping up to be very exciting and productive for the Richmond retail market. The Richmond retail market has started at a brisk pace for the first half of 2015, similar to the end of 2014 as it absorbed 111,889 square feet. The vacancy rate has continued to decline over the past 12 months as well. The overall retail vacancy rate in Richmond tightened to 6.6 percent, a 50 basis point improvement over last year.
The main drivers of retail activity throughout the Richmond MSA continue to be grocery stores, fitness centers and restaurants. Early this year we saw the commencement of construction at two Wegmans-anchored developments in Richmond, one in Short Pump and another in Midlothian. The Midlothian Wegmans will anchor the new Stonehenge Village and is on pace to open in early 2016. The Short Pump Wegmans will join Cabela’s in the new West Broad Marketplace, a 400,000-square-foot development on the western edge of Short Pump.
There has also been solid activity in the market from several other grocers, including Walmart Neighborhood Market and Aldi. Each of these concepts has opened four new stores in the market. Another grocer poised to enter the market is LIDL, one of Aldi’s fiercest competitors in Europe. The chain has been working on several sites in Richmond and has identified a new distribution center located in Spotsylvania County to serve the East Coast. Additionally, LIDL has identified an office building in Northern Virginia for its United States corporate headquarters.
Another factor that is bound to have significant impact on the Richmond retail market is the announced merger of Food Lion (Delhaize) and Giant/Martins (Royal Ahold). This merger is a very logical move as it will create a dominant grocery store chain with a presence all along the East Coast. The only real area of market overlap for Food Lion and Martin’s is Central Virginia. While regulatory approval is not expected for at least nine months, there will undoubtedly be some store closures or dispositions throughout Central Virginia, where the two chains have a total of almost 70 stores.
The fitness segment has been very active in the area, with the opening of Crunch Fitness and YouFit. Each concept has opened three locations and are looking for more opportunities. Meanwhile, Gold’s Gym with eight current locations is also in expansion mode.
Additionally, numerous local restaurateurs buoyed by great recognition in publications such as the New York Times, Food & Wine, Garden & Gun and Southern Living, have developed large followings. Historically these operators have chosen to locate within the confines of the city of Richmond given its dense population.
David Crawford, CBRE|Richmond
Kevin South, CBRE|Richmond
However, in 2015 several local restaurateurs ventured outside the city limits to open locations in the suburbs. So far this venture has paid off for them. This is a trend we expect to continue, given the proliferation of new developments in suburban areas creating the need for dining options that offer a better experience than chains and franchises.
Richmond is also seeing explosive growth in the craft brewing arena, as well increased activity in craft spirits, ciders and even mead. Nothing is more significant in Richmond than San Diego-based Stone Brewery’s recent announcement to open a 200,000-square-foot distribution center and a full service restaurant in the historic Shockoe Bottom district. Stone Brewery will distribute to the entire East Coast from its new Shockoe location.
Like many areas in the Southeast United States, retail investment sales, especially grocery-anchored projects, are heating up in Richmond. To date this year we have seen several grocery-anchored shopping centers change hands. In January Stony Point Shopping Center, a Martin’s-anchored property, was purchased by Chicago-based Next Realty. In May another Martin’s-anchored shopping center, Westpark Shopping Center, was sold to InvenTrust Properties, a REIT based in Illinois.
Finally, 2015 will see the start of two large retail redevelopment projects in Richmond. Regency Square Mall was purchased in January by local developer The Rebkee Co. Plans are not yet public, but Richmonders will be very excited to see this enclosed mall redeveloped into something special that will energize the surrounding trade area. Additionally, the Greater Richmond Transit Co. issued an RFP for its six-acre urban site on West Cary Street in the city of Richmond. The results of the RFP are due by late fall and this redevelopment is sure to become the center piece of urban redevelopment in Richmond.
— By Kevin South, Vice President, and David Crawford, Assistant Vice President, CBRE|Richmond. This article originally appeared in the August 2015 issue of Southeast Real Estate Business.