New Apartment Developments Reflect Richmond's Cool Atmosphere
Did Richmond get hip while you weren’t looking? If you missed all of the skinny jeans, slim-fit plaid, tattoos, beards and craft breweries, then you were not paying attention. Is there a correlation between the amount of breweries, luxury apartments and historic rehabs? Maybe, but something is happening here and it has little to do with Richmond’s former designation as the Capital of the Confederacy and more to do with a vibrant and diverse culture, native-brick buildings, the James River, Virginia Commonwealth University (VCU) and a great quality of life. Millennials are flocking here and Richmond has gotten cooler (i.e. better) every year, albeit somewhat slowly.
In terms of apartments, there are several hotspots in the area that continue to be, or are becoming, destinations to live, work, shop and play, and multifamily developments are leading the way. Shockoe Bottom is booming, Manchester is coming to life, Scott’s Addition & Boulevard could become Richmond’s SOHO, Short Pump is moving into Goochland County and does not seem to be stopping anytime soon, and Chesterfield County, once you get around the cash proffers, continues to surprise.
Richmond has just over 70,000 units and a very stable vacancy rate of 4.5 percent. Class A product has the lowest rate at 4.3 percent. The net absorption total for 2013 was 1,541 units, but new construction only added around 1,000, according to Reis.
The Bureau of Labor Statistics reports the unemployment rate is hitting a five-year low of 5.4 percent and trending downward. This begs the question, is Richmond building enough new product to keep up with consistently high demand and job growth? It does not appear so. With market rents averaging $849 and Class A average rents just reaching $1,000 per month, there appears to be room to grow and push rents substantially when compared to nearby, secondary markets such as Hampton Roads, Raleigh and Charlotte. Richmond has never been known as “pro-development” and it takes a lot of patience and time to get new developments approved, but persistence usually pays off.
Shockoe Bottom is the place to be. With well over 1,500 rental units built in the last four years and the mayor threatening to build a new, mixed-use, baseball stadium, there has been a fever pitch of activity. The best new luxury deal in the Bottom has to be the 124 units at The Lofts at Rivers Fall. Main Street Realty just completed these and it fills in the missing tooth of Tobacco Row along the James River. This ground-up development is asking over a $1.70 in per square foot rents, about as high as it gets for Richmond.
HAVOC Lives Here
That is the slogan for the scrappy VCU basketball team and the university continues to gobble up space. The latest student housing development, The Square Apartments, is nearly completed and is quickly pre-leasing for fall 2014. This 11-story building at 900 W. Grace St. is a prime example of the need for more student housing at VCU in a limited amount of space. Several successful and pioneering developments, such as the Collegiate and 1200 West Marshall, show that growing into areas formerly considered blighted and developing high-end housing is the clear path for VCU’s expansion.
Moving to Mid-Town
The Boulevard and Scott’s Addition is one of the most intriguing areas in the city now. Once it was just some burned out buildings, a Greyhound station and The Diamond, formerly the home of the Richmond Braves, but currently the home of the Richmond Squirrels. Now many of the buildings have been rehabilitated into boutique apartments, restaurants, breweries, distilleries and art space. Now the area has a new Redskins training camp and, potentially, a massive redevelopment of The Diamond.
Other than the aptly named Boulevard, the rehab of the Interbake cookie factory into 178 apartments and retail by Rebkee Co., one of the most innovative developments currently under construction is The Preserve at Scott’s Addition. This is a redevelopment and expansion of a former Coca-Cola bottling plant into 194 units by Spy Rock Real Estate Group. Being the gateway to a bourgeoning neighborhood with at least five large historic multifamily rehabs in progress, The Preserve is not just pioneering but adding to the fabric of the fastest growing area of Mid-Town.
(Not So) Short Pump
Short Pump is moving westward with high end retail, medical office and more apartments, pushing past the Henrico County line and into Goochland County with new multifamily developments from Atack Properties and in The Notch at West Creek. The best new product, to rival the Flats at West Broad Village, would be the 420-unit Marshall Springs at Gayton West. This is The Breeden Co.’s sister to The Reflections of West Creek and the first to take advantage of the new Gayton Road extension. With its “Vegas-style” pool it will certainly be the jewel of Glen Allen.
Where are the Sales?
Only a handful of transactions have been completed in the Richmond area over the last few years, and with market fundamentals being so strong when compared to the rest of Virginia, investor interest has not appeared to wane. But, owners are still reluctant to sell. Some say it is the strong cash flows the Richmond economy provides, some say people will never pay capital gains taxes in Richmond, but as Chmura Economics & Analytics notes, “clearly a lack of dependence on federal government spending is now favoring the RVA economy.” This is a great time for investors and Millennials alike to consider coming to Richmond.
— Wink Ewing, Investment Sales, ARA Mid-Atlantic. This article originally appeared in the August 2014 issue of Southeast Real Estate Business.