If you mention the phrase “retail apocalypse” to anyone in the Richmond market, you will immediately receive a puzzled look back. The Richmond retail market is about as far away from a retail apocalypse as any market in the country. Yes, we have seen the Toys ‘R’ Us, Sears, Macy’s and Kmart closures, but with close to 83 million square feet of retail space in the Richmond MSA, the current retail vacancy rate is below 5 percent. The vacancy rate is at, or near, a record low and demand for more space remains robust. New retail development projects are leasing quickly and several noteworthy redevelopment projects are in the works.
In May 2016, Wegmans opened its first 120,000-square-foot Richmond store at Stonehenge Village along Midlothian Turnpike. In August of that same year, Wegmans opened its second store at West Broad Marketplace in Short Pump. Since those two openings, Richmond has received new attention from many national tenants, developers, and investors looking to enter the market.
James Ashby IV, Cushman & Wakefield | Thalhimer
Market activity has been driven by the likes of Wegmans, Kroger, Publix, Aldi, Lidl and Whole Foods Market, as well as Gold’s Gym, Planet Fitness and Crunch Fitness. In 2016, Ahold announced it would sell 10 of its Martin’s branded stores to Publix. Ahold closed the other nine stores it had open in the market, leaving what some would say significant vacancy. However, most of those empty stores have found new tenants.
At Gayton Crossing, which is owned by Regency Centers, Gold’s Gym leased roughly 28,000 square feet while Gold Fish Swim School leased the remaining 10,000 square feet. Along Staples Mill Road in the northwest quadrant, Advance Auto Parts leased 31,000 square feet — utilizing 8,000 square feet for a retail store and the remainder for parts distribution to other locations in the market. In Chester, which is in the southern part of Richmond, GFD Management redeveloped a former Kmart and signed leases with T.J. Maxx, HomeGoods, PetSmart, Ross Dress for Less and Ulta Beauty — demonstrating new retailers to this Chester market.
Whole Foods is building a 45,000-square-foot store along West Broad Street in between The Boulevard and Virginia Commonwealth University — its second location in the market.
Publix is redeveloping several stores it has taken over in the market, as well as the former Martin’s at The Village Shopping Center owned by Regency Centers and the former Martin’s at Westpark Shopping Center owned by InvenTrust Properties. Publix spent millions of dollars renovating the interiors of Harbour Pointe Village, owned by First Washington Realty, Stratford Hills, a former Ukrop’s family-owned store it purchased, and Short Pump Crossing. Publix is also under construction on a brand new store at Cosby Village located on Hull Street Road in the southwest quadrant of the market, which it is developing on its own.
On the Mechanicsville Turnpike corridor, located in the northeast quadrant of Richmond, Publix and The Morgan Cos. are under construction on a 49,000-square-foot store set to open in October. The new Publix openings bring new retail small shop space opportunities in a market that is lacking availability. Landlords developing these quality projects have a distinct advantage in that they have successfully been able to command higher rents.
Two of the most noteworthy redevelopments are Regency Square Mall (rebranded as Regency), comprising 865,000 square feet, and The Richmond Shopping Center, which will be known as Carytown Exchange, totaling close to 90,000 square feet of new retail space. Regency is a joint venture partnership between Thalhimer Realty Partners and The Rebkee Co., while Carytown Exchange is a joint venture partnership between Regency Centers and The Goodwyn Family. Regency has lined up tenants such as Starbucks Coffee, MOD Pizza and Chipotle Mexican Grill, with several larger deals pending. Carytown Exchange’s lead tenant will be a Publix taking over the former Martin’s grocery store. The project will be in high demand given the lack of vacancy in the Carytown submarket, coupled with demand from retailers seeking out this highly sought-after market. Many high-end tenants will ink leases at this project by this time next year. Delivery is scheduled for late 2020.
Aside from the grocers and the gyms, Richmond has seen new stores opened by Chopt Salad at Willow Lawn, First Watch at Huguenot Place and Cava Grill at Short Pump Town Center. The quick-service restaurants are sprouting up everywhere. These retailers continue to seek expansion opportunities, but quality sites are few and far between given the limited vacancy. Chipotle, Starbucks and Panera Bread continue their push for end cap sites with drive thrus.
On the local restaurant front, Richmond continues to see major expansion from some of its top local talent. Chris Tsui’s EAT Partners opened Red Salt, a high-end sushi/steakhouse in GreenGate, a mixed-use project in the Short Pump submarket. Michelle Williams, owner of The Richmond Restaurant Group, opened two concepts in the same project: The Daily and Coast Provisions, which also have locations in Carytown. Shagbark Restaurant, which opened in the Libbie Mill mixed-use project, received a Four Star Diamond rating and was listed in USA Today’s “20 New Restaurants to Try This Fall.” Richmond’s restaurant scene is thriving and garnering the attention of many regional restaurant groups looking to expand.
Richmond is home to six Fortune 500 company headquarters, as well as numerous universities turning out educated, talented and motivated people who want to make Richmond home. The market has attracted a steady stream of millennials, ranking as high as No. 4 in the nation for millennial population growth. The region continues to witness consistent employment gains, with the economy adding 9,700 jobs from the previous year in the second quarter. Incomes have also increased 2.8 percent in the past 12 months to help drive consumer spending.
Richmond continues to receive press about it being a foodie town and it being a great place to live. The retail market in Richmond is healthy and vibrant, and the retail apocalypse has not come anywhere close to this thriving retail community.
— By James Ashby IV, Senior Vice President, Cushman & Wakefield | Thalhimer. This article originally appeared in the August 2018 issue of Southeast Real Estate Business.