We are fortunate to live and work in a region that experiences steady growth and maintains a healthy economy. From a commercial real estate perspective, the Richmond market is a consistent performer due to its diversified economy and reliable and consistent business drivers. Industrial and multifamily construction activity has remained strong without being overbuilt, eliminating the pattern of “boom and bust” that some other areas experience.
A submarket that has been red hot is Scott’s Addition, a 20-square-block neighborhood that has been transformed from warehouses and light industrial to a mixed-use mecca of multifamily, office and retail. Developers and tenants alike appreciate the proximity to the interstate, numerous amenities and abundant diversity within the community.
Exceptional walkability scores, along with a thriving restaurant and brewery scene, seem to be driving tenants’ willingness to pay the highest rents in the area. The high cost of new construction also informs these rents and, ultimately, is passed through to end users. Scott’s Addition will likely continue to be a desirable location for many, although high rents and challenging parking will remain an issue for some.
Another very desirable submarket and consistent performer is Glen Forest. Primarily office- and medical-focused, this area offers Class A and B alternatives with immediate proximity to I-64 and the dense West End residential population.
With Scott’s Addition and Glen Forest as bookends, there will be abundant infill and redevelopment opportunities, with activity already underway in the Libbie Mill and Kinsale Insurance/Anthem redevelopment sites. Upcoming redevelopment opportunities currently in the planning stages include the Ukrop family’s Westmoreland Crossing site, and the future Genworth redevelopment. Additionally, the retail-heavy Willow Lawn area will see its fair share of redevelopment and new projects over time.
Moving further west along the Broad Street Corridor, we encounter Reynolds Crossing which, with its urban mixed-use rezoning, is likely to see a large uptick in density. Primarily office and medical with abundant surface parking, the growing mixed-use trend has provided yet another blueprint of how “densifying” former surface parking with multifamily and retail can revitalize an aging development.
Innsbrook, the area’s largest suburban submarket, faced major pandemic-related challenges but has come roaring back with overall occupancy at approximately 83 percent. With its proximity to I-64 and Routes 288 and 295, as well as large residential areas, it sees stable demand and enjoys a strong tenant roster. With major landlords like Highwoods Properties, Lingerfelt and Seminole Trail spending money on common area improvements, these offices and the submarket continue to improve.
Due to its Urban Mixed Use (UMU) zoning overlay, Innsbrook will continue to evolve from a traditional office park to mixed-use with apartment infill rising atop surface parking lots. The area has already seen the addition of more than 750 units in the past three years.
“Innsbrook continues to be Richmond’s premier suburban office park that attracts a vast array of office users with amenities that include walking trails, restaurants and hotels. Leasing activity has remained strong throughout 2024 for a variety of square footage sizes,” says Eric Hammond, vice president of Commonwealth Commercial Partners (CCP).
Two areas ripe with opportunity are Richmond’s downtown CBD and the Southside/Southwest Quadrant. Downtown is still trying to claw back after COVID precipitated the work-from-home trend, which led to the loss of some traditional downtown amenities such as lunch restaurants, coffee shops and banking locations.
Downtown landlords have faced ongoing struggles to attract and retain tenants and have been forced to improve amenities like lobbies, atriums, restrooms, lighting and in-building food-service offerings. Truist Center, Gateway Plaza and The James Center have led this charge and continue to set the standard for Class A offerings in the CBD.
“The phrase, ‘flight to quality’ seems to be commonplace as tenants are gradually making the trade up from dated Class A office to buildings where landlords are making these amenity investments to satisfy employers’ charge to bring employees back to the workplace,” says Tucker Dowdy, SIOR, senior vice president and partner at CCP. “Additionally, the new construction investments made by CoStar Group and Dominion Energy are helping to drive a necessary refresh back to the downtown scene.”
South of the James River in the Southwest Quadrant, the 288/Midlothian corridor is fast-growing with Lingerfelt nearing completion of its OrthoVA medical build-to-suit. Another MOB is on the way by the Emerson Cos. A pioneer retail destination at its 2008 inception, Westchester Commons has finally diversified to accommodate the increasing multifamily and office demand.
Prominent residential developers HHHunt and Ryan Homes are taking advantage of this demand and delivering a substantial amount of single-family offerings surrounding Westchester. Given its proximity to so many rooftops and with employees not having to go through tolls, this growing area has an exciting future. Future opportunities will also include the Hull Street Road (360) corridor as the push west continues with more new neighborhoods being built.
New construction inventory on the office side has been limited, but development of MOBs has been consistent over the past several years due to three large hospital groups: Bon Secours, HCA Healthcare and VCU Health. Two new MOBs are nearing completion on Wilkes Ridge Parkway at “The Notch” off West Broad Street. Additionally, Sauer Properties is nearing completion of the most recent building at 2230 W. Broad St., which is anchored by Bon Secours and will offer both medical and office space.
“Despite a tumultuous national outlook for commercial office, Richmond has proven itself as a stable environment to continue transacting in the office sector. Almost daily, I find myself educating clients on the misconception that the local office scene is failing with the limited office inventory as an initial indicator,” says Dowdy.
“Richmond’s accessibility to multiple interstates, our ‘business-friendly’ economic development mentality and suburban-city office balance will continue to position this market for significant and opportunistic growth in the years to come,” he continues. “For a metro area its size, Richmond continues to see a fair amount of growth, while maintaining stability in its reasonable cost of living and cost of doing business.”
— By Tucker Dowdy, SIOR, senior vice president and partner, and Eric Hammond, vice president, Commonwealth Commercial Partners. This article originally appeared in the August 2024 issue of Southeast Real Estate Business.