If you asked any retail broker in the Richmond market in April 2020 what the forecast might look like, the response would be dark and stormy skies ahead with record-high retail vacancy rates. Fast forward four years later, and the forecast has been quite the opposite, with sunny skies in terms of deal flow and record-low retail vacancy rates, both a positive and a negative as it relates to the vacancy rate itself.
Richmond boasts close to 82 million square feet of retail space, and at the end of the second quarter of this year, the vacancy rate stood at 3 percent. Despite COVID, the vacancy rate stood at 5.1 percent at the end of 2020. The market is experiencing record-high demand for new space and about a 15.6 percent year-over-year increase in quoted rental rates due to that demand and limited product availability. Since 2020, our market has seen, on average, 2 million square feet of retail space leased per year, and all signs point to steady leasing velocity in the future.
Short Pump, Hull Street West
The Short Pump and Hull Street West submarkets continue to be the prime focus of many retailers looking to expand in the market due to exceptional demographics and substantial residential growth. Short Pump, the No. 1 retail submarket, comprises roughly 4.8 million square feet, and the vacancy rate currently stands at 1.4 percent, making entry into the market beyond challenging.
Over the past two years, the market has welcomed Sierra Trading Post and Homesense, which backfilled a former Stein Mart at Short Pump Crossing, and Academy Sports + Outdoors, which backfilled a former Toys “R” Us box at The Corner at Short Pump. Perry’s Steak House opened in front of Short Pump Town Center, and most recently, Fogo De Chao Brazilian Steakhouse opened in the former Kona Grille at the main entrance into West Broad Village.
The Rebkee Co., which is developing West Village located at the intersection of West Broad Street and Gayton Road, recently saw the opening of Fink’s Jewelers, which pulled out from Short Pump Town Center. Fleming’s Steakhouse and Shake Shack have recently signed on at West Village as well.
Along the Hull Street corridor, the former Stein Mart box at Commonwealth Centre was backfilled by Painted Tree, which also recently opened in a former Christmas Tree Shops box at Westpark Shopping Center owned by InvenTrust Properties along the West Broad Street corridor.
The most notable new development along the Hull Street corridor is Cosby Village Square, a mixed-use project with close to 500 residential units and 90,000 square feet of retail being developed by Main Street Homes. Preleasing has been robust, with leases having been executed by Chipotle Mexican Grill, Starbucks Coffee, Panera Bread, Mezeh and The Vitamin Shoppe.
On Midlothian Turnpike, Atlanta-based developer SJC Ventures recently announced a new project to deliver in 2027 — Midlothian Depot. It is rumored to be anchored by a 35,000-square-foot Whole Foods Market along with 60,000 square feet of retail space and 60 townhomes. Further east at Pocono Crossing, Academy Sports recently signed to lease 63,200 square feet, marking its second store in the Richmond market and fourth in Virginia.
Regency, Carytown Exchange
Two of the most noteworthy redevelopments that have taken place over the past few years in Richmond are Regency Square Mall (now known as Regency), one of Richmond’s first malls that opened in 1975 and spanning 865,000 square feet, and Carytown Exchange, totaling close to 90,000 square feet of new retail space. Regency is a joint venture partnership between Thalhimer Realty Partners and Rebkee, while Carytown Exchange is a joint venture partnership between Jacksonville-based Regency Centers and The Goodwyn Family.
Regency has seen openings from Starbucks, First Watch, MOD Pizza, Chipotle, Panera Bread, Sheetz, NOVA Swim School and Surge Trampoline Park, as well as an opening at the end of last year by Performance Pickleball, a 12-court pickleball facility. Regency recently announced the addition of Chase Bank, and the project has added close to 1,250 new high-end apartment units.
At Carytown Exchange, Richmonders welcomed Burton’s Grill & Bar, Torchy’s Tacos, Jeni’s Splendid Ice Cream, Monkee’s of Richmond, City Row, Pure Green, Urgent Vet, Schwarzschild Jewelers and Midtown Yoga.
Expanding retailers, sales
The market has seen tremendous anchor activity from Burlington, T.J. Maxx, Marshalls, HomeGoods, Sierra Trading Post, Homesense, Painted Tree and Planet Fitness. The PGA Superstore opened in February of this year at The Colonnades West Shopping Center, backfilling an OfficeMax after a multi year’s search for space in the Short Pump/Innsbrook submarkets. Planet Fitness signed new deals taking over the former Best Buy box in Mechanicsville as well as the former Marshalls at Meadowdale Shopping Center. The group has several other deals in the market pending, and many more are planned throughout the state.
Trader Joe’s, which currently has a location south of the James River at Stony Point Village and a location at Short Pump Station, is on the hunt for additional locations in the market to alleviate pressure on these two stores as both are exceeding expectations and pulling from many miles outside of the Richmond MSA. On the restaurant front, both Raising Cane’s and First Watch have rapidly expanded, with additional locations in the pipeline.
Retail capital markets remain active despite higher interest rates. Publix recently became an owner/occupant by acquiring Harbour Pointe Village, which was owned by First Washington Realty. Gayton Crossing, located in the northwest quadrant, was recently acquired by Continental Realty Corp., marking its first acquisition in the market for the Baltimore-based firm. In 2021, Wafra purchased Short Pump Station, which is anchored by Trader Joe’s, Ulta Beauty and Petco. Richmond remains an attractive market for retail investors given the health of the market on all levels.
Diamond District
By far the biggest and best news in the Richmond MSA is the proposed new baseball stadium and development known as The Diamond District. The city announced on July 25 that it had sold $170 million in bonds to pay for the ballpark and the related infrastructure to support the surrounding development. The state-of-the-art, 10,000-seat stadium will be the new home of the Richmond Flying Squirrels and the VCU Rams and shall fully comply with the new Minor League Baseball (MiLB) requirements.
The Diamond District surrounds the stadium and will encompass 67 acres of mixed-use development. Phase I alone consists of 1,660 multifamily units, with affordable housing, for-sale homes, a 180-room high-end hotel and more than 156,000 square feet of commercial space. T Diamond District Partners, which is being led by Thalhimer Realty Partners, is developing Diamond District.
The Richmond retail market continues to hit home runs, but this will be a grand slam for many years to come; one that will leave a dynamic impact on our region unlike we have seen before.
— By James Ashby IV, senior vice president, Retail Services Group at Cushman & Wakefield | Thalhimer. This article was originally published in the August 2024 issue of Southeast Real Estate Business.