By Celeste M. Smucker–
National Association of REALTORS® Chief Economist, Lawrence Yun predicts continued growth in commercial real estate thanks to an improving national economy characterized by declining unemployment and increased consumer confidence.
Local REALTORS® agree describing an active commercial market with significant opportunities for business owners and investors.
The Power of Our Local Economy
The many reasons Charlottesville is a popular choice for top ten lists—Best College Towns, Best Places to Retire, Best Cities for Entrepreneurs—are also why it enjoys a robust commercial market. Much the same is true of the Shenandoah Valley, where Staunton often receives recognition for its beautiful Main Street, and—for the last 21 years running—has been a regular recipient of the Arbor Day Foundation’s Tree City USA in recognition of its focus on planting and caring for trees.
Regardless of whether you are in Charlottesville or the Valley, unparalleled natural beauty and a lifestyle with something for everyone, from Millennials to Boomers and from cultural enthusiasts to sports fans, are big draws for both company owners and their employees.
The strength of area residential real estate markets also supports increasing expansion of the commercial market. CAAR’s recent Second Quarter Market Report showed a 3.9 percent year over year increase in home sales, accompanied by an impressive eight day decrease in the median number of days that homes stay on the market and a 29.7 percent decrease in the inventory of homes for sale. Sales are also strong in both Waynesboro and Staunton where, as in Charlottesville, one of the biggest challenges is lack of inventory.
Of course the insulating impact of UVA and the Medical Center adds stability to our residential market and makes our area attractive to investors contributing to the growth of Charlottesville’s commercial market explained Reid Murphy, partner at BMC, Building Management Company in Charlottesville.
Keith May, Broker and owner of Cottonwood Commercial and Kline May Realty echoed that sentiment citing the importance of the colleges and universities in the Valley, which contribute to a market there that he called “very stable.”
Local Commercial Markets Strong
“Overall the market is great, busy,” said John Pritzlaff with Thalhimer. He indicated that while business is slow for some big box retailers, small shop retail space is “doing well.”
“All the markets are in a “very active cycle right now,” said Peter Wray with Triangle Realtors in Staunton. He added that, nationally, consumer confidence is the highest it’s been in 17 years.
Wray also noted changes in the retail market as reflected in closings of big box stores. He attributes that in part to a failure of these companies to interact with customers via their phones, citing studies that show Millennials prefer physical stores but only if there is also a digital connection. He added that e-commerce, while very significant, is still less than 10 percent of retail sales.
Income producing properties are showing a good return now explained Bill Gentry, Principal Broker and owner of Jefferson Land & Realty in Madison County, adding that they are attracting a lot of interest. He is also happy about an uptick in residential development in Greene County, which, he said is starting to “take off” and will eventually lead to more commercial activity as people relocate there. “Good things are happening and I am optimistic every day,” Gentry said.
With no building going on, “the market continues to tighten up,” said Benton Downer with Downer & Associates.
One sector where the Charlottesville market has seen considerable tightening is warehouse and light industrial space, which Downer says is “very in demand.” There has never been a lot of this kind of property available, he added, but recent shifts in the market have reduced that inventory even more. He cited instances of warehouse space being converted to the sale of wine and beer products as well as the IX Building where over 60 percent of the project is leased by non-industrial type businesses.
Other agents are in agreement on this issue. Wray offered that the lack of well-located light industrial space “continues to be a problem,” in the Charlottesville market. He recently listed a 10,000 square foot property and had 20 people look at it in the first five days. On the other hand, he said that for businesses wanting to locate in the Valley, the supply of this kind of property is ample.
Robin Amato with R.E. III Commercial Properties described the light industrial/warehouse sector as “very active, both sales and leasing.” She added that commercial sales have increased as buyers find it easier to get loans so long as they have 15-20 percent to put down. Often in those instances it is cheaper to buy than to lease, she continued,
The grocery market is another active part of the local economy. Gentry cited groceries along with restaurants and services as examples of commercial properties that are “holding their own,” currently.
Wray referred to the grocery market as “amazing” noting all of the activity there. A big player, he said, is the German chain Lidl, the sixth largest retailer in Europe that is planning to open 100 stores in the mid-Atlantic over the next 18 months. These include stores in the Valley as well as two in Charlottesville.
While these are general trends, the following are highlights by geographic area.
Wray spoke glowingly of the Pantops area calling it one of the best growth locations in Central Virginia. His strip center there is all but leased. Mattress Firm, first with 4,000 square feet, was recently joined by Marco’s Pizza and T-Mobile.
Other agents also expressed excitement about this area. “We’ve seen an increase in activity in the Pantops area in the last two months,” Amato said.
Virginia Land Company’s project at 1415 Rolkin Court is a five-year old building that features a variety of medical offices and other businesses including a mortgage company. Today Broker and Property Manager, Steve Melton, is happy to report only one remaining vacancy there.
The Monscane Center—from a native American term describing an area occupied by a local Monacan tribe—located behind CarMax at the site of the old White House Motel is another Virginia Land Company project. Melton reports they are now “squared away with the County” on this development and ready to start grading the site. When complete the project will offer three buildings and 45,000 square feet of much-needed Pantops-area office space, available for either purchase or lease.
Other changes in the works for Pantops include the proposed move of Malloy Ford to the Better Living building on 29 North, and the possibility of a Lidl grocery store opening on Richmond Road.
Route 29 North
Activity in this busy corridor continues Wray said describing the intersection of Hydraulic and 29 North as “non-stop activity.”
Pritzlaff described “lots of activity” at the recently closed Kmart store that opened up many square feet of space. The vacancy is attracting attention from potential occupants as the owners look for the correct mix of new businesses there. “We are talking to a ton of people about the space,” he said.
In a big change for that area, Kroger announced it would not, after all, be making a move from its Hydraulic Road location to Seminole Square. This also means a change in plans for Hobby Lobby, the arts and craft store that had intended to renovate and occupy what would have been Kroger’s former location.
South of there a new project is under construction at the intersection of Barracks Road and Emmet Street, Pritzlaff said. The retail site will accommodate four to five tenants and at the moment they have at least three actively considering space there.
5th Street Station
5th Street Station continues to be a busy area, which is seeing “lots of attention and change,” Wray said. Warmly welcomed by south side residents who appreciate staying close to home when they shop for groceries and a host of other goods and services, the center is also bringing more residents to the area who previously had concerns about it being too far from their favorite stores.
The success of 5th Street Station is attracting other commercial activity to the area such as one of Wray’s projects located just north of the Holiday Inn. The site plan for the four usable acres is almost finalized he reports and will include three buildings with a front strip that features a drive-through for a national tenant. Stay tuned for updates as leases are finalized.
In other 5th Street Station news, Alamo Draft House theater with a full service restaurant is now open for business. Pritzlaff explained there is a push for new restaurants to locate nearby and that the center’s next phase will be more “entertainment focused.”
“Downtown is still the strongest area,” Downer said, adding it is still the place where businesses like to be. It has a “different vibe,” than other parts of town and continues to have a “strong degree of attraction.”
One big change there is the departure of Bank of America from its location on the Mall that opens up space for a steak house restaurant, Pritzlaff said, as well as Vault Virginia, a proposed shared office space for entrepreneurs and others developed by James Barton and based on the success of his Studio IX.
South of downtown, the IX Project is now all leased, Pritzlaff said. Once a busy textile factory, this development is a seventeen-acre, mixed-use business center with space for office, retail, restaurants, and arts and crafts featuring green spaces, free parking and community events.
Waynesboro and Staunton
Retail is strong in the Valley, May explained, and has been the “main part of his business for the last three years.” He attributes the area’s popularity to a variety of factors including a “very diversified economy with a stable agrarian base.” He added that manufacturing is very strong there featuring a work force known for being “reliable and highly productive with a strong work ethic.” All of this plus several universities, beautiful scenery and a convenient location make the area very attractive.
Other exciting commercial activity includes warehouses, which May described as “the biggest boom sector,” along with hotels and multi-family. While new office buildings are not going up at the moment, there has been absorption of existing space, also good news.
Wray also referenced hotels as an active sector citing the 26 acre project in Staunton called Staunton Crossing Center, featuring a Marriott and a Hilton. He is happy to report he is seeing as much construction activity as has been seen in the last 30 years and attributes this to an improving economy and the freeing up of land appropriate for development.
Waynesboro is also a happening place. Wray reports that the Ladd Elementary project on Route 340 across from Wal-Mart is back on track and looks to be a “grocery-anchored” retail center.
Commercial real estate is prospering in our area and the outlook is good for its continued success. Look forward to changes in the landscape as well as more and varied places to shop.
Celeste Smucker is a writer and blogger who lives near Charlottesville.