Charlottesville’s Commercial Real Estate Market Continues to Impress

Charlottesville’s Commercial Real Estate Market Continues to Impress

The commercial real estate market in our local area continues to improve as it does nationally. The annual report from Deloitte and the National Association of Realtors on the 2016 national commercial real estate market outlook states that expectations for growth reflect “steady job gains and stable leasing demand,” trends the authors believe will support continued expansion.

In our market both commercial sales and leasing are strong and we are seeing decreased vacancies in the retail sector. The industrial-warehouse sector is also strong and prospective tenants may face inventory shortages as they look for just the right property.

The energy behind commercial expansion starts with an active residential market and fortunately the news continues to be good there as well. The recently released CAAR Second Quarter Market Report showed a remarkable 17.2 percent increase in the number of homes sold compared to 2015, and the highest number of sales in any quarter since 2006. In addition, while listing activity was up 6.6 percent, inventory was actually down 10.8 percent compared to the second quarter of 2015 thanks to many more buyers actively looking to purchase a home. All of that bodes well for the continued growth of Charlottesville’s commercial market.

Commercial Market Continues to Expand
“The market is positive right now,” said Bill Howard, President and Broker at Real Estate III Commercial Properties, describing the agents in his office as “very busy.” He added that there is “definitely an upswing in office rentals” leaving many fewer vacancies, especially downtown.
Other sectors of the commercial market are also doing well Howard said stating that “there are not a lot of vacancies in retail centers” and that we are experiencing a “shortage in industrial and warehouse space.”

“We’re definitely seeing an increase,” said Robin Amato with Real Estate III Commercial Properties who described the market as “active,” with both tenants and buyers in a positive mode. The amount of leasing activity in both office and retail space has increased making it difficult to find the properties she needs for her clients.

She added that for a time after the economic slowdown landlords had to reduce their rates in order to get spaces leased. Now, she said, with the success of new centers like 5th Street Station and Stonefield, older, established centers are beginning to raise their rates.

“Sales of commercial properties have also increased over last year,” Amato said adding that mortgage companies are working with buyers to help make it all happen.

Much of the recent activity comes from local businesses choosing to expand their leases, or who are moving having sold their previous location. While a fair amount of the business is from out of town, Amato estimates that as much as seventy-five percent is local.

Bob Kahn with Bob Kahn Realty and Investments agreed with this assessment stating that in his experience the majority of new leases and sales in our commercial market represent growth that is happening “organically” within Charlottesville. “Many are entrepreneurs involved in cutting edge technology based industries, and many have roots in our area either by birth or because they were once students at UVA and Darden.” These entrepreneurs have a desire to “get back to Charlottesville to both live and work here,” Kahn continued.

Commercial Market Activity is Area-Wide
While downtown continues to be a hot spot, it is no longer the only active market in town.

Our local market is “unique,” said Benton Downer with Downer and Associates as it doesn’t fluctuate as much as some others. He described the downtown market as strong with a lot of appeal to major-mid to large-size companies. Part of the attraction is that employees can walk on the mall during breaks, enjoy decent food when they go to lunch and partake in the many entertainment venues available there after hours. Downtown has a “good vibe,” he said and “is a unique experience for our community.”

Kahn described downtown as the preferred location for many IT folks and technology- based companies. “All of these companies are doing well and ever in need of more space,” he said. These kinds of tech companies attract a younger group of employees, many of them Millennials, who especially appreciate the downtown location.

Preston Avenue is another active area where Amato described “two great projects.” One is the building at Preston and 10th, home to Shenandoah Joes and the former home of the Charlottesville Albemarle SPCA Rummage Store that relocated to the Seminole Square Shopping Center at the end of last year. The new owners of this Preston Avenue project plan renovations that include doubling Shenandoah Joe’s current footprint and adding additional parking behind the building.

Down the street at 608 Preston Avenue, Mark Green and Tom Hickman are putting final touches on the King Lumber Building, a structure originally built in 1909 that has been extensively renovated and today houses four businesses including OpenSource Connections, a software development company, Balance Chiropractic, Random Row Brewing and Express Employment Professionals. Of the original 10,000 square feet of available space for lease, only 2,000 remain, Amato said.

The 29 North corridor continues to be active in spite of recent construction activities. “There are not a lot of vacancies in retail centers,” Howard said. He referenced new tenants at Stonefield, and Krogers’ expected move from their long-time location at the bypass and Route 29 to the Seminole Square location previously occupied by Giant and Ashley’s Furniture.

Office leasing is also going well on 29 North. Steve Melton, Property Manager with Virginia Land Co, said that his company’s Hollymead offices are now fully leased.

Further north Bill Gentry with Jefferson Land and Realty suggested there may be national tenants looking at space in Madison as well as increased interest from locals wanting to expand existing businesses or open a new one. Recently he facilitated Yoder’s Country Market’s move to an 18,000 square foot building in Madison on Seminole Trail 25 miles north of Charlottesville, and found a new tenant, MESA, Madison Emergency Services Association, to lease the 8,000 square foot building the Yoders left behind in the town of Madison.

South of town anticipation grows about the opening of 5th Street Station with its anchor tenant, Wegmans, an upscale family-owned grocery store based in Rochester, New York. Wegmans is known for its quality and reasonable prices and for giving back to the community. A recent corporate-level press release announced that in the winter months of 2016 customers in 27 of their stores raised  over a million dollars for local food banks, a 6 percent increase over what was raised the previous year.

Wegmans is now training 350 employees for part time positions in preparation for the store opening now scheduled for November 6, 2016. The store will employ 550 people of which 500 are local.

While there are a few remaining spaces at 5th Street Station, most are leased. “It’s amazing how well it’s coming along,” Amato said. In addition to Field & Stream, PetSmart, Panera Bread and Dick’s Sporting Goods, Wegman’s will also be joined by Haverty’s Furniture and Planet Fitness along with A.C. Moore, an arts and crafts retailer, Timberwood Tap House, Dollar Tree, Mattress Warehouse and Krispy Kreme, to name a few. Shoppers can also see a movie at the new Alamo Cinema, take care of banking at one of two banks, buy cell service, get a haircut or manicure and even enjoy an appointment at Select Physical Therapy.

“5th Street Station will be a game changer for Charlottesville,” said Ed Brownfield with Brownfield Realty Associates. “Wegmans will make a big difference for the south part of Charlottesville,” he added since there is nothing comparable out there.
Downer said that 5th Street Market will “transform our community,” and predicts that people from the east end of town who have been driving to Zion Crossroads to avoid the traffic on 29 North, will be willing to drive to 5th Street Station when it opens due to the ease of access off the interstate.

5th Street Station shoppers who love wine can take advantage of another south side addition. Wineworks Extended, an extension of Michael Shaps Wineworks, is located just across the street from the east entrance into 5th Street Station on Avon Extended, Howard said. Wine will be bottled and stored in this 16,000 square foot former warehouse which will also feature a tasting room and event space. In addition to bottles of wine, Wineworks patrons can take home growlers of wine that are filled and sold in the tasting room.

Pantops on the east end of town continues to be a popular spot with low vacancy. The location is enhanced by its easy access to the interstate making it convenient for companies with multiple locations and personnel who frequently travel in and out of Charlottesville.

While there is not a lot of space for new construction, Melton reports that Virginia Land Company has submitted a final site plan for county approval for a project on the site of the former White House Motel behind Carmax. This 45,000 square foot office space called Monscane Center will consist of three buildings with office condos for rent or for sale. Built on a slope, the one story condos will have walk out access to parking on both levels. With no common spaces, stairways or elevators the offices are more economical to maintain, Melton explained. He added that this project is “moving along well.”

Another Virginia Land project on Rolkin Road is 75 percent leased, Melton said. Thanks to the popularity of the area, the building is getting leased up by word of mouth only, with no advertising required. Tenants include Atlantic Coast Mortgage and, most recently, a medical services company called Intravene Infusion for which, Melton said, they did “a nice build out.” He explained that the nearness of Martha Jefferson Hospital plus easy access from the interstate makes this area especially appealing to medical companies who also look for ground floor locations to save patients from having to navigate stairs or elevators.

Technology and Venture Capital Boost Commercial Growth
Tech companies make an important contribution to the growth in our local economy and commercial real estate market thanks in part to increasing amounts of venture capital flowing into our area. An article at Newsplex stated that “Charlottesville is the fastest-growing venture capital ecosystem in the United States.”

They added that funding of local companies grew to an impressive $27.7 million from just $250,000 between 2010 and 2015 and described UVA as “a driving force behind the rapid growth, with six of the nine leading companies that were primary investment recipients having worked directly with the UVA Licensing and Ventures Group.”

The outlook for Charlottesville’s commercial market continues to be positive. There is lots of good news including low vacancy rates in most parts of town, a strong residential market, and new projects in the works. The future does indeed look bright.

Celeste Smucker is a writer, blogger and author who lives near Charlottesville.

Posted In:     Real Estate

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