Nationally there is good news for commercial real estate, and local agents express similar optimism about our local market.
A commercial market report from the National Association of REALTORS® (NAR) based on national survey data indicated “an upbeat pace of sales during the second quarter.” They also reported a “6.4 percent quarterly increase, following a 3.8 percent rise during the previous quarter. Sales of commercial properties rose 9.1 percent on a year-over-year basis.”
Lawrence Yun, Chief Economist for the NAR, cited a stronger labor market and increases in housing formation as underlying trends supporting this growth and continued expansion of the commercial market. Nationally the demand for apartments continues, backed by a growing demand for housing from young adults, and the multi-family market, with its very low vacancy rates, leads the commercial recovery.
Charlottesville agents were similarly optimistic about the market here and about the strength of the multi-family sector, although they expressed some concern it could soon be over-built. Geographically, Downtown and Pantops continue to be strong markets, with evidence of growth as well on the 29N corridor and beyond.
Continuing low interest rates also contribute to the improving market, explained Benton Downer with Downer and Associates. In contrast to the days of the recent down turn, today’s market is in what he called “more of a growth mode” as evidenced by the number of businesses relocating, opening second or better locations or expanding at an existing location.
The Local Commercial Market
“The market is improving over last year,” said Hock Hockensmith with Roy Wheeler Realty Co. “There is less vacancy than there was a year ago. Multi-family is still the leader,” he said, and “there have been some massive projects to keep up with the demand.”
Ed Brownfield, with Brownfield Realty Advisors, also cited the apartment market as “a big player in the commercial market recovery.” Of course, in our area there is always demand for housing from the student population, which Brownfield says has attracted “some big players from out of town.”
“The commercial market in Charlottesville is picking up,” said Bill Gentry with Jefferson Land and Realty in Madison County. However, recently he has experienced what he described as “nibbles” from people interested in property in Greene County, attracted by the lower price per acre than was available six years ago.
“The market has started to show a lot of movement in the last couple of weeks and the phone is ringing,” said Sara Schroeder, a partner in Real Estate III Commercial Properties. Some of her calls have been about office space, but two last week were about retail space, definitely cause for optimism about a market sector that has been somewhat slow. Schroeder agreed that while apartment buildings are in demand, she is also seeing small (defined as less than 5,000 square feet) office sales. In terms of geography she said, “Downtown and Pantops are where it’s at!”
The Market for Office Space
Yun predicts gradually improving demand for office space nationally, leading to a modest decrease in vacancy rates in this important sector.
In our area, the strength of this market is second to that of multi-family as many business owners take advantage of favorable prices and interest rates to find more suitable office space for new and expanding businesses. Examples of companies currently relocating reflect a wide range of businesses including non-profits.
Steve Melton, Property Manager for Virginia Land Company, facilitates the leasing of his company’s office space. He is excited about the activity in their new building on Pantops where he has leased three spaces in the last several months. He also sold one of his units to a physician who will be relocating there in late September or October. In addition, Melton has other prospects waiting in the wings. Two are looking to lease in his Pantops building soon and he was recently contacted by a third, a physician who is interested in possibly leasing or buying there as well.
Virginia Land also has property on 29N near Hollymead. At the same time that he expressed concern this area has been a little slow, Melton described an existing tenant who not long ago expanded his space by leasing the office next door. Meanwhile, the same tenant is thinking about leasing the entire building in the near future. Other Virginia Land tenants recently located to that complex include a Montessori school that Melton says is “doing very well,” and a medical company that delivers hospital supplies to patients at home.
Melton has also leased space in two of his other buildings to area non-profits, clients of local commercial agents. One of these is Keys Academy, a private school that serves a special education population, and is now located in Culpeper. The school will be moving into space on Fontaine. SARA, the Sexual Assault Resource Agency, another non-profit, has found a new home on Greenbrier. SARA offers free services to victims of sexual assault in Charlottesville and the surrounding counties of Albemarle, Louisa, Nelson, Fluvanna and Greene.
Another non-profit that just completed a move is the Northside Library, which relocated to West Rio Road next door to the Daily Progress. After years of renting space for the library at Albemarle Square, the county’s Board of Supervisors voted to purchase and renovate the Rio Road property, formerly home to a building supply company. The new library is light and bright and offers an array of books and informational programs as well as computer access, book groups, crafts, a job seekers support group, a gallery area where local artists can display their works, and much more in a space that is twice the size of its former home.
Another popular area for new and relocated businesses is the neighborhood around the former Martha Jefferson Hospital, now the CFA Institute. “The surrounding properties are coming back,” Hockensmith said. He explained that this area is attractive to start up businesses, some, but not all, of which are medical care related. Others are professional companies that are software and computer oriented.
While retail businesses need to be near the population they serve, office based companies, especially those that serve markets beyond their local area, may choose to locate according to the needs and interests of owners and employees rather than customers. Bob Kahn, with Bob Kahn Realty & Investment, explained that an office staffed with younger employees might choose to be near Downtown in walking distance to the excitement of the mall and all that it has to offer. On the other hand, more mature employees may prefer working further out, away from the congestion, and where parking is not an issue.
Either group may initially choose Charlottesville over other areas because of the strong economy, thanks in large part to UVA and the number of other large employers like GE, NGIC and State Farm already established here. Other strong points include our highly educated workforce and a quality of life that includes natural beauty, a wealth of cultural activities, and a location convenient to DC, Richmond and other east coast centers.
New Life for Retail
While retail is often described as the slowest market to recover, nevertheless there is movement there as well. For example “the smaller specialized shops in the Downtown Mall are very busy,” Schroeder said. Recently the boutiques were joined by The Pie Chest on Fourth Street NE, where everything is made from scratch and demand for its sweet, savory, gluten free, vegan and breakfast hand pies is booming.
Anyone who shops at the national chain, Family Dollar, Neighborhood Discount & Dollar Store, may recall that it often shares a strip center with anchor tenant Food Lion grocery store. Gentry explained that to locate in these strips the Family Dollar stores had to agree to limit their sale of groceries to avoid competition with Food Lion. Now many Family Dollars are moving to stand alone locations to avoid this conflict and open the door to more grocery sales. Recently Gentry was the agent in the sale of just such a location to a Family Dollar in Madison County. Similarly the Family Dollar in Lovingston, in Nelson County, moved out of its long time location in the Food Lion strip center on Route 29 and into a standalone location across the street.
The popularity of The Shops at Stonefield, with its six restaurants, Regal Cinema, Trader Joes, Face Value Salon, the Hyatt Place Charlottesville hotel and a growing list of high end shops of all kinds is clear evidence that retail is alive and well here, and the now open Costco can only draw more crowds to this area.
Across the street at Seminole Square, Krogers plans to move into an expanded and renovated spot formerly occupied by Giant. When it opens for business, the new Krogers will be the largest one in the region.
As the 2016 opening date approaches, there is also a lot of excitement about the start of construction at 5th Street Station featuring Wegmans, a well respected, family owned grocery chain out of New York State. Wegmans, known for giving back to the community, has also won many awards over the years, including being named #1 in a list of 100 firms with the best corporate reputation according to a national Harris Poll. This year in June, Wegmans was one of two retailers nationwide to receive the EPA’s Safer Choice Partner Award for its introduction of a safer line of cleaning products to its stores.
A long list of other national retailers will join Wegmans at 5th Street Station including such well-known names as Field and Stream, Dick’s Sporting Goods, Mattress Warehouse, Panera Bread, PetSmart, Jersey Mikes Subs and Sprint, with more leases under negotiation
People who live and work on Pantops will soon be able to enjoy one of Charlottesville’s newest fast food restaurants, Chik-Fil-A, which is now under construction in the location that used to be Aunt Sarahs. Melton worked with the owners as part of their process of obtaining county approval and gave them high marks saying, “They are a nice company to deal with.”
Residential Market Supports Commercial Growth
An important consideration in where a company chooses to locate is the strength of the local residential real estate market. CAAR recently reported an impressive 12 percent increase in sales compared to second quarter last year with half of the homes selling in 33 days or less. This kind of result bodes well for continued growth in the commercial market.
One last note, when visitors come for business, pleasure, or to look for a new home, they will find lots of hotels to choose from including Graduate Charlottesville, now open, and the Marriott Residence Inn, still under construction on West Main.
By Celeste M. Smucker, PhD
Celeste Smucker is a writer, blogger and author who lives near Charlottesville.