Those college graduates stuck at home with their parents as a result of the Great Recession are starting to move out and get their own places.
Meanwhile, mom and dad are downsizing to an apartment or a town home. A grocery store just went up down the street. General warehouses are being replaced by specialty industrial complexes that help with the dissemination of goods or information.
Experts who gave a snapshot of the real estate industry in the area during a Feb. 11 Greater Richmond Association for Commercial Real Estate conference at the Jefferson Hotel in Richmond were optimistic, whether they were reporting growth in their particular sectors or stagnation.
Craig Toalson, chief executive officer of the Home Building Association of Richmond, told the crowd that the housing market in Richmond is healthily recovering.
“Affordability is at record levels,” he added, noting that, in 2005, before the recession, only 16 percent of the houses for sale in the Richmond area were worth $500,000. That number has now dropped to 9 percent.
Nowadays, the largest portion of the housing market, about 37 percent, is homes worth less than $250,000. In 2005, only 16 percent of homes had that value.
“It’s really begun to be a buyer’s market,” Andrews said, noting that he has a friend who recently put a house on the market that was snapped up in a single day.
In the Richmond area, about 83.9 percent of families can afford to own homes, Toalson noted.
Baby boomers are downsizing and young folks are starting new households, and they’re all seeking walkable neighborhoods with lots to do nearby. That means lots of takers for units in multi-family housing developments.
“In 2012, the multi-family market almost doubled,” Toalson said.
When asked to address a big news item in Hanover and Chesterfield counties, cash proffers, Toalson pulled no punches.
“It’s no secret we’re very against cash proffers,” Toalson said of the fees charged by some localities to offset the infrastructure costs of new development. He added that developers were glad to see proffers dropped in Hanover County, and hopes to see the same happen in Chesterfield County.
“In Chesterfield, it’s up to $20,000 a house,” Toalson said. “It’s wrong, it’s not fair, and it’s just not sustainable.” He added that developers are forced to pass the cost on to the homebuyer. There are plenty of lots zoned and ready to go in areas with proffers still in place, but those proffers make them too expensive to build on, he said in response to a question about available land.
Residential growth both inside and outside of the city is supporting retail growth, said David Andrews of the Shopping Center Group, who pointed to Short Pump, the Hull Street Corridor and Chesterfield Towne Center as hotbeds of development.
“The Richmond retail market has moved from recession to recovery,” he told his colleagues, adding that the Greater Richmond area has just a 7.5 percent vacancy rate, as compared to about a 9 percent national average.
Expansion and redevelopment at the Southpark Mall, including a Bass Pro Shop, a new Ulta at Virginia Center Commons and the Kroger Marketplace at the former Cloverleaf Mall site were a few successes he pointed to as evidence of a retail recovery.
Andrews noted that a “big trend” in the Richmond area market seems to be grocery developments, with two new Krogers in recent years, while Martin’s has expanded many local stores to include fuel centers and Fresh Market has entered Carytown. Popular grocer Wegman’s plans to move to Charlottesville within two years and is looking at the Richmond area next, he added.
Fitness businesses also are on the rise, with gyms like ACAC, American Family Fitness, Fitness Evolution and Gold’s Gym popping up and staying strong region-wide, Andrews reported. Smaller fitness businesses, including private training centers and small yoga studios, are snapping up empty space in strip malls.
As for shopping malls, Andrews called Short Pump Town Center a “diamond,” noting that 92 percent of the space there is leased. Next in the standings was Chesterfield Towne Center, which Andrews noted is for sale, but is still a strong property.
Although no vacancy or lease rates were released for Regency Square Mall, Andrews said it is in receivership. Once the debt is purchased for the facility, it will be a spot to watch, he added.
Upcoming news-makers in the retail market include the new Stonehenge Village Center on the Midlothian Turnpike, a Kroger Marketplace at Staples Mill and a Walmart at Reynolds Crossing.
Andrews’ predictions for 2013 included casual restaurants filling more shopping center vacancies, national retailers outpacing local retailers, more growth in grocery store-anchored shopping centers and more erosion of some brick and mortar businesses by internet commerce.
“We’re on fire here,” said Andrew Little of John B. Levy & Co., who talked about investments.
Private investors are investing in real estate, with apartments up 20 percent and office, retail and industrial investments up 35 from 2011. He added that bank and commercial mortgage-backed security levels are down, $29 million and $28 million respectively.
“This buying wasn’t backed by debt,” Little said.
Commercial mortgage-backed security rates are down, so Little said he expects lots more investment activity in 2013.
“The lending environment is getting aggressive because rates are just so low,” Little said.
That is, except for the apartment market, he added. With the explosion in apartment development in 2012, lenders are likely to get skittish about lending for those kinds of projects due to fears of over-building.
The southern portion of the Greater Richmond area was singled out as the shining star for industrial development in 2012 by Greg Creswell of Colliers International.
A massive Amazon facility and a Capital One data center – seven of the 10 largest industrial buildings delivered to new users in 2012 -- were south of the James, Creswell pointed out.
Right now, the trend seems to be toward facilities tailor-made for the businesses that will inhabit them, not the sale of existing property for new uses.
“This area is no longer just about warehousing – we’re moving toward delivering goods around the world,” Creswell said, noting that, in addition to a new Amazon shipping facility, FedEx and the Vitamin Shoppe have chosen the Richmond area for major facilities.
He urged industrial real estate brokers to drop the “cautious” from “cautious optimism.”
With aggressive economic development authorities working hard across the region and the 460 corridor project underway, Creswell said he sees growth on the horizon.
“We’re the most central location on the East Coast with the least congestion,” Creswell said. “Don’t be cautiously optimistic in 2013, or you might see the best industrial deal of the year pass you by.”
Suzanne White, a vice president at Thalhimer, said jobless recovery rates really impacted leasing rates.
Office properties have a 10 percent vacancy rate, which is holding fairly steady. However, rents are dropping, and the absorption rate, or the amount of available property being snapped up over time, is dropping in the city. In the suburbs, it’s on the rise, likely due to Business, Professional and Operating License issues within city limits, White said. Hot properties outside the city included Innsbrook, Stony Point, Huguenot and the Midlothian corridor.
White cited election uncertainty, and fears over healthcare reform, debt ceiling debates and European financial collapse as reasons businesses may have decided to hold off on starting up, relocating or hiring more people.
In 2013, White said her wish list includes jobs, no new office construction, a stampede of new companies into Richmond, no more political excuses to hamper business growth and better deals between landlords and tenants.