Commercial real estate investors are trying to find a good good thing out of some “Bad Bad News,” as the lyrics from singer Leon Bridges’ recent hit suggests.

Worries that economic growth is slowing around the world has forced the Federal Reserve to put short-term interest rate increases on hold. It also has sent the 10-year Treasury yield to its lowest point since the first days of 2018.

The economic slowdown will have to be dealt with in the U.S., but for now commercial real estate investors are getting a boost with 5- and 10-year rates down, and now solidly below 4.5 percent for conservatively leveraged loans. These low rates continue to spur growth in real estate investing.

Richmond’s real estate market is benefiting from the flow of money into the sector.

Despite a wave of new development, particularly of apartment buildings, the market remains in balance and, in fact, rental rates continue to push upward.

Richmond registered a 4.8 percent increase for 1-bedroom apartments that now average $1,108 a month and a 3 percent increase for 2-bedroom units that now average $1,289 a month, according to the Apartment Guide’s 2019 rent report.

The report highlights apartment rent trends across the country and shows rental growth in the top 100 cities for 1- and 2-bedroom apartments.

Nationally, the average 1-bedroom apartment rent rose 4.2 percent to $1,140 in 2018, and 2-bedroom rents experienced the same increase and now average $1,354.

Richmond’s rent growth was not only above the national average, it was stronger than many other markets such as Charlotte and Raleigh-Durham, N.C.; and Nashville, Tenn.

Richmond also outperformed Virginia Beach, which interestingly experienced a decline in rentals despite having average 1- and 2-bedroom rents that are much lower than Richmond’s.

Norfolk, like Richmond, experienced strong growth, particularly for 2-bedroom apartments where rents now average $1,385 and grew 13.5 percent in 2018.

Strong rental growth is helping apartment projects in the Richmond area sell at record-setting prices per unit.

For instance, The Flats at West Broad Village sold in late February to an Atlanta-based company for $75.5 million. The sale of the 339-unit apartment community was one of the top multifamily transactions this year.

To the contrary, multi-tenant retail properties are selling at prices lower than where they were just a few years ago.

Recent sales of the Stony Point Shopping Center in South Richmond and Hancock Village in Chesterfield County are good examples.

Stony Point Shopping Center, which is off Huguenot Road near Forest Hill Avenue in the Bon Air community, has a 40,060-square-foot space that has been vacant since the Martin’s Food Markets grocery store there closed in July 2016.

The center was sold in 2015 for about $15 million.

In February, it was sold for about $10.425 million to Ziff Properties Inc., according to Richmond property records. That represents a loss of more than 30 percent.

Hancock Village, at the southwest corner of Winterpock and Hull Street roads in Chesterfield County, also is an interesting study.

Five sections of the shopping center totaling about 159,460 square feet were purchased in 2013 in one transaction for $27.5 million, according to county property records.

Those five parcels included buildings used by Dick’s Sporting Goods, Hobby Lobby and Five Below; the section that includes Starbucks and Crazy Greek; two buildings with smaller shops including Made in Asia, Sweet Frog and Jersey Mike’s; and the building with Longhorn Steakhouse. (The sale did not include the Walmart Supercenter or the free-standing emergency room operated by HCA Virginia.)

The same five sections were sold in two transactions in late December and in February amounting to $26.4 million, for a loss of more than $1 million after a six-year investment.

That’s not exactly a winning formula, but not poor on a relative basis.

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John B. Levy & Co. partner and investment banker Andrew Little can be reached at

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