By Celeste M. Smucker
It’s a great time to be in the commercial real estate business. Local agents are excited about the year they are having and anticipate continued growth in 2018, a prediction consistent with findings in a recent report from the National Association of REALTORS® about the national commercial market.
The report states that “commercial fundamentals are expected to maintain an upward trajectory,” thanks to factors—such as employment in business and professional services—that continue to boost demand for office space, a growing need for warehouse space due to e-commerce activity, and a shortage of residential properties that contributes to demand for multi-family housing at a time of “rising household formation.”
Local Economy Bolsters Commercial Sales
Both Charlottesville and the Shenandoah Valley rank high when it comes to recommendations for popular places to live and retire. These suggestions always tout our area’s unparalleled natural beauty along with a lifestyle that offers something for everyone, from Millennials to Boomers and from cultural enthusiasts to sports fans. Of course this means the area also draws employers who love the lifestyle and recognize the importance of locating in an area that excites their employees.
A robust commercial market also reflects strength in the residential market and while CAAR’s (Charlottesville Area Association of REALTORS®) recently released 2017 Third Quarter Market Report showed a year-over-year 2.4 percent decrease in home sales, pending sales were up 6.7 percent for single family detached homes and 15.9 percent for single family attached homes.
Other signs of an active residential market include a 13 plus percent decrease in inventory of both attached and detached single family homes, higher median home prices and fewer days on the market. Sales continue to be strong in both Waynesboro and Staunton as well where insufficient inventory continues to be vexing for agents as it is elsewhere in our region.
The stability of our commercial markets is also enhanced by the presence of colleges and universities such as UVA, the Medical Center, Mary Baldwin University in Staunton and James Madison and Eastern Mennonite Universities in Harrisonburg that bring people and their demand for housing to our area regardless of the economy.
Commercial Market Continues to Expand
“The commercial market is as strong as it has ever been,” said Nathan Wickline, leasing and marketing director at Charlottesville’s BMC. He added that the market struggles to keep up with demand from “new businesses looking at Charlottesville and existing businesses that are looking to expand their space.” He described the Charlottesville-Albemarle commercial market as “full steam ahead.”
Peter Wray with Triangle REALTORS® in Staunton explained that the commercial markets are in a “very active cycle right now,” noting with enthusiasm that consumer confidence is the highest it’s been in 17 years.
Lisa Jones, Broker and President of Pavilion Properties, and developer of Peter Jefferson Place in Pantops, described commercial demand as “strong,” adding that with her growing list of prospects she anticipates Peter Jefferson Place will soon be 100 percent leased.
Generally the market has been “very strong and very healthy,” said Bill Howard, Broker and President of Real Estate III, Commercial Properties, indicating that much of the previously vacant office space is now leased.
Woodard Properties’ Commercial Property Manager Tanashia Washington described the commercial market as “thriving, with interest from entrepreneurs, new businesses and existing businesses looking to expand and improve location.”
Keith May, Broker and owner of Cottonwood Commercial and Kline May Realty in the Valley, described the years 2008 and 2009 as the worst and is happy today’s market continues to turn around and grow at a sustainable pace.
Office Space
While in recent years the market in office space has not been the best, much of what has been vacant is now leased, Howard said. He described the downtown office space market as “crazy,” and said the county market has recovered.
A good example is Pantops whose popularity is due to a number of factors including residential growth and easy access to the interstate and to Martha Jefferson Hospital for businesses associated with the health care industry.
Jones offers much needed Class A office space at her Peter Jefferson project that comes with full service amenities such as janitorial service and utilities—benefits that are especially attractive to national companies with multiple locations. While she works with many medical offices and companies in related fields, fully 75 percent of her tenants are non-medical.
In spite of shrinking inventory there is not a lot of building going on, and with limited office space coming online, “the market continues to tighten up,” said Benton Downer with Downer & Associates.
One example of a building project that is moving forward is Virginia Land Company’s Monscane Center located behind CarMax. Broker Steve Melton explained that when complete, the center will offer three buildings and 45,000 square feet of much-needed Pantops-area office space, available for either purchase or lease.
A big plus for Pantops locations is free parking that appeals to customers and employees alike. Jones points out that even downtown companies that don’t pay for employee parking may incur costs in the form of turnover as workers choose to go elsewhere to avoid the expense and frustration associated with parking near where they work.
Another area with a lot going on and where free parking is a big plus is Preston Avenue, which Wickline reports “has been particularly hot because it has the proximity to downtown without the parking nightmare, which appears to only be getting worse.”
Restaurants, Grocery Stores and Coffee
Bill Gentry, Principal Broker and owner of Jefferson Land & Realty in Madison County, is pleased with commercial market activity and described food related businesses such as restaurants, and the grocery market as “holding their own.”
Wray called recent activity in the grocery market “amazing,” citing as an example the intention of the German chain Lidl—the sixth largest retailer in Europe—to open 100 new stores in the mid-Atlantic region in the very near future calling it the “biggest rollout of any retailer in 15-16 years.” Currently the closest Lidl stores are in Richmond and Culpeper, but plans to build in both Charlottesville and the Valley are in the works.
Aldi, a Lidl competitor also from Germany with a store in Waynesboro, is expanding as well, May said, with plans for a new location in Harrisonburg. A Staunton store is also reportedly in the works and will be located in the new Staunton Frontier Center where it will be joined by Chick-fil-A.
Charlottesville area residents from as far south as Scottsville and as far east as Zion Crossroads enjoy the convenience of shopping at Wegmans and other 5th Street Station stores, restaurants and entertainment venues. “Wegmans added a lot to that area of town,” Howard said. And soon shoppers and others can enjoy The Yard, a mixed-use space near the Alamo Drafthouse Cinema, that will feature five to six restaurants, the Augusta Free Press reports.
And there is more good news. 5th Street Station shoppers can also look forward to ordering their daily lattes at a new Starbucks set to open in a strip center located just north of the Holiday Inn, Howard said.
Warehouse and Light Industrial
The Charlottesville market has long been short on warehouse and light industrial space, which Downer says is “very in demand.” He added that recent interest in space to sell wine and beer products, and the leasing of much of the IX Building to non-industrial type businesses, has reduced the inventory even more.
There are, however, a few options currently on the market, Howard said, citing the Eck Lighting Building on Rose Hill Drive with 25,000 square feet of space that just went on the market and the Comdial Building next to Costco on Seminole Trail that has 500,000 square feet of space and is now home to Reason Beer with its recently opened tasting room.
For businesses willing and able to relocate, the supply of warehouse space is ample in the Valley. May called it “the biggest boom sector” there along with hotels and multi-family.
Retail and Mixed Use
Retail is undergoing major changes with the closing of big box stores such as Kmart at Hydraulic and 29. E-commerce is partly to blame but Wray explained it still comprises less than 10 percent of retail sales.
On the other hand, “small shop space retail is doing well,” said Thalhimer’s John Pritzlaff. The transformation from big box store to smaller shops may soon be evident at the former Kmart and Gold’s Gym location as it is widely reported that Riverbend Development will remodel and upgrade the building after a partial demolition. When completed it is expected to feature six to eight new stores adding to the options at that busy intersection.
Another popular area, and one with mixed-use features, is West Main that Pritzlaff says is in process of transitioning to retail.
The area is also, Howard points out, one that is seeing lots of hotel and student housing activity. But look for these projects to also incorporate retail as most have plans to reserve space on the first floor for that purpose, Howard continued.
Another example of mixed-use development is Woodard Properties’ new project on Allied Street behind McIntire Plaza. Washington reports that: “We will have 36 units of residential, and up to 32,000 [square feet] of Commercial space at The Circle. Currently two-thirds of the Residential apartments are now occupied, [and] we are in search of the right business to move into the 5,000 square feet of commercial space.” She added that more square footage in what was the Old Sears Warehouse Building “will be ready for occupancy late November.”
Part of the allure of these Woodard projects is their proximity to downtown and to all that McIntire Plaza—home to Circa, C-ville Coffee, and The Habitat Store—has to offer. Washington emphasized McIntire Plaza’s prime location adding that it is affordable and attracts what she calls “cool, unique businesses.”
It also accommodates a wide range of enterprises from those needing a small office space like a therapist or tutor moving into their first commercial space after working from home, to, at the other extreme, businesses needing a large warehouse or retail space.
Retail is also going well in the Valley, May said, and has been a mainstay of his business for the last three years. He attributes the area’s popularity to factors such as a “very diversified economy with a stable agrarian base.” Manufacturing is also very strong in the Valley that is known for featuring a work force that is “reliable and highly productive with a strong work ethic.”
Commercial real estate continues to prosper and expand in our area and the outlook is good for its continued success. Look forward to changes in the landscape bringing more and varied places to work, as well as to shop, eat, live and enjoy a night out.
Celeste Smucker is a writer and blogger who lives near Charlottesville.