By Celeste M. Smucker–
Commercial real estate is still a hot commodity in both Charlottesville and the Shenandoah Valley. Agents report the phone is ringing and they are cautiously optimistic that the upward trend will continue.
A recent article in Forbes magazine expressed similar confidence in the national market stating: “the industry is expected to continue riding the waves of the strong economy to steady growth, albeit at a more moderate pace than years past.”
Forbes added that industrial real estate is a “star performer,” thanks to high occupancy rates and rising rents while job growth promotes continuing demand for office space.
In the multi-family sector the proliferation of new apartment buildings may, over time, force landlords to lower rents. On the other hand, nationwide inventory shortages and rising prices in residential real estate may bolster demand for apartments and keep rents high.
While all of these elements are at play in our local market, we are fortunate to have additional factors that consistently support commercial market expansion.
Strong Economy Plus Gorgeous Scenery Equals Success
A big driver of commercial expansion is robust residential sales.
In Charlottesville and surrounding counties, UVA and the Medical Center attract multiple home buyers and are a continuing source of residential market stability. Similarly, Mary Baldwin University in Staunton and James Madison and Eastern Mennonite Universities in Harrisonburg insure reliable demand for homes in the Valley.
Gorgeous scenery on both sides of Afton Mountain brings newcomers of all ages while our relatively mild climate with four seasons appeals to retirees from the North who sometimes arrive by way of points south. After a few years, when they miss the fall leaves and blooming spring plants they relocate to our area where they can have it all.
Other retirees are alums of local Universities or come to be near children and grandchildren, while some arrive, curious about why Charlottesville and Staunton show up on so many “The Best ” lists.
Employers appreciate our area because it is attractive to the high caliber people they want to recruit. These include employees in Charlottesville’s high tech sector and those drawn by the manufacturing that is a powerful force at work in the Valley.
CAAR’s (Charlottesville Area Association of REALTORS®) recently released 2018 2nd Quarter Market Report offers further proof of an active residential market. It shows a 7.5 percent increase in home sales compared to the second quarter of 2017 including a 23.6 percent year-over-year increase in the sale of attached homes, growing in popularity thanks to the rising price of building lots.
Agents also report shortages in the Valley housing market. On the positive side, scarce inventory pushes up prices, which is good news for sellers. Rising prices may also stimulate subdivision development explained Keith May with Cottonwood Commercial in Harrisonburg, which will give buyers many more options to choose from.
Commercial Expansion Continues
“Overall the market is still good,” says Benton Downer, Owner and Principal Broker at Downer and Associates. He voiced concern about recent interest rate jumps that have caused “a pause” in leasing activity, but added that the investor side of the market continues to boom.
A big issue is that there is “not a lot of product,” Downer said expressing concerns about inventory shortages throughout the commercial market.
John Pritzlaff, Vice President at Cushman & Wakefield, Thalhimer described the market as “strong,” adding that things are “very busy.” He cited activity on West Main, Preston Avenue and Barracks Road as some of many current commercial market hot spots along with Stonefield to the north and Pantops to the east. He expressed concern about inventory shortages explaining they push up rents and impact the leasing side of the market.
Bill Howard with Real Estate III Commercial Properties said the market is doing “real well,” adding that they are receiving “an amazing number of calls,” about all kinds of property from close-in to as far away as Zion Crossroads and Greene County. He is especially happy about the 300,000 square feet of property currently being developed downtown and expected to be available in the next several years.
Millennials working for high tech companies are a big part of what energizes the demand for downtown space Howard said. Employers respond by adding “pizzazz” to their offices, making them light with lots of open space. Restaurants and play areas may also be part of the package, he continued.
“Charlottesville as well as Staunton-Waynsboro all continue to be in a very active cycle,” said Peter Wray with Triangle Realtors in Staunton. He still has “lots of investors calling,” adding there is plenty of competition, especially for prime properties and lots.
Wray recalled another active time back in 2002-2006, prior to the slow down. However, he believes today’s activity “exceeds even that. Every category [of property] is doing very well.” he said.
It’s not just close-in locations that are booming. Matthew Woodson with Roy Wheeler Realty Co.- Greene is excited about all the inquiries—”more than in the previous five years”—about commercial property that are coming into his office for both retail and industrial space. He explained that when businesses locate in Greene County there is “real added value” for residents giving them the option to live, work and shop in the same area.
He sees commercial expansion as a trend that will continue stating: “the best days are ahead of us.”
Mixed-Use Developments
New developments combining commercial and residential projects on one site are increasingly popular throughout our region thanks to a combination of rising land prices and zoning requirements that encourage a mix of uses in high density areas.
These developments offer a nice combination of convenience for residents, and a built-in market for the businesses that locate there. Many are also close-in to Downtown making all of its popular amenities readily available.
Dairy Central, Stony Point Design Build’s redevelopment of the former Monticello Dairy Building at the intersection of 10th, Grady and Preston, is a good example. The rapidly growing Preston Avenue area is known for its downtown “vibe” and plenty of free parking. Groundbreaking for this ambitious project is expected to be the end of August, Pritzlaff said.
The new development includes 45 thousand square feet of retail space and 60 thousand square feet of Class A office space. A recently approved special use permit allows for 251 residential apartments housed in two five-story buildings, 20 of which will be designated for tenants making less than 80 percent of the area’s median income, according to The Daily Progress.
The project also features “Virginia’s first food hall with unique local and regional offerings” Pritzlaff said. Negotiations are underway for tenants expected to include “national retailers and a craft brewery.”
Pantops on the east side of town is another area experiencing both residential and commercial expansion. Martha Jefferson Hospital (that attracts plenty of employees plus other businesses associated with health care), the closeness of Downtown, plenty of free parking and easy access to the Interstate all make Pantops a desirable spot for continuing growth including mixed-use development.
One example, Riverside Village on Route 20 – Stony Point Road, features single family homes, villas, townhomes and condominiums.
Earlier this year the developer, Stony Point Design/Build, broke ground on The Shops at Riverside, where residents will soon be able to enjoy fun and convenient retail services such as a gym and a pizza sports bar, Pritzlaff said. Folks who work nearby or just want to enjoy the Pantops lifestyle, but aren’t ready to buy a home, can rent one of the luxury apartments going in above the shops.
Still another close-in development is The Circle, Woodard Properties’ project on Allied Street behind McIntire Plaza. Commercial Property Manager Tanashia Washington reports that: “We will have 36 units of residential, and up to 32,000 [square feet] of Commercial space at The Circle.”
Apartment residents can enjoy proximity to downtown as well as all that McIntire Plaza—home to Circa, C-ville Coffee, Great Harvest Bread Company and The Habitat Store—has to offer. Washington emphasized McIntire Plaza is affordable and attracts what she calls “cool, unique businesses.” It also accommodates a wide range of enterprises from a therapist or tutor in a small office to businesses requiring a large warehouse or retail space.
Warehouse Space Scarce
A “serious shortage of warehouse space” is a big problem in the Charlottesville market, Howard said. Downer agreed calling it “absolutely a top priority.”
The high price of land is a big cause of this dilemma as are the need for special requirements such as space that can accommodate tractor trailers making deliveries. Together these factors drive up rents beyond what many businesses needing warehouse space are willing to pay.
Howard referenced the old Comdial Building (which is nearly leased) as an example of warehouse space that is being adapted for a variety of different and interesting uses.
A popular tenant is Reason Beer started by three friends who pooled their expertise to create a brewery and tasting room success story. Recently the company was listed as one of the 50 best new breweries in 2017 by BeerAdvocate, a craft brewer’s publication.
Another enterprise started by three friends, Custom Ink, is also housed at the Comdial Building. Started in 2000, it is best known for its custom T-shirts. However, it also produces a variety of other items from towels to holiday ornaments, hats and bumper stickers. Today it employs over 100 people, Howard said.
Albemarle County Schools is another Comdial tenant. The new center, called Albemarle Tech: The Center for Creativity and Invention, will be a place for high school students to work with technology and business professionals as interns.
For businesses that are able to relocate to the Valley, there is ample warehouse space available. Savings are substantial, nearly 50 percent of what you could expect to pay in Charlottesville, Downer said.
Retail Still Active
Big box operations may be struggling, but “small shop space retail is doing well,” Pritzlaff said. He described “good interest” with deals about to close on space available at Hillsdale Place the new upscale development on the site of the former K-Mart building.
In Pantops, you can now enjoy breakfast all day at the new Tropical Smoothie Cafe that just joined Marcos Pizza and Mattress Firm on Olympia Drive off Route 250, Wray said.
If your drive takes you through Greene County you will soon be able to stop at the market and deli store in Ruckersville that once housed a Burger King. The new store, similar to one Tiger Fuels operates on Ivy Road, will also feature fuel and a car wash.
Retail is hot in the Valley, May said, stating it has been the mainstay of his business for the last several years.
Wray agrees citing the Frontier Center in Staunton where the Aldi Grocery chain has just opened a new store joining Bojangles’, Chick-fil-A and McDonald’s.
Impressive growth in commercial real estate of all kinds continues both sides of Afton Mountain. Agents are optimistic about future expansion, which means more and varied places to work, shop, eat, live and enjoy a night out on the town.
Celeste Smucker is a writer and blogger who lives near Charlottesville.