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Building opportunity: Kuttner’s Second Street project morphs along the way

A year ago, developer Oliver Kuttner announced plans for a three-story building on the Glass Building site at the corner of Second Street SW and Garrett Street. The structure, the first part of a multi-phase project he has planned for the site, is now well underway with several commercial tenants already signed on to occupy the light-filled, high-ceilinged spaces. But anyone familiar with Kuttner’s previous projects won’t be surprised to hear the design and plans for the structure have changed along the way.

“The building morphed when I’d see opportunity,” said Kuttner on a recent morning tour of the building that a friend’s son has dubbed The Treehouse. Instead of three small apartments of roughly 500 square feet each on the top floor, for instance, there will be two to allow one of the commercial suites to be larger at a tenant’s request, an adjustment that also added a fourth level. And when the structural steel arrived on site months ago, Kuttner realized that some of the beams had been cut to the wrong length, a potentially expensive disaster.

“Most people would sue the people that messed up,” he said. “I decided it was an opportunity sent my way to think about the building.”

Because the ceilings in the building are already so high— more than 20 feet in some places—Kuttner could play with the levels. He simply created a mezzanine and worked with the beams he’d been sent.

“I spent an extra $30,000 on welding, but I had a lot of fun with it,” he said.

That’s Kuttner for you.

The guy who led a team of auto engineers to a $5 million victory in the 2010 Progressive Insurance Automotive X Prize doesn’t really like rules, a trait that’s put him at odds with city planners in the past. He famously wrangled with city hall over the development of The Terraces on Water Street more than a decade ago, but the location of this new project south of the tracks downtown means he’s free of oversight by the Board of Architectural Review, and he said this time around, the process has been relatively smooth.

“The city has been very nice to deal with and very positively interacting and working toward a better product,” he said.

The building has attracted a slate of high-tech tenants who appreciate Kuttner’s flexible approach. The second floor will be occupied by two businesses: the graphic design co-op Ten Flavors and PsiKick, a business that builds low power wireless sensing devices and is currently housed in the Glass Building.

“It has a wow factor to it when you walk in,” said Laura Roseberry, owner of graphic design firm Roseberries and a member of Ten Flavors.

The third floor, a sprawling 6,000 square-foot space with views of Carter’s Mountain and much of downtown, will be home to Willow Tree Apps, a local start-up that’s grown to 85 employees and is still expanding.

“They’re building the office of the future,” Kuttner said, praising the design that will provide a variety of workspaces from private glass-walled rooms for group meetings to two-person cubicles that encourage collaboration to phone booth-style spaces that allow isolation for when a project requires total focus.

Willow Tree’s Vice President of User Experience Blake Sirach said the company prioritized a location near the Downtown Mall and sought a space they could customize.

“The new construction was a natural place because of the proximity to the mall, but also for its architectural intrigue, Oliver’s unique architectural style,” said Sirach. “It kind of melds with the Willow Tree mantra of staying flexible, agile. The style of the building matches the culture of our company.”

The bottom floor of The Treehouse will house a couple of food-related businesses, and Kuttner expects those leases to be finalized in the near future. The Treehouse isn’t the end of his building downtown, however. He already has plans for three more residential buildings on the adjacent parking lots designed by the Downtown Mall-based Design Develop firm and has applied for a special use permit to build up to 233 units. The project next goes before the Planning Commission for a public hearing on June 9.

The one-bedroom units will be small—450 square-foot apartments that Kuttner believes are in high demand among the younger generation, Millennials who he said have eschewed the trappings of suburbia in favor of a more minimal lifestyle that offers convenience and frees up money for travel.

City planner Brian Haluska agrees that smaller, more affordable rental units downtown have appeal, even if there may be potential stumbling blocks. “He’s forward thinking possibly beyond the extent of our ordinances,” Haluska said. “The question is, can he translate the ideas in his head to a project that the Planning Commission can review and say O.K., we’re comfortable with this on this site.”

Kuttner is confident he can.

“What I’m building is the way people will live,” he predicts. And if he’s wrong?

“Well, we’ll just knock down some walls,” he laughs.

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Projects Reflect Confidence in Cville’s Commercial Real Estate Market

News about commercial real estate both nationally and locally continues to be positive.  The Urban Land Institute’s 2014 annual report entitled Emerging Trends in Real Estate (based on interviews with 1,000 experts in the field) states that respondents “expect growth to be sufficient to generate consistent and growing demand for commercial real estate across all property types.”

Our local agents also describe an improving commercial market citing very low vacancy rates in the office and retail sectors and a continuing demand for space.  Along with the good news about existing space comes that of anticipated new activity from Costco on 29 North to Wegmans on the south side, to some significant new developments downtown.

Residential Growth Supports Commercial Expansion

Our strong residential market positively impacts commercial development, and the news there continues to be good.  CAAR reported 10 percent growth in yearly home sales in 2013. In the first quarter of this year, the median number of days on the market declined by 18 and the average sales price increased by 20 percent.

This kind of residential market strength is good news for developers of retail properties like Costco, Wegmans and the new Pantops area Starbucks.

Ed Brownfield, with Real Estate III Commercial Properties, looks forward to the opening of Costco.  He explained that having a Charlottesville store will keep dollars in our local economy and bring new jobs to the area.  “Costco has a reputation of being a wonderful employer,” he continued and “people who work there love it.”

Brownfield also anticipates the 2015 opening of Wegmans, the upscale grocery store coming to the south end of town at Fifth Street Station.  This should cut down on the number of people traveling north on Route 29, he explained, adding that things will  “be more balanced which will help with congestion.”  Wegmans also has a good reputation, ranking 12th in Fortune’s 100 Best Companies to Work For in 2014.

Next year will also see the opening of the new Pantops Plaza which, Brownfield said, will be the new home of the Pantops’ area Starbucks.  This 10,500-foot development will also house a Chipotle Mexican Grill and Jersey Mike’s Subs.  Rumor has it the Starbucks will feature a drive through window, the first in our area.

Commercial Growth Reflects Strength of Local Economy

Commercial investors like markets with a strong economy, as reflected in part by the number of major employers. In recent years we have seen the growth at NGIC and UVA Research Park.  These and other commercial establishments north of town, such as GE, Kohl’s and now Gander Mountain, generate as much as 50 percent of Albemarle’s total tax revenues and attract other commercial development, said United Land’s Wendell Wood.

While growth and expansion is happening all over our area, there is significant activity in and around downtown.  The former Martha Jefferson Hospital building is now home to the CFA Institute, which occupies 100,000 square feet, said Mark Mascotte, Principal Broker at the Jefferson Real Estate Group.  The Institute’s newly renovated space includes green features such as solar panels and a grey water reuse system.

The former Cardwell Building at the old hospital site is also home to some smaller, though still substantial 20,000 square foot tenants.  It’s hard to find space for companies with this kind of large footprint, Mascotte added.

HemoShear, one of these new tenants, is a bio tech company described on their website as the “leading developer of human relevant systems for drug development and discovery.”  Senator Mark Warner recently stopped to admire the company’s new headquarters and spoke of their importance for creating jobs in our area.

Another major new downtown development is the 925 Market Street project, featuring views of Carter Mountain and Monticello, said Mason Graham with CBRE Charlottesville.  This is a mixed-use project that will have 18,000 square feet of Class A office space available for sale and high-end residential apartments for lease. The seven story building will be walking distance from the downtown mall, the new CFA offices and Court Square.   Delivery of the office space is anticipated for late 2015.

The new building will help meet the demand for Class A office space downtown for which the vacancy rate is currently very low, just one percent, Graham said.

Real estate suitable for a medical office building is also in short supply, according to Michael Johnson, President of PMI Charlottesville, who currently has a multi-million dollar client looking for just such a property.

Overall, the commercial market is doing well, and, Graham said it is “very competitive. ”  While this poses its own set challenges, it is good news for our area and especially for a market that has just come through a serious recession.  It also makes for a lot of excitement about all the new developments coming on line over the next two years.

Celeste Smucker is a writer, blogger and author.  She lives near Charlottesville.