The commercial real estate market continues its remarkable growth, and local agents expect another profitable year in 2018. This assessment is consistent with findings in a recent report from the National Association of REALTORS®, Situs RERC and Deloitte predicting trends in the national market.
The Report cites factors such as low unemployment and low inflation at the end of 2017, economic growth of 3 percent and an active stock market as just some of the factors contributing to optimism about commercial market prospects this year.
Another important variable is nationwide inventory shortages in the residential market that push up prices and squeeze out potential buyers at the low end of the spectrum bolstering demand for more apartments.
A robust commercial market always reflects strength in the residential market, and there are several factors at work in our area that keep it that way.
UVA and the Med Center in Charlottesville, Mary Baldwin University in Staunton and James Madison and Eastern Mennonite Universities in Harrisonburg add stability to our housing markets regardless of the economy.
And of course, the gorgeous scenery and quality of life variables on both sides of Afton Mountain make living here very desirable, inspiring prospective home buyers to stay for good.
Employers recognize the value of locating in a spot that attracts high quality employees. Especially noteworthy is Charlottesville's growing high tech sector that attracts its share of Millennials who love the active entertainment and restaurant scene and are also great buyer prospects. Similarly, a strong manufacturing sector is a powerful force at work in the Valley.
CAAR's (Charlottesville Area Association of REALTORS®) recently released 2017 4th Quarter and Year End Market Report offers further proof of an active residential market. It shows a year-over-year 4 percent increase in home sales while pending sales (sold but not closed) were up 7.5 percent, signaling the start of a profitable 2018.
Agents are optimistic about the commercial market and expect 2018 to continue to be a time of expansion.
"On the sales side the market has definitely tightened up and has flipped to a sellers' market," said Benton Downer, Owner and Principal Broker at Downer and Associates. He added that while money is reasonable, there is not a lot of product and that makes buying property a challenge.
The market has also tightened up significantly on the rental side as well with no new product other than what is slated for downtown "putting landlords squarely in the driver's seat," Downer continued.
Robin Amato with Real Estate III Commercial Properties called the market "extremely active" keeping agents in her office very busy on both the leasing and sales sides. Office and warehouse space is particularly in demand she offered.
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 previously vacant office space is now leased, a real shift.
Things are also jumping in the Valley, said Keith May with Cottonwood Commercial adding that a lot of hotels are going up. Part of the hotel boom is increased business travel as the economy expands, but now that we are out of the recession, there is also growing vacation travel as people come to relax and enjoy the natural beauty, outdoor recreation and cultural amenities of the Shenandoah Valley.
The Charlottesville market is "crazy" said John Pritzlaff, Vice President at Cushman & Wakefield, Thalhimer, adding that it is "super active with no real vacancies." He cited activity on West Main, Preston Avenue and Barracks Road as some of many current commercial market hot spots.
Here are a few highlights of our very active commercial market.
A number of factors drive Pantops' popularity including residential growth, easy access to the interstate, and the presence of Martha Jefferson Hospital that attracts other businesses associated with the health care industry.
A good example is the Class A office space at Peter Jefferson Place that includes full service amenities such as janitorial service and utilities—benefits that are especially attractive to national companies with multiple locations, said Lisa Jones, Owner of Pavilion Properties. While many medical offices choose it for its proximity to the hospital, fully 75 percent of Jones' tenants are non-medical indicating the area has a lot to offer other kinds of companies as well.
The Pantops area's growth is reflected in a recent decision by the Albemarle Board of Supervisors to update the region's master plan thanks to a goodly number of new subdivisions, apartment complexes and senior living options as reported by Charlottesville Tomorrow.
A good example of this trend is the soon-to-happen groundbreaking for a commercial addition to Riverside Village, a mixed use community of homes, townhomes, villas and condos located at the intersection of Routes 20 and 250. The commercial addition will feature 12 thousand square feet of retail space plus apartments, Pritzlaff said.
A big plus for Pantops area businesses is free parking that appeals to customers and employees alike. Jones relayed 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 of parking near where they work.
Preston Avenue with its downtown "vibe" is another rapidly expanding area. Wickline reports that its "proximity to downtown without the parking nightmare," is a big reason it is so attractive to both businesses and their customers.
Coming soon to Preston Avenue is Stony Point Design Build's redevelopment of the former Monticello Dairy Building that recently received a certificate of appropriateness from the Charlottesville Board of Architectural Review. The new site will include 30 thousand square feet of retail office space and 50 thousand square feet of Class A office space, Pritzlaff said. Included in the design is a Food Hall that will be home to a variety of food vendors and artisans.
One of the big challenges of our current commercial market in Charlottesville is the lack of warehouse space. Redevelopment of sites such as the Monticello Dairy or the former Coca Cola Building have put pressure on this market, Amato said, because they displace existing warehouse tenants.
While all of this means more clients for commercial agents, finding space for the displaced tenants (especially if they require small spaces in the two to five thousand square foot range) is especially difficult, she said.
One building where space is available is the former Eck Lighting Building on Rose Hill Drive. Amato reports that the owners have recently reduced the price and are now willing to divide the 25 thousand square foot building into two spaces.
Always a busy area, the 29 North corridor continues to grow.
While big box operations are struggling, "small shop space retail is doing well," Pritzlaff said. This phenomenon is playing out in the former K-Mart building now being redeveloped as Hydraulic Station, where leasing is going "incredibly well. " He added that the developer will be reshaping the parcel soon.
In the Barracks Road area south of the 250 Bypass, a new retail strip at Barracks and Emmet will be opening soon. Lessees that move into the remaining 25 thousand square feet of space will join Verizon, Mod Pizza and CAVA, a restaurant featuring Mediterranean-style food opening its first Charlottesville area location.
Individuals who have family members in need of assisted living or memory care may find the help they need with the opening of The Blake, a 106+ thousand square foot facility located on Rio Road West. This project offers a resort lifestyle that includes a coffee shop, bar, spa, putting greens and other amenities. Independent living apartments will be available as well as increasing levels of care for residents as they require them.
Further north in Greene County Bill Gentry, Principal Broker and Owner of Jefferson Land and Realty, reports that what was once a Burger King in Ruckersville will soon be home to a market and deli store similar to one that Tiger Fuels operates on Ivy Road. The location will also offer fuel and a car wash.
Gentry explained that he is "very optimistic," about the market in Greene County. An example of future development there is three acres at the entrance to Deer Lake Estates that will attract commercial retail development to serve residents of the neighborhood.
It's not just urban locations that are experiencing retail activity, May explained. General Dollar and Family Dollar are both expanding and opening in small towns. This trend is happening in other parts of our area as well including the recent opening of Family Dollar in Madison County and a new General Dollar store in Nelson County on Route 151 on the way to Wintergreen.
May is also pleased with industrial growth in the Valley, most of it from the expansion of existing companies. Examples include WhiteWave Foods in Mount Crawford and Draftco in Stuarts Draft.
For businesses willing to relocate to the Valley warehouse space is plentiful there. Downer explained that Waynesboro space can be obtained at a savings of nearly 50 percent of what you could expect to pay in Charlottesville.
Like other parts of our area, the Valley is experiencing inventory shortages in residential real estate that are pushing up prices, May said. Until recently home prices there have been too low to encourage much in the way of new construction. He believes, however, that rising prices will stimulate subdivision development and give buyers the option of building a new home when what they want in the way of resale is not available.
Both sides of Afton Mountain are experiencing impressive growth in commercial real estate of all kinds and the outlook is good for its continued expansion. Residents can look forward to concurrent changes in the landscape that bring more and varied places to work, as well as to shop, eat, live and enjoy a night out on the town.