Richmond, Va.'s retail has turned the corner. Until six months ago, consumers looking for more than a mundane shopping experience had to travel 100 miles north to the Washington, D.C., area or fly even farther to New York.
Now, however, they can choose from two upscale centers on opposite ends of the city: Forest City Enterprises' 1.2-million-square-foot Short Pump Town Center and Taubman Centers' 750,000-square-foot Stony Point Fashion Square. The centers, which both opened last fall, attracted 70 new retailers to the area.
“This has generated a good, new vibrant retail market and put us on the map nationally,” says Brian Glass, a broker at Harrison & Bates, Grubb & Ellis's local affiliate.
The one drawback, brokers say, is that the excitement of the new developments is prompting retailers to quit older suburban centers, leaving them with dark boxes and causing the vacancy rates to rise. Eventually, some older centers will close, brokers say.
The new centers, meanwhile, have few vacancies. Short Pump Town Center, which is 94 percent leased, is anchored by Nordstrom, Hecht's and Dillard's, and includes J. Crew, Abercrombie & Fitch, Crate & Barrel and Pottery Barn. Maggiano's, Copper Grill Lobster & Steak House, and California Pizza Kitchen are three of the six sit-down restaurants there. Stony Point, which is 99 percent leased, is anchored by Saks Fifth Avenue, Dillard's and Galyan's, and includes Anthropologie, Brooks Brothers, American Eagle and Restoration Hardware. Among the six restaurants are P. F. Chang's China Bistro and Fleming's.
“We had only planned to have four restaurants, but built six due to demand, ” says Susan Kay, Taubman leasing vice president.
The new metro
A couple of years ago, neither Taubman nor most of the retailers would have considered locating in the area. But Richmond is far different today. A corporate base for Capital One, Circuit City and GE Financial Services, among others, the region's population recently passed the 1 million mark. What's more, Philip Morris is relocating its headquarters from New York to Richmond later this year, adding 450 jobs. Another 1,500 jobs were created when Wachovia-Prudential opened its brokerage headquarters there.
“We're seeing major corporations in big cities look to smaller cities due to economics,” says Jeff Doxy, president of the Virginia unit of the Shopping Center Group, a Southeast retail real estate company. The two new centers themselves employ 6,000.
Richmond offers a variety of incentives to businesses: tax breaks and cash, for example. It even created a free-trade enterprise zone to snag Philip Morris, which is investing $300 million in its relocation. That may help explain why Richmond boasts one of the lowest unemployment rates in the nation, at 3.5 percent. Even at the height of the recession, unemployment never exceeded 3.7 percent. Craig White, general manager for Short Pump Town Center, points out that the region's employment base is stabilized by 100,000 government jobs.
The Richmond metropolitan area, which extends through the once sleepy hamlet of Short Pump to the West and Petersburg, Va., to the south, is divided into four quadrants by Interstate 95 running north and south and the James River running east and west. Short Pump, located 13 miles west of Richmond in Henrico County in the northwest quadrant, is one of most densely populated markets in the area, with 270,000 residents. Stony Point Fashion Square is located in growing Chesterfield County in the southwest quadrant. Since 1980 Chesterfield County has nearly doubled size, from 141,000 people to 278,000 in 2003. Petersburg, which is usually included with Richmond demographics, is on I-95 about 23 miles south.
Retail development in the area will slow, of course, after last year's dramatic growth, but another 500,000 to 750,000 square feet should be delivered in 2004. The additions will be mostly grocery-anchored and necessity-type strip centers — although one is anchored by a PetSmart, notes White.
Doxy says Ukrops, a local, family-owned grocery chain and the dominant food player with 40 percent of the region's market, opened three new stores recently; Kroger opened two more. Three shopping centers are under way in the Short Pump vicinity, totaling 170,000 square feet. Two Target stores are under construction. The Shops at Stratford Hills is going up two miles from the Taubman center, and Lowe's and Wal-Mart recently opened stores across the street from Stony Point.
Communities along the 288 Freeway Corridor all the way to the Midlothian and Woodridge districts just west of Short Pump are the next areas most likely to experience retail growth, says White. Construction of the new freeway, which runs north and south through two counties, will cut the 40-minute trip from downtown Richmond to the Midlothian and Woodridge districts in half. “Approximately 6,000 new homes are planned over the next 10 years,” he says, “so retail will pop up along this corridor.” White notes that the new freeway should benefit business at his shopping center, which is only about a mile east of the 288, bringing shoppers up from the south.
But development isn't confined to the suburbs. Like many urban markets, Richmond is making an attempt to revitalize its core. Old tobacco row warehouses in the Shockoe Bottom District — home to 40 restaurants and nightclubs — and along the James River are being converted to residential use. And new mixed-use projects are going up on infill sites. When completed, the $82-million Riverside on the James, a joint venture of the Daniel Corp. and The Cordish Co. on an old power plant site on Brown's Island, will have 122 luxury apartments, 225,000 square feet of office space and 76,000 square feet of retail space.
Another large redevelopment project is Forest City's seven-phase River Lofts at Tobacco Row, which at build-out will have 600 apartments and ground floor retail space for restaurants and neighborhood stores like dry cleaners.
Record sale price
Last year, five shopping centers changed hands at between $80 and $265 per square foot. The $265-per-square-foot sale was a record for the region — nearly double the previous high of $140 per square foot — and involved Short Pump Center, a 250,000-square-foot center in the middle of the community, anchored by Barnes & Noble and Regal Cinema. This center, which was here before Forest City built its Short Pump Town Center center, has a skating rink too.
But the past year also saw decline of the 100,000-square-foot Cloverleaf Mall, which lost half its small retail shops and all its anchor tenants, when JC Penney's, Sears and Hecht's moved west. Hecht's moved to Forest City's Short Pump Town Center and Taubman's Regency Square.
With all this development, Richmond now has 36 square feet of retail space person, well above the national average of 20 square feet per person. Perhaps that's why vacancies rose last year to 9.5 percent from 8.4 percent, according to Grubb & Ellis.
Developers aren't too worried, however. White says the limited supply of land left in growing areas such as Short Pump will restrict future development of major centers.
Still, there are bound to be some losers, says Glass. “For a population of 1 million people, we have a lot of retail, and we definitely will see a decline in players,” he says.
Market Profile/Richmond, Va.
Population: 1.019 million
Unemployment Rate: 3.5% Richmond-Petersburg Dec. 2003
Per Capita Income: $32,268
Median Household Income: $46,800
Median Home Price: $158,000
Source: Greater Richmond Partnership; Economy.com; Richmond Chamber of Commerce
Total Inventory: 36.7 million square feet
Vacancy Rate 9.5% (4Q03)
Source: Grubb & Ellis