With thousands of apartments planned for Scott’s Addition, Manchester and other parts of Richmond, can the market absorb all of that new multifamily development?
Eric Phipps, the co-founder and principal at SNP Properties, which is developing the 166-unit The Summit at Scott’s Addition and the 166-unit The Penny at Jackson Ward, believes so.
“Everybody that I talk to, the first question they ask me is how can Richmond, or RVA in particular, absorb 4,000 to 5,000 units” over the next three to four years,” Phipps told those attending the Greater Richmond Association for Commercial Real Estate’s annual Commercial Real Estate Market Review on Tuesday afternoon. The event, held at The Westin Richmond hotel, drew several hundred area real estate professionals.
“It takes a long time to build something. It will take, starting from pencil and paper to opening the doors, 36 months,” he said. “That pipeline of 5,000 units does include proposed ones so some of those won’t get built, but it will take three to four years to do them all.”
In the past 12 months, he said Richmond absorbed 1,650 apartments of the 1,800 units that came online.
“Based on the population trends of the city of Richmond of 13,000 to 15,000 [new residents], the city itself can absorb 1,500 units a year,” he said.
The Scott’s Addition and Manchester areas are hot now for new apartment buildings. Phipps believes the next area to see more multifamily developments will be along West Broad Street from the convention center to Scott’s Addition.
The catalyst is the change in zoning that allows for apartment building heights up to 12 stories.
The new developments in Scott’s Addition and Manchester are attracting retailers, said Nicki Jassy, another panelist who is with commercial real estate brokerage Cushman & Wakefield | Thalhimer.
“For a long time, no retailer would look at Manchester. Now they are,” she said.
For instance, The Continental Manchester restaurant and a gourmet market are planned to open this year in City View Marketplace, a mixed-use development in the works at Hull and Sixth streets.
“Retailers are changing their mindsets of ‘I have to have a storefront or I have to have so many parking spaces in front of me’ because now there is the understanding that many people are living and working there who are within walking distance,” she said. “It is a different atmosphere than we have seen before.”
What is the surge in apartment building doing to rental prices? In the past 12 months, Phipps said rents are down over the three-year average because the average was skewed during the past two years as rental prices rose 3.5% to 4%.
That large increase in rent is unusual for Richmond, he said. “Richmond is a 2% [a year] growth market. With all of these new [apartments], we are just getting back to a more normal growth market as these units are absorbed.”
There is a need for affordable housing in the city especially if rents keep running up, Phipps said. Mixed-use and mixed-income properties are the best way to introduce affordable housing into downtown, he said.
Jodie Strum with Atlantic Real Estate, another panelist, agreed. “Real estate is not just all about making money. We all have to live in the city [and the Richmond region], and we want it to thrive.”
The panel discussed various aspects of the commercial real estate sector including retail, industrial, office, multifamily, hotels and capital markets. The other panelists were Malcolm Randolph with Colliers International; David Williams of Commonwealth Commercial Partners; and Nick Patel with Kalyan Hospitality.
Randolph talked about how the region’s low 7% office vacancy rate and the lack of a lot of new construction in that sector is a concern.
“The danger is we don’t have the product to help companies grow that are here and we don’t have the product to help attract new companies to Richmond,” he said. “There are projects planned, but the timelines for those often don’t meet the requirements of the timelines for the prospects that are out there. Our challenge right now is how do we bridge the gap to bring some new product to Richmond.”