Commercial real estate: Retail rebound

The retail sector in the Richmond area seems to be bouncing back, though it has yet to return to pre-recession levels.

"We've seen some fairly strong activity since this time last year, but it's not at the level of 2003 through 2008," said James Ashby IV, a commercial real estate broker for Cushman & Wakefield|Thalhimer.

"I'm cautiously optimistic," he said. "There's a huge difference from where we were last year, but I'm cautious."

Driving the return, local real estate experts say, is pent up demand from retailers looking for space along with landlords who have vacant space and are lowering rental rates to lure tenants.

The combination is spurring growth in the retail sector as many merchants and restaurateurs expand.

Among those adding locations are SportsClips, Gold's Gym, The Fresh Market, Bonefish Grill, Toys "R" Us, LaDifférence, Hobby Lobby, Dick's Sporting Goods and Q Barbecue. These retailers and restaurants either have added locations in recent months or are close to opening ones.

"I'm not bullish and I'm not bearish. I'm somewhere in the middle," John Jay Schwartz, managing director for commercial real estate firm Have Site Will Travel, said about the local retail real estate market.

In recent months, landlords have seen an uptick in interest from retail tenants looking to expand, commercial real estate brokers say.

"There are some very aggressive brokers and some very aggressive tenants," Schwartz said, adding that some landlords are offering lower rental rates.

Schwartz said the past few months have been the strongest he has experienced in his decades-long career.

The retail vacancy rate for the third quarter in the Richmond market stood at 6.3 percent, down from the 7 percent vacancy rate for the same period in 2010, according to a report compiled by Henrico County-based commercial real estate brokerage Cushman & Wakefield|Thalhimer.

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A good example of how the retail market is improving since the economic downturn is West Broad Village in western Henrico.

The mixed-used development, which includes homes, apartments, offices and retail space, was besieged with problems in the early stages of development.

It had construction delays as liens against the original developer began to stack up. Retailers, including Old Navy, backed out of the project. Luxury hotel aloft filed a lawsuit because a promised garage was not completed.

In late 2009, Markel/Eagle Partners LLC took over the development from the original developer and settled some outstanding liens.

Now the retail portion of the development is taking off, with several new retailers and restaurants moving in or under construction. Developers say several other deals are in the works.

Jeffrey D. Doxey, president at Eagle Commercial Realty, a unit of Markel/Eagle Partners, said tender loving care and hard work is responsible for the development's resurgence.

"I've been pleasantly surprised with all the activity," Doxey said.

Besides, the developers lowered rental rates to be more attractive to potential tenants.

"We did it to wake up the market," he said.

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As retailers begin to test the water again, the Richmond market has changed quiet a bit since 2007.

While the area saw some large chains shut their doors, others saw that as an opportunity and moved into this market.

In the past several years, Linens 'n Things, Circuit City, Mattress King and S&K Famous Brands are among chains that shut down.

But as those retailers left, others entered the local marketplace including hhgregg, Tiffany & Co., Trader Joe's, Whole Foods, Hobby Lobby, and HomeGoods.

"We had the big losses, but they've been replaced," Schwartz said.

Now, some of those newbies are expanding. Hobby Lobby and HomeGoods opened stores in western Henrico first and have expanded into Chesterfield County this year.

Some existing chains including Dick's Sporting Goods, Ross Dress for Less, FiveBelow and Value City Furniture added or are in the process of adding stores in the region.

Home décor retailer Garden Ridge, which had a store in the Richmond area but closed it in early 2008, returned to the marketplace a year ago. It opened a store in Chesterfield Towne Center and reopened the location in eastern Henrico that it had previously closed.

Also coming to the area is fast-food chain Steak & Shake, which is expected to open its first Richmond-area restaurant next month at The Shops at White Oak Village in eastern Henrico.

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Even though stores are taking over new space, they often leave the previous space vacant.

For example, Babies "R" Us and Bassett Furniture are relocating to the Corner at Short Pump shopping center across from Short Pump Town Center.

Babies "R" Us will leave its space on West Broad Street at West End Drive to open a combo store with Toys "R" Us. Bassett Furniture will leave its spot at 9850 W. Broad St., for new digs.

The moves will leave two large vacant stores within a several blocks on West Broad Street, Ashby said.

"You're looking at a five-block area of West Broad Street that will have a significant amount of space sitting empty," he said.

West Broad Street, between Staples Mill Road and Short Pump, is an area that already has an increasing number of vacant spaces, he said.

Throughout the region, several large shopping centers have vacancies as well.

At Westchester Commons in Chesterfield County, the pedestrian-friendly portion in the middle part of the center has several vacant spaces.

The Shops at White Oak Village in eastern Henrico has lost some small retail tenants in the center portion since opening in October 2008. The former Circuit City store there also remains vacant after 2½ years.

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Here's an update on retail activity in the region.

West Broad Village

Where: On West Broad Street off Interstate 64 in western Henrico

Coming up: The Bonefish Grill restaurant is scheduled to open Dec. 5; work is under way at The Halligan Bar & Grill, which is expected to open soon; construction has started Spirited Art and All Fired Up, both of which are expected to open later this year; and the groundbreaking for the ACAC Fitness & Wellness center is scheduled for Thursday, with the 55,000-square-foot fitness center expected to open next year. Eagle said there are a couple of leases close to being completed.

Westchester Commons

Where: On Midlothian Turnpike off state Route 288

Coming up: Construction is nearly complete on Chick-fil-A, which likely will open in several weeks; Sedona Taphouse, a higher-end brew pub that carries 500 types of beers and hosts live music, should open later this year near Books-A-Million.

Hancock Village

Where: Off Hull Street and Winterpock roads in Chesterfield County

Coming up: Dick's Sporting Goods opened in mid-October; arts and crafts retailer Hobby Lobby is expected to open its 55,000-square foot today; construction will begin soon on Crazy Greek's second Chesterfield restaurant; discount retailer Five Below will open its new 7,500-square-foot store Nov. 4; Great Clips and Starbucks are expected to open next year.

Chesterfield Towne Center

Where: At Midlothian Turnpike and Huguenot Road in Chesterfield

Coming up: Salon Plaza is opening a 4,485-square-foot store along the exterior of the mall facing Midlothian Turnpike later this year.

Short Pump Town Center

Where: Off West Broad Street in western Henrico.

Coming up: Ann Taylor's new concept store is expected to open next month; Texas de Brazil restaurant is scheduled to open in March.

Stony Point Fashion Park

Where: In South Richmond off Chippenham Parkway

Coming up: Pandora, which specializes in hand-finished designs on silver and gold, opens next month; Vineyard Vines, which sells a preppy brand of clothing and accessories for men and women, opens early next year.

The Corner at Short Pump

Where: West Broad Street and Lauderdale Drive across from Short Pump Town Center

Coming up: Construction is under way on 85,000 square feet of retail space. Tenants for that space include Olive Garden, Bassett Furniture, mattress retailer Select Comfort and a combined Toys "R" Us/Babies "R" Us store. The stores are expected to begin opening next year.