Developers See Fast-Growing Richmond Market As New Target For Expansion

Richmond has experienced faster population growth than Northern Virginia since the start of the pandemic, and several employers and developers are seeing the migration trends as a reason to expand in the market.

Developers and economic development officials speaking earlier this month at Bisnow’s Richmond State of the Market event said the city has a few key factors going for it: a talent pipeline stemming from nearby and local universities, business-friendly policies and a reduced cost of living.

“It seems to be, I hate to say ‘on fire,’ because I know that technically Richmond burned down at some point, but things are happening,” Greater Richmond Partnership President Jennifer Wakefield said at the event, held at the Richmond Marriott Downtown. 

Matan Cos., whose director of leasing spoke at the event, broke ground  in 2021 on Northlake II, a five-building, 655K SF industrial development half an hour south of the city’s downtown, and it delivered the first phase this month. The project marks a new expansion for the firm. 

"Richmond is our first ground-up development outside of our core market in D.C.," Matan Director of Leasing JP Matan said. "We saw an opportunity to build speculative in this market, which is the norm in D.C., our market, which was not the case here."

From 2020 to 2022, the Richmond area grew by 2.1%, or more than 27,000 people, according to a University of Virginia study. This outpaced Northern Virginia's growth of 0.7% during that period.

Louis Rodgers, founder and CEO of Richmond-based developer Capital Square, said the Richmond area has benefited from Covid-era migration trends.

“The migration from the gateway cities has been going on for a long time, but the pandemic accelerated the migration,” he said.

The shift in many workplaces to remote work and a lower cost of living than many of the city’s neighbors are driving factors. 

“The cost of living discrepancy that Richmond still has — to this day to other markets like a Charlotte, like in Atlanta, obviously, D.C. that's not even a question — that's what's driving a lot of this population,” Crescent Communities Managing Director Brandon Wright said. 

But population growth is also coming from within, panelists said: Students who come to the area’s colleges and universities are choosing to stay in place as more opportunities come to the region. 

“We are a talent attraction magnet because people are coming to school here and then more importantly, more where people are choosing to stay here once they finish their matriculation,” said Leonard Sledge, director of Richmond's Department of Economic Development. 

Virginia Commonwealth University, University of Richmond and Virginia Union University are within the city proper, while schools like Virginia State University and Randolph Macon College are roughly a half-hour from downtown Richmond.

The economic calculation for those new graduates to stay local makes sense, Rodgers said.

“Those kids would have a pocket full of cash left over and they live in a nice place that's less congested, very historic and pleasant and lovely to live in, or they could live in D.C. and have no money left over at the end of the year," Rodgers said. 

With that growing population, there are new public and private developments underway. The most prominent is the city's project to develop a new neighborhood called the Diamond District.

Last month, Richmond announced RVA Diamond Partners won the bid to develop an 11-acre park, a Major League Baseball-standard stadium for the minor league Richmond Flying Squirrels, over 3,000 rental and for-sale housing units, including affordable housing, a hotel and retail at the 66.7-acre site.

Commercial real estate data firm CoStar is bringing a 750K SF research and technology hub to Gambles Hill, just outside downtown. The project broke ground in November 2022 and will cost $460M. The company has a goal of bringing 2,000 jobs to Richmond — it already has 1,500 employees working out of the city after it planted a flag there in 2016. 

In the suburbs, Lego announced last year it is building a 1.7M SF production facility in Chesterfield, roughly a half-hour south of downtown Richmond, and Amazon is bringing a robotics fulfillment center to Henrico. 

Wakefield said in recent months some of these $1B "megaprojects" they were competing for have gone to locations other than Richmond. 

“Within the active pipeline, right now we're seeing a kind of a stabilizing-ness, but not a slowdown," Wakefield said of the megaprojects. 

Greystar Managing Director John Clarkson said the firm signed 75 apartment leases in May at its 350-unit Otis project in Richmond's Scott's Addition neighborhood, which he said was a record-high pace for the national apartment giant. The building started leasing in January and is already 65% leased, he said. 

"We've been blown away with how well it's done," Clarkson said. 

As the population grows and job opportunities expand across the area, transportation is a hurdle for developers. Wright said that at Crescent Communities' multifamily development under construction in the Scott’s Addition neighborhood, branded as Novel, parking is planned at 1.3 spaces per unit. 

“This is still a suburban office — a suburban working environment," he said. "And so unfortunately, you’re going to need a car to commute until all those jobs do come back and are more urban-oriented. I think you're unfortunately gonna need higher parking counts."

Capital Square co-CEO Whitson Huffman agreed, arguing that the public transportation infrastructure isn’t there yet, but expressed hope, as did other panelists, that it will one day get there.

“I don't think the adoption of things like Bus Rapid Transit is to a place yet where you could justify building a lot less parking,” he said. “But I would say that it isn't a bad thing to have that flexibility because maybe someday we get there, and that's already in place, you can go build less parking. And hopefully, someday people are working downtown and they're taking the BRT, and they're jumping off and running to CoStar. But that's not where we are today.”