The views expressed in Guest Opinions are those of only the author and not BizSense or BizSense reporters.
For the past 23 years, I have watched the westward march of retail on the West Broad Street corridor, which I will roughly define as between Belvedere Street in the City of Richmond and Short Pump in Henrico County. What amazed me over this span of time was that, unlike most retail corridors throughout the country, the West Broad Street corridor remained healthy even as the suburbs moved westward.
In Richmond, VCU played a significant role, along with the addition of a Kroger Supermarket and Lowe’s. In Henrico, while many new shopping centers were built, others such as The Shops at Willow Lawn, Loehmann’s Plaza (now called Gold’s Gym Plaza), Merchant’s Walk, Tuckernuck Square and others were remodeled, as were several car dealerships. There were also tear-downs that resulted in new users such as Sheets, WaWa, Walgreen’s and CVS.
But in the past few years, there has been a modest change in the landscape, which has become pronounced as a result of the recession. The change is particularly evident in the 7200 to 8000 blocks of West Broad Street (slightly west of Glenside drive and east of Parham Road) and has hit new and used car dealers and auto-related businesses particularly hard. Several restaurants are also vacant.
Driving west, we can see two Car Man locations that are for lease at 7212 and 7221 W. Broad St.. There is also the former Wicker Gallery at 7219 W. Broad. Lawrence Dodge is next, followed by the former Mega Office, at 7425 W. Broad, which has been vacant for several years and – in my opinion – is functionally obsolete due to the interior layout and age of the building.
Still driving westward, you’ll find the former A&N space that has been vacant since A&N liquidated in 2008, adjacent to Pier 1 at 7496 W. Broad, followed by the Willow Lawn Auto Sales at 7605 W. Broad, the American Café (the endcap restaurant at Old Town Shopping Center, which has been vacant for several years), the former Midas repair shop at 7909 W. Broad and finally the old Bennigan’s Restaurant at 8000 W. Broad.
This is an awful lot of high visibility vacancy in roughly an eight-block stretch. Will this vacancy be absorbed?
My answer to that is yes, but …
Two things that will have to take place.
1. The owners will have to have realistic expectations with regard to pricing, whether for sale or lease, and
2. Lenders will have to be more willing to loan money to qualified buyers as the economy slowly improves.
With regard to the first “but,” I have recently contacted an agent for one of the properties noted above. The rent was quoted as $25 per square foot after we had made an offer at what we thought was a reasonable rate. Mind you, we are in a severe recession where even the rates in Short Pump have dropped to the mid- to upper 20′s from their mid- to high $30′s. How an owner can insist on this high a rental rate in an area this hard hit is beyond my comprehension.
If there is someone out there that will pay it, my compliments to the owner and his agent, but I would check out the creditworthiness and business plan of the tenant very carefully before I proceeded.
Another agent has quoted $26.45 per square foot for a property in this area. Perhaps there is something that I don’t know, but I simply can’t recommend these rental rates to my clients. Indeed, the one that was interested said “no thanks,” end of discussion. He will wait and eventually go elsewhere.
The second point is that lenders aren’t willing to place loans on empty buildings. In other words, speculation is out. Owner-users who are willing and able to pay 35 to 40 percent of the purchase price in cash and have strong balance sheets – and usually a longtime relationship with their lender – are the best candidates for loans.
I have worked on three sales of this type this year. Two have closed, and one is under contract. The other candidate is someone who can pre-lease space, to credit worthy tenants, prior to going to a lender. They will still have to make a substantial upfront capital investment.
So, is there blight on West Broad Street? The short-term answer is yes, but it will diminish more quickly if the owners are savvy and don’t try to hold out for the last dollar.
Brian,
I admire your concern about the blight that has happened in almost every city since the nation wide flight to the suburbs. In my 20 years experience in the residential and commercial realestate business as an investor, owner and an appraiser, it has been my experience that agents are the primary reason both prices and rents are inflated. Agents manipulate the market through the control of inventory, price fixing and shunning discount agents and FSBO’s. This causes inflated prices. An agent portraying owners as greedy and the cause of blight in a business article (albeit opinion) is laughable.
You also mention the problem of lenders. They are also in business to make money and have every right to protect themselves as they are taking to a risk. Of course if the market was not controlled by Realtors, the prices would not be as high AND more investors could afford these properties.
The risk takers (banks and investors) are the engines of capitalism and create many products and services including the industry you are in. I would love to see the article investigating the how the Realtors manipulate the industry (legally and illegally) to keep the prices high.
An agent calling an investor greedy is … uh … let’s just say naive at best.
I loved this article and wish BizSense had more of them like this.
I would be extremely cautious regarding believing ANYTHING Glass has to say. He has made many many incorrect statements in past columns and he no longer writes for the TD- ask him why. It is obvious to me that from this article, he states that his clients offer wasnt accepted and a counter offer of $25 per was made. Is Glass trying to get landlords to lower rents by writing this article, and thus lining his own pockets by accomodating his clients? Be wary, very very wary of Glass.
Biz Sense- you deserve a better writer.
I have to concur with Woodson.
If you think broad st looks bad or empty take a drive around innsbrooke and check out all the empty giant buildings there. Some have been vacant for well over 2 years.