Research &
Forecast Report
RICHMOND
Q2 2016 | Multifamily
Suburban Barriers to Entry Create Investment Demand
for Class B Apartment Communities in Richmond
Market Indicators
RVA
Q2 2016
Relative to prior period
RVA
Q3 2016*
VACANCY
RENTS
CONCESSIONS
TRANSACTIONS
PRICE PER UNIT
CAP RATES
*Projected
Historical Apartment Occupancy & Rents
97%
95%
94%
Occupancy %
96%
93%
2016
2015
92%
2014
$1,200
$1,000
$800
AVG Monthly Rent
$1,400
$600
US
SOUTH
RICHMOND
2016
$400
2015
There’s been a great deal of attention in the media for the
phenomenal rebound of the apartment market in the urban core.
Certainly the City of Richmond is no exception as “suburban flight”
has created a terrific market for new communities of apartments
in every sector of the City.
However, the story that has been ignored is the creation of a new
dynamic in the Class B suburban market. The severe barriers to
entry for new product in the suburbs have come to the attention of
global investors. They are coming to Richmond to purchase welllocated properties “with good bones” and upside potential. The
demand for such product is so high that the cap rate for sales of
Class B product is sometimes lower than that of Class A product.
Last year, The Retreat at West Creek, a Class A garden deal
adjacent to Short Pump, sold at a 5.75 Cap. The Colliers MF team
had three Class B properties, each 1980’s vintage with deferred
maintenance needs, close over the last 30 days.
Richmond occupancy declined 0.3 points quarter-over-quarter.
Annually, demand for 1,644 units outpaced supply of 1,618 units,
pushing occupancy up 0.1 point to 94.6%. On the pricing side, rents
ticked up 0.2% in the 1st quarter 2016. Previous increases took
annual rent growth to 2.7%.
Richmond isn’t a fast-growth market like some others in the
Southeast region, but it does offer opportunity as a relatively lowrisk, low-upside market with stable demand drivers. Richmond’s
demand levels have picked up with the recent supply wave. With
solid demand, occupancy continues to gain momentum, averaging
roughly 95% since mid-2014. Following five years of mostly solid
job growth, demand appears to be getting a boost from solid
economic fundamentals. Meanwhile, unemployment remains low.
While healthy demand has pushed up occupancy, annual rent
growth has averaged roughly 2% over the past three years. That
could be due to a consistent supply pipeline that saw completion
volumes pick up to levels above historical norms. Furthermore, rent
growth will likely face some headwinds through 2017 as elevated
supply continues, testing metro-level demand for high-price, Class
A product. Multifamily permit volumes remain elevated, suggesting
the supply wave should continue through at least 2017.
2014
Market Overview
Source: MPF Research
Richmond Multifamily Market (continued)
DEMAND
OCCUPANCY
Apartment demand remains moderate-to-solid, as annual
absorption levels ranged from roughly 1,600 units to 2,700 units
in each of the last 10 quarters. These results compare to the
five-year average of approximately 1,600 units annually. The
metro absorbed 1,644 units in the year ending 1st quarter 2016,
outpacing annual completions for the 10th consecutive quarter.
By product class, demand for new supply appears firm. Among
submarkets, demand has also generally followed supply. Going
forward, structural drivers should continue to produce substantial
apartment demand results.
Even with elevated supply, recent demand levels are keeping
occupancy tight in Richmond. Occupancy registered 94.5% to
95.5% for the past eight quarters. In 1st quarter 2016, occupancy
registered at 94.6%, down 0.3 points quarter-over-quarter.
Occupancy has been historically tighter in Class A and B units
and weaker in lower-tier product. Class A and B product have
maintained occupancy above 95% for the past two years, while
Class C product trails slightly, averaging occupancy closer to 93%
over that time. Most submarket-level occupancy stayed around
to 94.5% or higher over that same time period. The primary
exception was Petersburg/Colonial Heights/Hopewell, the usual
laggard. Looking ahead, demand is expected to remain firm, likely
keeping occupancy levels within the current range.
SUPPLY
Supply levels have remained elevated by historical standards
over much of the past four years. Over that time, annual inventory
growth has mostly hovered between 1.5% and 2.5%, with
completions averaging roughly 1,600 units annually. In the yearending 1st quarter 2016, completions reached 1,618 units, growing
inventory 1.8%. Expansion should continue around current
levels, as the apartment stock is set to grow around 2% with
completion of 1,754 units over the next year. Deliveries in the past
four years were concentrated in Scott’s Addition, Shockoe and
Manchester, with adjacent submarkets also recording elevated
completion levels. Over the next year, the bulk of completions
are scheduled for those same submarkets. Identified projects and
permit volumes suggest that supply levels should remain steady
through 2017.
OUTLOOK FOR 2016
In the short term, the biggest headwind is the supply outlook.
New development is primed to be a fairly meaningful factor
through 1st quarter 2017. That could restrain occupancy and
rent growth potential. While the numbers aren’t dramatic,
Richmond isn’t a market that has the demand drivers or
demographics to support elevated supply for any sustained
period. Longer term, as supply normalizes again, Richmond
should be able to sustain occupancy at 94.5% to 95.5% and
annual rent growth between approximately 2% and 3%.
Notable Sales Activity
PROPERTY
SUBMARKET
SALES DATE
SALE PRICE
SIZE (UNITS)
PRICE / UNIT
BUYER
Jefferson Pointe Apartments
Prince George
2/17/16
$20,570,000
220
$93,500
Douglas Management Realty Inc
Townhomes of Chesterfield
Deerbourne
3/1/2016
$5,343,625
116
$46,066
William Walde
Source: CoStar Comps
2
Research & Forecast Report | Q2 2016 | Richmond Multifamily | Colliers International
Multifamily Pipeline | Richmond
2
9
Sources: CoStar Property, MPF Research
7
4
5
2
8
9
1
7
6
5
6
10
3
1
4
3
8
LEASE UP
#
Name
Developer/Owner
Address
Market
Units
1
8th & Main
The Edison Co.
800 E Main Street
City Center
2
Clairmont at Chesterfield
KOT
2000 Breezy Point Circle
Midlothian
368
3
Deco at CNB
Douglas Development
219 E Broad Street
City Center
200
4
Main 2323
MacFarlane Partners LLC
2323 E Main Street
Shockoe Bottom
194
71
5
Oxygen at Centerpointe
Robinson Development Group
14400 Palladium Drive
Midlothian
255
6
Centennial
CMB Development
523 E Main Street
City Center
24
7
Element at Stonebridge
Boyd Homes
7201 Midlothian Turnpike
Outer Chesterfield
400
8
Plant 1
Larson Development
403 Stockton Street
Old Town Manchester
134
9
Retreat at West Creek II
Kassinger Development Group
SW of Broad at Rt. 288
Goochland County
82
10
Terraces at Manchester
Robin Miller
800 Semmes Avenue
Old Town Manchester
140
TOTAL
1088
UNDER CONSTRUCTION
#
Name
Developer/Owner
Address
Market
Units
1
101 S Davis Ave (GRTC)
Edison Co.
101 S. Davis Avenue
The Fan
285
2
Avia
Commonwealth Group
12400 W Broad Street
Western Henrico County
320
3
City View Lofts
Thalhimer Realty Partners
611 Bainbridge Street
Old Town Manchester
219
4
Courtyard Lofts
Thalhimer Realty Partners
3200 W Clay Street
Scott’s Addition
90
5
Element at Stonebridge II
Boyd Homes
7201 Midlothian Turnpike
Outer Chesterfield
200
6
First & Canal Residences
Monument Realty
111-119 S 1st Street
Monroe Ward
93
7
Libbie Mill
Gumenick Properties
Staples Mill Road at Bethlehem Road
Western Henrico County
320
8
Osprey Lofts
Cushman & Wakefield
3210 W Leigh Street
Scott’s Addition
30
9
The Symbol
The Holladay Corp
Rockbridge St & Highpoint Ave
Scott’s Addition
202
TOTAL
3
Research & Forecast Report | Q2 2016 | Richmond Multifamily | Colliers International
2539
Historical Investment Volume & Cap Rates
600
8.0%
5.5%
0
5.0%
AVG Cap Rate
2013
2011
2007
Sales Volume
2015
6.0%
100
2014
200
2012
6.5%
2010
7.0%
300
2009
7.5%
2008
500
400
2006
Millions
Market Experience
Source: Real Capital Analytics
Metro Richmond Employment Overview
25.0
Recent Transactions by Colliers
Multifamily Team
> Hickory Creek SOLD 6/23/16
294-unit apartment community located in Henrico
County built in 1986. The Property is situated on
±20.40 acres and features one, and two bedroom
floor plans.
> Park West End SOLD 7/7/16
312-unit apartment community located in Henrico
County built in 1985. The Property is situated on
±18.06 acres and features one and two bedroom
floor plans.
> Champions Club SOLD 7/13/16
212-unit apartment community located in Henrico
County built in 1987. The Property is situated on
±19.4 acres and features one and two bedroom
floor plans.
> The Spectrum CURRENTLY MARKETING
103-unit apartment community located in the City
of Richmond completed in 2015. The Property is
situated on ±2.34 acres and features one, two, and
three bedroom floor plans.
Jobs Added/Lost (thousands)
20.0
12.5
12.2
9.2
10.0
5.0
8.6
7.5
9.6
10.8
13.6
0.6
(5.0)
18.1
15.2
15.0
-2.1
-2.8
-3.5
(10.0)
(15.0)
(20.0)
(25.0)
-24.6
(30.0)
Source: Bureau of Labor Statistics; Metro Level Data March 2016(p) Average, not Seasonally Adjusted
Metro Richmond Employment Comparison
RANK
Y-O-Y
EMPLOYMENT
Y-O-Y
PERCENT
UNEMPLOYMENT
RATE
New York/NNJ
1
193,200
2.1%
5.0%
Los Angeles/OC
2
145,300
2.5%
4.8%
Dallas-Fort Worth
3
129,900
3.9%
3.8%
DC-Arlington
4
86,600
2.8%
4.1%
Chicago
5
81,400
1.8%
6.6%
Atlanta
6
77,000
3.0%
5.2%
Philadelphia
7
71,700
2.6%
5.0%
San Francisco
8
71,100
3.2%
3.8%
Phoenix
9
69,900
3.7%
4.5%
Miami
10
64,600
2.6%
4.9%
Seattle
11
60,700
3.3%
5.1%
Richmond
26
METRO AREA
U.S. Total
28,400
4.5%
4.2%
2,785,300
2.0%
5.1%
Source: US Dept. of Labor Statistics/Moody’s Analytics
4
Research & Forecast Report | Q2 2016 | Richmond Multifamily | Colliers International
Richmond Submarkets
MULTIFAMILY ADVISORY GROUP
EAST REGION | AT-A-GLANCE
50
MORE THAN
Dedicated Multifamily
Professionals & Advisors
20
COVERING OVER
STATES
Expansive geographic footprint
30,000
MORE THAN
Units sold since 2011
$2.0B
Group gross transactional
value since 2011
FOR MORE INFORMATION
CONTRIBUTORS
Bruce Milam
Senior Vice President | Richmond
+1 804 591 2412
[email protected]
Jason Hetherington, SIOR
Senior Vice President | Richmond
+1 804 591 2407
[email protected]
Jackie Noel, CCIM
Senior Broker | Richmond
+1 804 591 2423
[email protected]
Will Mathews
Vice President | East Region
+1 404 877 9285
[email protected]
Copyright © 2016 Colliers International.
The information contained herein has been obtained from sources deemed reliable. While
every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No
responsibility is assumed for any inaccuracies. Readers are encouraged to consult their
professional advisors prior to acting on any of the material contained in this report.
5
Scott Amoson
Director of Research | Atlanta
Matt Spratley
Research Analyst
Richmond & Norfolk
Multifamily Advisory Group | East Region
Colliers International | Richmond
6606 W Broad Street, Suite 400
Richmond, Virginia | USA
+1 804 788 1000
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