Kornblau Institute Industry Talk Examines the Richmond Office Market
July 30, 2021 - Susan T. Burtch
“If Richmond were a breed of dog, which breed would it be?” This is not the question you might expect in an industry talk about “Commercial Real Estate and the Future of the Office Market.” Yet with this interactive poll question and others sprinkled throughout her presentation,
Choice of the majority: a Golden Retriever. Not a pit bull, a Jack Russell terrier or a poodle. Although all the alternative answers were equally intelligent breeds of dogs, the warm, gentle personality of the golden retriever was seen to best exemplify Richmond.
And although Greenwood is Global Head of Data and Insights for Cushman & Wakefield, her observations were less global and more local, thus bringing new insight into the commercial real estate market in Richmond. Beginning with the macroeconomic picture, Greenwood proceeded to discuss office fundamentals, trends to watch and capital markets.
She said China and the U.S. were the two nations rebounding fastest from COVID, and when it comes to leasing, Richmond is already at 82% of where it was in 2020. Office pricing trends are up per square foot, with volume up 45% overall.
In short, her key take-aways:
Richmond is on par with the rest of the U.S.
Office leasing is mostly back, but vacancy is still high.
The market is polarized, driven primarily by technology and life sciences.
Are you wearing PJs right now? Another poll question, which initially seemed more humorous than substantiative, soon led to an examination of the new trend towards working remotely. (Most in the audience claimed they were dressed – top and bottom.) Yet Greenwood’s presentation actually accounted for only half of the lecture time. The second half of the hour was devoted to specific questions from the attendees. Moderator Jane DuFrane, Senior VP of Highwoods Properties, said she had received 60 questions.
There was a lot of interest in working from home vs. working in the office vs. some sort of hybrid model. According to Greenwood, the more creative and collaborative the nature of the business, the more benefit there is to be had from coming together in person. Studies also show that those who work in an office tend to be promoted more often than those who work remotely.
As to how this will impact new development, Greenwood says companies need to increase the experiential effect of coming into the office in order to attract the younger demographic: “The stage is ripe for innovation.” This means adding amenities such as collaborative fun spaces, walking paths and maybe even an in-house coffee shop. Environmental factors such as enhanced air circulation also come into play, so employees feel safe in the workplace.
All these demands introduce the issue of old vs. new office space. Build to specifications or retrofit an existing office? The real estate issue ultimately hinges on how to manage needs of different groups of people. “And that,” smiles Greenwood, “is a more nuanced discussion for the next phase.”
Meanwhile, migration patterns bear watching in the next ten years. If you could work from home, would you move? (Most respondents would not.) Predictably, those in larger cities with longer commutes are more likely to relocate. Luckily for young workers who do entertain the itch to move, Richmond is in a positive migration path. Not only is it “Sunbelt-ish,” but it benefits from the trickle-down effect of burgeoning high-tech in Northern Virginia.
Finally, remember the popular meme that went around the internet recently? Is this dress blue and black or white and gold? Greenwood is satisfied her audience seems divided as to the correct answer. “What you see on your screen depends on where you are sitting,” she observes knowingly.