Q2 2012 Richmond, Virginia Commercial Real Estate Economy

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Q2 2012 Richmond, Virginia Commercial Real Estate Economy

Is it time to start talking about a “Richmond Revival?” Virginia Business posed just that question in an August 31st story that pointed to the city’s resurgent downtown and other projects set to develop that could transform the city into a more dynamic regional player. This source notes that the city is “heating up” for various reasons: “development is booming, and people and capital are flowing into the city’s River District, and into areas beyond. Virginia Commonwealth University (VCU), anchored by a medical school and the nation’s premier public art and design school, is having its own building boom.” This source also points out that “the Redskins are coming to town next year for their training camp, with an eight-year commitment, and one of the world’s most prominent bicycle races will be staged in the city in 2015, drawing upward of 450,000 people from 70 countries to the area. Meanwhile, national retailer Amazon is furiously completing huge warehouses in two nearby counties, which will create 1,350 jobs and push the Richmond area into the online retail scene in a big way.”

The latest household-based data from the U.S. Bureau of Labor Statistics (BLS) show a reason for optimism. The number of persons employed, including the self-employed, in Richmond grew by 6,291 in the 12 months ending in July, according to this source. Establishment-based Current Employment Survey (CES) data from the BLS show total non-farm payroll employment has increased by 7,700 jobs (1.3%) in the 12 months ending in July, slightly lower than the number recorded in the previous Reis Observer report on this market, but positive nonetheless. There were winners and losers spared across sectors. Although Manufacturing is slowly returning to the area, employment in this sector fell by 1,300 jobs (4.1%). Wholesale Trade employment fell by 100 jobs (0.4%) but Retail Trade employment grew by 3,000 (4.6%). It should be noted that as the state capital, the state government is the city’s largest employer. However, state government employment has been reduced by 700 jobs (1.8%) and overall Government sector employment is down 400 jobs (0.4%). Many municipalities are cutting costs as a result of the difficult economy and government payrolls are under scrutiny everywhere. Richmond is also home to six Fortune 500 companies, so the corporate presence here is strong. According to Moody’s Economy.com, office employment increased by 3,408 (1.6%) from the second quarter of 2011 to the second quarter of 2012. CES data show that Financial Activities employment increased by a modest 500 jobs (1.1%), but the larger Professional and Business Services sector increased by 1,300 jobs (1.3%). It is also the home of Virginia Commonwealth University (VCU), “a public university of 32,000 students,” according to Virginia Business, and “has long been a contributor to the development” in Richmond. Along those lines, the private but substantially publicly-funded Educational and Health Services sector saw employment increase by 2,300 jobs (2.8%).

Rounding out the sectors is a Leisure and Hospitality, which saw employment increase by 1,400 (2.4%). This sector, dominated by relatively low-paying service sector jobs, could come to the fore as Richmond continues to ponder, for the “umpteenth year,” as the Richmond Times Dispatch put it in an October 10th article, how and where to build a baseball stadium. The paper reported on the discussion that was held on the subject at the Annual Real Estate Trends Conference presented by Virginia Commonwealth University at the Greater Richmond Convention Center. Tom Murphy, a senior resident fellow of the Urban Land Institute who, as mayor of Pittsburgh in the 1990s, led efforts to revitalize the dying steel town through new sports venues, said that building a baseball park or an arena will be a catalyst for private investments, higher payroll and sales tax revenues, more employment and economic growth.