4/22/21 Richmond Mastermind Meeting

Richmond April 2021 – Key Take Aways 

• Chamber RVA’s President and CEO Brian Anderson was the guest speaker at the most recent Richmond Mastermind Group meeting.  The Chamber representing the business community covers 1.4M residents across 9 districts in the MSA.  Their focus of late has been to ensure Diversity, Equity and Inclusion, particularly helping smaller businesses who do not have the resources to have internal staff focus on this important initiative.
• The region has an exciting pipeline with a great location and infrastructure, good schools and higher education – but the Chamber is working to tell their story in a stronger way and is working on branding the region.
• Renee Haltom with the Federal Reserve Bank of Richmond commented generally on the economic recovery.  GDP has bounced back with 75% recovery since the start of the pandemic, with 6.5% GDP growth in 2021, which will decrease to ‘normal’ levels in 2022 and 2023 – the bounce back has been much faster than expected.  Employment is still down by 1/3, with 8.4M unemployment; the anomaly is that individuals have left the labor force, so the numbers are likely skewed as the rebound continues.  An interesting observation is that business production held despite fewer employees – due to automation and business efficiencies.  On the inflation front, expect 2.2% in 2021, but back down to 2% in 2022 – and it’s likely to be bumpy over that time frame, with the clunky process of reopening, residual supply chain issues and pent up demand.
• One South Commercial’s Tom Rosman reports a lot of investment interest in small offices and more and more out of town developers looking for opportunities.
• Mike Cobb with CoStar Group echo’s the trend of more out of town investors, especially looking at multi-family opportunities.  MF is not slowing with 1,200 units absorbed since the start of 2021.  Mike also commented on the Amazon expansion announcement bringing +/-1,000 jobs to the area.  Office activity has picked up with 650k sf leased since January, but almost 1M sf of sublet space is available (which is still below 2008 levels).  Retail is seeing activity with new leases and the frequency of closures is slowing.
• JLL’s Jimmy Appich advises they have been in a consulting mode with clients with both landlords and tenants on the ‘what to do with offices’ post-pandemic/re-occupancy.  What they are seeing is that companies had 5-10% work from home pre-pandemic, which will likely be 10-35% post-pandemic, but this will vary by market, business type, job role, corporate culture.  In large part, decisions are being postponed as much as they can be and most likely into 2022.
• Andy Little with John B. Levy & Co. reports that a number of DC developers are looking in the area, but construction costs are thru the roof making it difficult to make the numbers work.  Interest rates are still relatively low; Freddie Mac is getting more aggressive with their lending.  Overall, good activity across most sectors.
• Whiting-Turner’s Maynard Grizzard comments that there is stress on pricing.  Subs can only hold pricing 3-4 weeks – and it’s not a supply issue.  Some developers are continuing to move projects forward because despite pricing going up, low interest rates area helping to offset.  Busiest sectors are industrial, mission critical, higher ed  and tenant improvement work.  On the working from the office front, company-wide, people are growing tired of working from home and training is a challenge that they are working to address.
• Draper Aden’s Charlie Kreye and Jeff Nelson echo many of Maynard’s comments.  Demand on materials is a huge issue – with a lot of pent up demand putting pressure on the market; those that have the means are buying and storing product.  For building structures, delays are massive – what was 60-90 days is now 9-12 months.  Like others, they are seeing a lot of industrial work, but also with municipalities ramping up – K-12, public safety, utilities (all outside of the national infrastructure bill).  Charlie and Jeff also agree that recruiting and training has been hit hard.
• First time Member attendee CJ Muse with First Citizens commented that they are seeing increased competition from smaller banks who were sitting on the side lines.  There is a lot of activity in the owner/occupier space, medical practices and general investment deals.