July 24, 2020
The rumble of a truck engine, the beeping warning signs from construction equipment on the move, and the sound of power equipment could be heard just off West Broad Street in Scott’s Addition recently.
At 3200 W. Broad St., workers walked along the roof of the former Quality Inn, which is being renovated into the Lofts @ Broad, a development that will transform the former hotel into 100 apartments plus a 500-car parking deck and a new 12-story apartment tower with an extra 190 apartments that will be added.
One block east at the corner of Summit Avenue and West Broad Street, workers were busy bringing materials into a new seven-story apartment building that’s being developed by SNP Properties LLC, a Richmond-based development and acquisition company.
Plans for that building, where rents will start around $1,300 for a one-bedroom and $1,600 for a two-bedroom, show a dog run, third-floor outdoor terrace, fire pit and outdoor kitchen, said Catina Crosby, SNP’s vice president of asset management.
“We’re looking to deliver the first units in mid-October,” Crosby said.
Nearby, workers were busy on a third apartment building — The Nest — on West Marshall Street between Summit and Highpoint avenues, where tenants should start moving soon into the first residential floor. The apartments would be built on top of two levels of a parking deck.
Tom Papa, a principal of Fountainhead Real Estate Development, one of the developers of The Nest, said the 118-unit building should be leased at 95% or more capacity by the end of this year.
Despite the coronavirus pandemic, newly completed apartment buildings have been opening in Scott’s Addition, an area that has seen a surge of multifamily projects built in what had been an industrial neighborhood. It is now home to breweries, restaurants and offices, and more apartment buildings are set to come online in the coming months and years.
Papa welcomes the other apartment communities that are popping up in Scott’s Addition because he said they’ll bring residents, and those residents draw more businesses to the area.
“Some people would say those are your competitors, and they’re not [that] at all. The more activity there is, the more activity there becomes,” Papa said about the other apartment projects that are being built by other developers. “Scott’s Addition, like Manchester [in South Richmond], it’s very, very strong. They’re both very strong markets.”
Of the nearly 1,500 apartments that are in Scott’s Addition, the vast majority have been built over the past 10 years, said Mike Cobb, a senior market analyst at CoStar Group, a commercial real estate analytics company that has its global research headquarters in downtown Richmond.
Only about 5% of those units are vacant, Cobb said.
“At the moment, it’s still a pretty tight market in Scott’s Addition,” he said.
The vacancy rate can go up when a new building opens up and hasn’t been filled yet. But even then, the buildings tend to fill up, Cobb said. Over the past two years, all the buildings that have opened up have been able to reach at least 90% occupancy within a year, he said.
A key reason for that is Scott’s Addition provides much of what renters are seeking, including a place to live that’s within walking distance or an easy commute to work plus places to go out and socialize, Cobb said. In mulitifamily developer parlance, it’s called a live, work, play environment.
“It provides one of the more well-rounded live, work, play communities in the metro [Richmond area],” he said.
Demand for apartments in the Richmond region — which covers 13 counties and four cities — has been relatively unfazed as the economy sheds jobs during the pandemic, Cobb said.
But questions remain, including how quickly the Richmond region can recoup the net loss of 47,000 jobs between April and June, Cobb said.
“So in the past, buildings have leased up very quickly in Scott’s Addition. However, those were during times when the economy was continuing to grow,” Cobb said. “So the looming question is: What might lease-up trends look like when these buildings come online in coming months in Scott’s Addition?”
Developers say they expect demand will continue to rise in Scott’s Addition even as the supply of apartments does as well.
H. Louis Salomonsky, one of the principals of Historic Housing LLC, a major Richmond development firm that is behind the Lofts @ Broad project in the former hotel on West Broad Street, said Scott’s Addition offers a convenient location as well as services that are perfect for apartment dwellers.
“If you ever played the game of Monopoly, [Scott’s Addition] appears to be Park Place and Boardwalk all in one location,” Salomonsky said.
Historic Housing also built Scott’s View, an apartment development with 345 units housed in two buildings on West Clay Street between Roseneath Road and Belleville Street. Salomonsky said the seven-story building at Scott’s View is fully leased, while an eight-story building is expected to be at 100% occupancy in early August. He said he expects it will probably take about 18 months to complete work at the Lofts @ Broad project.
More apartments are planned for the eastern edge of Scott’s Addition.
A pair of old commercial buildings on a 0.5-acre lot near the corner of West Clay Street and Altamont Avenue will be taken down to make way for Scott’s Collection I, a five-story building with 80 apartments, an elevated courtyard, private balconies and parking for 65 to 70 vehicles.
Capital Square 1031, a Henrico County-based real estate investment and management company, is developing that apartment building and two others in Scott’s Addition for a total of 212 units.
The company expects to hold a virtual ceremonial groundbreaking on July 30 because of the pandemic, said Adam Stifel, Capital Square’s executive vice president for development.
“You can use words like ‘contemporary with a nod to industrial,’ but definitely edgy,” Stifel said in describing the architecture style behind the new apartments.
Capital Square announced last month that despite lenders being more cautious amid the pandemic, a construction loan had been secured to build Scott’s Collection I. The loan covers about two-thirds of the $19.35 million that’s being raised for the project, with the rest of the money coming from investors, Stifel said.
Capital Square is raising the money under a federal opportunity zones program created by the 2017 federal tax overhaul that rewards investors with tax breaks for putting money earned from other investments back into businesses or real estate projects in more than 8,700 census tracts around the nation. Some of those census tracts run from Scott’s Addition to VCU Medical Center.
Scott’s Collection I, located at 3000-3008 W. Clay St., is expected to be the first of a trio of apartment buildings that Capital Square is building in that area.
At 2900-2904 W. Clay St. near Sheppard Street, Capital Square is working to secure a loan for Scott’s Collection II, a five-story building with 60 apartments.
A third building, Scott’s Collection III with 72 units, is planned for West Leigh Street and Altamont Avenue, essentially behind the Scott’s Collection I property.
Favorable vacancy rates in Scott’s Addition were among the reasons that Capital Square chose to develop in that neighborhood, Stifel said.
Work on Scotts Collection II might start in January with work on Scott’s Collection III perhaps beginning a couple of months later, Stifel said.
“The fact that these were also in an opportunity zone was attractive for us,” Stifel said of the lots that will house the three Scott’s Collection projects.
Capital Square is bullish on Scott’s Addition.
The company also is working with Greystar Real Estate Partners LLC of Charleston, S.C., on a proposal to build one of the biggest apartment buildings in Scott’s Addition.
The 350-unit apartment building with six stories would be located across Roseneath Road from The Dairy Bar restaurant and across West Moore Street from Väsen Brewing Co. and Stella’s Grocery gourmet market. The project would take up most of a city block bounded by Roseneath Road, Mactavish Avenue and West Moore and Norfolk streets.
Approvals are still being sought for the project, Stifel said.
Plans are in the works for a new type of co-living configuration where units with a half-dozen bedrooms use the same communal kitchen and central living area.
The Richmond Planning Commission last Monday recommended approval of the project at 1101 N. Arthur Ashe Blvd., just north of the Starbucks and Growlers to Go stores.
Lory Markham, a planning consultant for Outlier Realty Capital and Warwick Park LLC, wrote in a Feb. 10 letter to city officials that the units would be furnished and would be marketed as co-living accommodations that have been popular in such places as New York City and Washington.
“It’s a different type of co-living environment than you would have in your traditional apartment building,” Markham said before the Planning Commission’s vote. “We think it adds to the variety and the choices available in the neighborhood.”
The six-story building would have 29 dwelling units with each having groups of five or six bedrooms. Each bedroom would have lockable doors so the other tenants couldn’t get into the bedroom while they’re vacant, according to a city planning staff synopsis of the proposal.
The project will go before the City Council for final approval.
Across Myers Street, the first residents started moving into the Scout at Scott’s Addition apartment complex.
The 218-unit complex, which is next to the River City Roll boutique bowling alley, has a pool, dog park and fitness center, said Andrew Basham, a principal at Richmond-based Spy Rock Real Estate Group, which developed the new five-story building.
About 80 units have been leased so far, where tenants pay rents starting at $1,295 for a one-bedroom and go up to $2,400 for a three-bedroom, Basham said.
The building has 13,500 square feet of commercial space on the ground floor with one space for recruiting firm Ettain Group. The other one will be occupied by the Workshop Digital marketing agency.
Asked if he could envision a time when the apartment building boom in Scott’s Addition could end, Basham said the apartment market continues to hold up well in other other parts of the city that have also seen a surge in apartment construction.
“I think if you look at Manchester, Shockoe Bottom, those neighborhoods have experienced similar construction booms on the multifamily side and they seem to be holding up,” Basham said. “Our leasing space, and the leasing space of our [competitors’] properties, seems to be good.
“Our rents are holding up.”