Real Estate Strategies

REAL ESTATE STRATEGIES

Behind the scenes of the site selection process for workplaces.

While cities nationwide are experiencing decreasing growth rates, Richmond seems to be moving forward. A recent report found that office occupancy rates in Richmond are higher than other major cities nationally.

According to Kastle Systems, the percentage of workers returning to the office in Richmond was 60.5%, while the national average was 48.4%. According to Axios, these rates are leading business and real estate organizations to encourage companies to relocate to the Richmond area at an increasing pace.

With Richmond’s growth and the influx of Fortune 500 companies to the city, other companies are reconsidering their office locations. While downtown has traditionally been the focus of businesses moving into the city, Scotts Addition, Manchester and Innsbrook now compete with the central district for new and relocating businesses.

In selecting a site, companies are starting to consider a broader set of factors as work style has changed and younger generations are moving into the workforce. Neighborhoods like Scotts Addition and Manchester are attractive to corporate organizations because of the vibrant mix of housing, galleries, restaurants, and bars.

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Corporate Client

While the urban districts are set up to deliver a broader set of assets, office parks like Innsbrook can provide other amenities like outdoor space, parking and easy access. They are working to add to those missing assets by re-planning their parks to integrate housing, essentially becoming self sustaining towns.

Another important factor, especially for the denser urban districts, is mass transit and alternative transit. According to GRTC, use of Richmond’s public transportation has steadily increased over the past few years. One factor in this increase is that Richmonders are able to ride the GRTC for free through 2025 thanks to a grant from the Virginia Department of Rail and Public Transportation. GRTC is focused on extending the pulse network out into the counties to better integrate developments nodes into the network. In addition to mass transit there is an ever growing network of scooters, e-bikes rideshare and bicycles that are sharing the roads.

The benefit of many of these alternative transit modes is that they reduce parking requirements.

This is especially impactful in the urban core but benefits all developments that are trying to promote density.

Corporate Change Real Estate Strategies

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Richmond Area Opportunity Zones, an conomic development tool that allows people to invest in distressed areas in the United States.spurring economic growth and job creation in low-income communities while providing tax benefits to investors.

Amenities The ability to access amenities and services within walking distance of the office has been trending in importance for the last decade, and the pandemic has only elevated its importance to employees and leadership. The term amenities encompasses a broad range of things, from traditional corporate gyms to outdoor space, to food and beverage to personal services.

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Site Selection Criteria The first step in developing a new office space is selecting a site that supports operations, staff, and clients. This process is thorough and catered to an organization’s specific needs, taking into account a variety of factors including location, growth models, transportation, amenities, sustainability, and tax incentives.

Prior to choosing a site, a company must evaluate workplace and real estate trends and shifts within key demographics (like staff or clientele) and understand the how those developments might impact site selection. With evolving perspectives on work following the COVID-19 Pandemic, the ideal office of today is not that of yesterday.

The re-imagining of the downtown business district is a phenomenon that has accelerated in the past two years. In Bloomberg’s The Death and Life of the Central Business District they report, “As 2020 began, the 21 most important urban business districts in the world housed 4.5 million workers in 100 million square meters of office space.” Within months, however, the COVID-19 pandemic shut down offices everywhere, leaving business districts especially quiet. Even as the world returns to normal, that dramatic shift to hybrid work has had lasting impacts on organizations and workers.

Part of the appeal to employees is the ability to cluster activities and tasks with their work day. Some of that can be accomplished within a company’s own space, either through direct provision of services or corporate concierges.

Otherwise, settling at a site that offers proximity to amenities outside of the office that are accessible through short drives, walking, or biking is an ideal solution. Since services follow people, the density of workers alongside residents supports this type of live, work, play space. We see this trend as a strategy in new urban and suburban developments as well as in the repositioning of SODA older FLATS suburban corporate parks.

Location The site selection process begins with identifying factors that will influence the selection. Some of those listed above are common; staff location, site access, amenities, tax incentives etc. These fundamental factors are usually out of the control of a company to change. Secondary factors such as zoning, entitlement process, site features, utilities etc. can be changed or modified in most cases.

So the initial search will focus on addressing the fundamental factors that need to be satisfied and then layering on the secondary factors that may help prioritize the options available.

In regards to location, it’s important to consider where the competition has settled. Strategically positioning an organization near potential clients and primary competitors strengthens visibility within a company’s industry. The relevance of these considerations is especially apparent in our own backyard. Of the over thirty Virginia based Fortune 500 and 1000 companies, a significant majority are located in Richmond and Northern Virginia. As for Central Virginia, the Greater Richmond Partnership found that two-thirds of the largest employers are located in Richmond or Henrico. Looking at the distribution of these organizations validates the opportunities and relevance that certain locations present.

Sustainability The site an organization selects can also provide opportunities for engaging in sustainable practices and finding ways to tell a sustainability story. Environmentally-conscious approaches to site selection, office design, and an organization’s operations can validate company, client, and employee values.

When discussing sustainability, a few of the major factors are energy use, microclimates, thermal comfort, structural systems, building lifecycle, and material selection. One of the first considerations is whether to start with a clean slate or an existing building. Refreshing an existing site rather than pursuing a greenfield development limits far-reaching environmental impacts of the design and construction process.

Specifics like landscaping, building position, insulation, and window placement all contribute to energy use and the overall microclimate of a building in passive and active ways.

Sustainable developments can be furthered and paid for through tax credits and financial incentives. The Federal Internal Revenue Service and energy and utility organizations like Dominion Energy offer rebates, tax credits, and property tax exemptions for efficient heating and cooling systems, lighting controls, energy efficient practices, and renewable energy implementation, all of which can also be found on Virginia Energy Sense’s website.

Case Study SMBW has worked through this process with a number of clients. For one recent client issues including staff consensus, amenities, brand visibility and tax incentives were essential to finding the right site for their operation.

This client had a single opportunity to build a new HQ facility that would stand for several generations as the home for the organization.

Like many service organizations, staff is critical to the success of the mission. In addition, donor support and financial security is critical to the long term planning for the organization.

Understanding how workers will react to the changes involved in moving to a new site can prevent complications down the road. In this project, the client anticipated their employees would be challenged by the move. The staff was coming from a suburban location to an urban location. There was concern around parking, safety and commute times. Thru staff surveys and mapping we were able to address the concerns. In addition we were able to highlight the benefits of the new location.

These included better proximity to their clients, better visibility in the market they serve and better access to amenities that will enrich staff.

Beyond staff consensus, the organization needed to address donor support and a stable financial structure that would ensure the long term viability for the organization.

Donors needed a site that would situate the organization near the client base. They also were focused on the visibility of their brand in the community. These goals were sometimes in conflict. It was critical for the project team to help the client understand the trade-offs and how they would impact different goals they were trying to achieve. Sometimes these were quantifiable as dollars and sometimes they were qualitative as in brand value and visibility.

Closing Out Real estate strategies offer many opportunities for organizations to grow and adapt. The selection of a site has the potential to foster a company’s brand and values, create enthusiasm and consensus among staff, and help an organization lay a foundation for future success. It also shows how a company can see the trend line in real estate development and the generational influence as factors in deciding where to locate.

Corporate REVERB Real Estate Strategies

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