Photo courtesy of Colliers
In a market flush with available downtown office space, and after sidestepping the foreclosure auction block, the James Center is banking on new owners and a team of brokers to give it a new lease on life.
Colliers International announced in March that it had been picked to handle leasing at the 986,000-square-foot, three-building complex at 901, 1021 and 1051 E. Cary St.
Colliers was tapped by LNR Partners, a company that acts as the special servicer of big, troubled commercial mortgages. LNR was hired by the new owners of the James Center, GMACC 2006-C1 East Cary Street LLC, which took over the office complex in March in a transaction done by transferring the deed in lieu of foreclosure after the previous owners defaulted on two loans totaling $150 million.
Now, the Colliers team, consisting of Austin Newman, Christopher Wallace and Andrew Fergusson, is crafting its strategy of how to fill the complex’s 330,000 square feet of vacant space, which amounts to one-third of all the space between the three buildings.
Austin Newman
“When you use terms like ‘auction’ and ‘foreclosure’ it makes people nervous,” Newman said, reiterating that the James Center never made it to foreclosure. “We have a new owner that is looking forward to enhancing the asset in terms of what we already have, making it better and trying to be aggressive to secure new tenants given the amount of vacancy we have.”
In addition to shedding any perceived stigma left over from the previous owner’s troubles, the brokers are also working to find the best rates for the available James Center space.
Newman said rental rates under the new ownership haven’t been set yet.
“Our mindset is not to lose a tenant over economics if we can help it,” Newman said on the question of leasing rates.
He said Colliers plans to do tiered-rental rates with higher floors fetching higher rates, adding that in the past a blanket rate has been applied to the James Center buildings.
“The thought is that with some of the lower floors you might not have that view that justifies that higher rate,” he said.
The average rate for downtown is $22.31 per square foot per year, which is about $2 higher than the average for the Richmond market overall, according to a report by CBRE | Richmond. The average asking rate for suburban space in 2016 is $18.43.
In turn, suburban office buildings have done better at luring tenants to available space.
The suburbs absorbed 448,579 square feet in 2015, according to CBRE’s report, while downtown absorbed 37,157 square feet.
The vacancy rate for Richmond office space is currently at 12 percent. In downtown, the vacancy rate is 14 percent with 1.31 million square feet on the market. In addition to the James Center, the SunTrust Center, Riverfront Plaza and Bank of America Center all have vacancies to fill.
CBRE | Richmond broker Will Bradley, who handles office space in the area, said the demand for downtown office space has yet to match the supply.
“We have had new supply in class A buildings, while class B is shrinking, but overall there isn’t enough demand to fill all the vacancy,” Bradley said, adding that he has seen positive activity downtown. “It’s a challenge to recruit companies when you’re competing with many markets.”
Some of James Center’s atrium space.
Newman said he is hoping “a lack of quality options” in the suburbs will translate into more demand for downtown’s office offerings. He said the upside to the James Center is its central location. It has its food court, and its courtyard has historically been a popular place for downtown workers to eat lunch, weather permitting.
“There’s a non-monetary value for a tenant to walk downstairs and walk into a client or potential client in the lobby of the James Center,” Newman said. “There’s something to be said of walking out of your office and not having to get into the car and have multiple dining and entertainment options, versus if you’re in Innsbrook, you have to get in the car.”
To attract tenants, Newman said Colliers is considering upgrades to seating, adding free Wi-Fi in common areas, and installing a new awning by the Wendy’s in One James Center. The top floor of One James Center, where the Bull & Bear Club used to be, has been gutted in preparation for a new look and use. It has its own heating and cooling system that’s separate from the rest of the building.
Mark Douglas, a principal with Cushman & Wakefield | Thalhimer, said another challenge for downtown office space is a shift in what some companies are looking for from new office space. He said people now prefer high ceilings, fun amenities and a well-stocked fridge. But none of these compare to a concern that cuts across all manner of person.
“The single biggest challenge is parking,” Douglas said, adding that monthly parking rates downtown drive some companies to the suburbs.
Douglas said so-called adaptive reuse projects could be in the future for some of downtown’s surplus office space. Douglas cited examples like the former Signet Bank Headquarters at 800 E. Main St. being converted to apartments and the 18-story former office tower at 700 E. Main St. transforming into a hotel as recent examples.
Newman acknowledged that parking downtown is a challenge and changing tastes have influenced what office seekers are looking for, but he disputed the idea that traditional office buildings can’t meet demand for unconventional work space.
“It’s no secret that millennials are changing the way companies address their workplace environment,” Newman said. “The notion that you can’t make the space inside a high-rise building a funky and creative office to appeal to a younger workforce – I don’t buy that. Go interview a good architect. It can be done.”
Colliers is hoping to lease out James Center space in 15,000- to 30,000-square-foot batches, Newman said. That’s in part because there aren’t many large companies eyeing Richmond for a big 100,000-square-foot office.
“The biggest challenge is the amount of product,” he said of downtown office vacancy overall. “We’re going to chip away at it.”
When asked what leasing milestones Colliers hopes to hit in the James Center’s immediate future, Newman refrained from trying to read the property’s tea leaves.
“That’s a crystal ball kind of question that’s difficult to answer,” Newman said. “We’re seeing some pretty good activity, and hopefully we can win over some of these prospects.”
Photo courtesy of Colliers
In a market flush with available downtown office space, and after sidestepping the foreclosure auction block, the James Center is banking on new owners and a team of brokers to give it a new lease on life.
Colliers International announced in March that it had been picked to handle leasing at the 986,000-square-foot, three-building complex at 901, 1021 and 1051 E. Cary St.
Colliers was tapped by LNR Partners, a company that acts as the special servicer of big, troubled commercial mortgages. LNR was hired by the new owners of the James Center, GMACC 2006-C1 East Cary Street LLC, which took over the office complex in March in a transaction done by transferring the deed in lieu of foreclosure after the previous owners defaulted on two loans totaling $150 million.
Now, the Colliers team, consisting of Austin Newman, Christopher Wallace and Andrew Fergusson, is crafting its strategy of how to fill the complex’s 330,000 square feet of vacant space, which amounts to one-third of all the space between the three buildings.
Austin Newman
“When you use terms like ‘auction’ and ‘foreclosure’ it makes people nervous,” Newman said, reiterating that the James Center never made it to foreclosure. “We have a new owner that is looking forward to enhancing the asset in terms of what we already have, making it better and trying to be aggressive to secure new tenants given the amount of vacancy we have.”
In addition to shedding any perceived stigma left over from the previous owner’s troubles, the brokers are also working to find the best rates for the available James Center space.
Newman said rental rates under the new ownership haven’t been set yet.
“Our mindset is not to lose a tenant over economics if we can help it,” Newman said on the question of leasing rates.
He said Colliers plans to do tiered-rental rates with higher floors fetching higher rates, adding that in the past a blanket rate has been applied to the James Center buildings.
“The thought is that with some of the lower floors you might not have that view that justifies that higher rate,” he said.
The average rate for downtown is $22.31 per square foot per year, which is about $2 higher than the average for the Richmond market overall, according to a report by CBRE | Richmond. The average asking rate for suburban space in 2016 is $18.43.
In turn, suburban office buildings have done better at luring tenants to available space.
The suburbs absorbed 448,579 square feet in 2015, according to CBRE’s report, while downtown absorbed 37,157 square feet.
The vacancy rate for Richmond office space is currently at 12 percent. In downtown, the vacancy rate is 14 percent with 1.31 million square feet on the market. In addition to the James Center, the SunTrust Center, Riverfront Plaza and Bank of America Center all have vacancies to fill.
CBRE | Richmond broker Will Bradley, who handles office space in the area, said the demand for downtown office space has yet to match the supply.
“We have had new supply in class A buildings, while class B is shrinking, but overall there isn’t enough demand to fill all the vacancy,” Bradley said, adding that he has seen positive activity downtown. “It’s a challenge to recruit companies when you’re competing with many markets.”
Some of James Center’s atrium space.
Newman said he is hoping “a lack of quality options” in the suburbs will translate into more demand for downtown’s office offerings. He said the upside to the James Center is its central location. It has its food court, and its courtyard has historically been a popular place for downtown workers to eat lunch, weather permitting.
“There’s a non-monetary value for a tenant to walk downstairs and walk into a client or potential client in the lobby of the James Center,” Newman said. “There’s something to be said of walking out of your office and not having to get into the car and have multiple dining and entertainment options, versus if you’re in Innsbrook, you have to get in the car.”
To attract tenants, Newman said Colliers is considering upgrades to seating, adding free Wi-Fi in common areas, and installing a new awning by the Wendy’s in One James Center. The top floor of One James Center, where the Bull & Bear Club used to be, has been gutted in preparation for a new look and use. It has its own heating and cooling system that’s separate from the rest of the building.
Mark Douglas, a principal with Cushman & Wakefield | Thalhimer, said another challenge for downtown office space is a shift in what some companies are looking for from new office space. He said people now prefer high ceilings, fun amenities and a well-stocked fridge. But none of these compare to a concern that cuts across all manner of person.
“The single biggest challenge is parking,” Douglas said, adding that monthly parking rates downtown drive some companies to the suburbs.
Douglas said so-called adaptive reuse projects could be in the future for some of downtown’s surplus office space. Douglas cited examples like the former Signet Bank Headquarters at 800 E. Main St. being converted to apartments and the 18-story former office tower at 700 E. Main St. transforming into a hotel as recent examples.
Newman acknowledged that parking downtown is a challenge and changing tastes have influenced what office seekers are looking for, but he disputed the idea that traditional office buildings can’t meet demand for unconventional work space.
“It’s no secret that millennials are changing the way companies address their workplace environment,” Newman said. “The notion that you can’t make the space inside a high-rise building a funky and creative office to appeal to a younger workforce – I don’t buy that. Go interview a good architect. It can be done.”
Colliers is hoping to lease out James Center space in 15,000- to 30,000-square-foot batches, Newman said. That’s in part because there aren’t many large companies eyeing Richmond for a big 100,000-square-foot office.
“The biggest challenge is the amount of product,” he said of downtown office vacancy overall. “We’re going to chip away at it.”
When asked what leasing milestones Colliers hopes to hit in the James Center’s immediate future, Newman refrained from trying to read the property’s tea leaves.
“That’s a crystal ball kind of question that’s difficult to answer,” Newman said. “We’re seeing some pretty good activity, and hopefully we can win over some of these prospects.”