Owens & Minor moving out of Riverfront Plaza, adding to sublease market

Owens & Minor has exited its call center at Riverfront Plaza. The Fortune 500 company is seeking to sublease its 90,000 square feet of office space there. (BizSense file)

Apparently content with its employees’ remote-work productivity, a local Fortune 500 company says it doesn’t have much use for its downtown office space anymore.

Mechanicsville-based healthcare logistics firm Owens & Minor has pulled the plug on its call center at Riverfront Plaza and is now seeking tenants to sublease the space it moved into three years ago.

“Owens & Minor continues to invest in our Richmond presence, including upgrades and renovations to our Mechanicsville headquarters and our Ashland distribution center. We have, though, placed our Riverfront leased location on the market for sublet. It is a great site that will serve future tenants extremely well,” a company spokeswoman said in an email last week.

Like other firms, Owens & Minor shifted office workers to remote work in response to the coronavirus pandemic. As the year wore on, the company said it found the downtown call center employees adapted well to a work-from-home setting. That prompted the decision to leave Riverfront Plaza, the spokeswoman said.

“As 2020 progressed, the COVID-19 pandemic compelled us to reevaluate our call center operations. The performance of our call center teammates in the work-from-home era has been spectacular, and the teammates requested that we carry that new business model into the future. We have recently made the decision to exit from our call center location in downtown Richmond,” the spokeswoman said.

The health care logistics company signed on in 2017 for a 90,000-square-foot office across four floors inside Riverfront Plaza at 951 E. Byrd St. The move was heralded at the time as a big get for the downtown office market, as the company was to bring 200 workers in the near term and 300 more long-term.

At the time the company announced it would invest $15 million in the office over several years. The company didn’t respond to an inquiry about whether that happened or how many call-center employees are affected by this latest change to move out of Riverfront.

As part of the 2017 deal, the state approved a grant of $1.5 million from the Virginia’s Commonwealth Opportunity Fund to help with the expansion, and Owens & Minor was said to be eligible for benefits through the Virginia Enterprise Zone Program and Virginia Jobs Investment Program funding and services.

A Virginia Economic Development Partnership spokeswoman didn’t respond to an inquiry about how the company leveraged those resources.

Owens & Minor said it has already sublet two of its suites in the building, though the spokeswoman wouldn’t identify the new tenants.

The company is still seeking tenants for about 50,000 square feet of space, according to a marketing flyer. Brett McNamee and Jimmy Cunneen of Divaris have the listing.

Riverfront Plaza is in line to lose another tenant next year, when investment firm Raymond James & Associates will move out in favor of the new Westhampton Commons development at Libbie and Patterson avenues in the West End.

Owens & Minor reported year-to-date net revenue of $6.1 billion in 2020, as part of its third quarter results announced Nov. 2. During the same nine-month period last year, the company reported net revenue of $7 billion. The company announced net revenue of $2.2 billion for the three months ended Sept. 30. During the same time period last year, the company reported $2.3 billion in net revenue.

Another notable local office space to hit the market in recent weeks is the 13,000-square-foot space in Scott’s Addition that’s being vacated by consulting firm Frontier Project. The firm also cited remote work as part of the reason for it moving out.

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Jeff Crook
Jeff Crook
20 days ago

I have no dog in the fight, but if the “Net Revenue” numbers left at the end of the article are intended to imply that O&M is reducing its footprint because it is struggling …. I would encourage readers to take a look at the company’s Operating Income for the periods listed. The rebound in the stock price is also revealing. The article almost made it there.

sam nelson
sam nelson
19 days ago
Reply to  Jeff Crook

Jeff. I have not followed OM’s financial performance for sometime. The stock was an a continuous slide pre-COVID and it has since bounced along. Its market is very competitive will consolidation. Net margin has compressed over time. Is the rebound temporary boost due to the Pandemic?

Zirkle Blakey
Zirkle Blakey
20 days ago

For Mr. Milam – Bruce – do you see this as a trend, and if so what impact will it have on the CRE market – I am hearing from multiple people that they are looking to downsize their office space, or sell a class a space and move to a smaller, less expensive property. In discussions with peers there seems to be a lot of momentum with this concept – but some are worried about longer term consequences on their workforce (training, corporate culture, etc.) Will be interesting to watch!

Tim Harper
Tim Harper
20 days ago
Reply to  Zirkle Blakey

Excellent question. So much of the impetus behind the Richmond 300 Plan revolves around the Pulse and its ability to take people to and from downtown. These days the only people physically going to and from downtown in large numbers are employees, faculty, and students at the VCU medical center.

charles Frankenhoff
charles Frankenhoff
20 days ago
Reply to  Zirkle Blakey

yeah. I don’t think anyone will close all their offices. But I do see them scaling back their office footprint, with a concomitant hit to marginal demand. It’s going to be interesting…

Ironically, hotels, which are getting slaughtered now, will probably come back. I bet office will consolidate a bit, or just stop expanding. And non-urban retail is going to get crushed by the secular change. I wonder what strip malls will look like in 20 years

sam nelson
sam nelson
19 days ago
Reply to  Zirkle Blakey

Zirkle. The local CRE data company, CoStar, performed a worst-case, best-case analysis (The Threat to Future Office…Working, Paul Leonard, 4/20/2020) based on a Gartner survey of 250 CFOs. If these CFOs’ strategies represent the market and they are fully implemented then the office vacancy rate might double. However, the impact of these strategies should be mitigated by the length of leases, normal demand growth, part-time worker practices, increased demand for temporary-workspace, legal issues, and a higher sq. ft. to worker ratio. Under the best-case scenario, these same factors might increase demand by 4.4% over three years. In short, the CoStar… Read more »

office vacancy COVID analysis.PNG
Zirkle Blakey
Zirkle Blakey
18 days ago
Reply to  sam nelson

thank you Sam!

charles Frankenhoff
charles Frankenhoff
20 days ago

oof. Office space is going to slowly get pummeled. I see more apt conversions downtown.

Michael Dodson
Michael Dodson
15 days ago

I wonder about call centers. As a customer this work from home has made calls to them worse as many never answer (Lowes) or put you in a call back queue only to call you from their personal phone (State Farm – the reps home/cell phone) and who answers numbers one does not know. But on the real estate side, I hear this will so many companies (including my own) that we will never return to our old footprints. They will just let leases expire and find smaller spaces for occasion office meeting and in-office work needs. But massive call… Read more »