Comprehensive Housing Market Analysis for Richmond, …
C O M P R E H E N S I V E H O U S I N G M A R K E T A N A LY S I S
Richmond, Virginia
U.S. Department of Housing and Urban Development Office of Policy Development and Research As of June 1, 2016
Greensville
Madison Orange
Stafford Spotsylvania
King George Charles St. Mary's
Maryland Westmoreland
Fluvanna
Louisa
Goochland Powhatan
Hanover
Caroline
Virginia Essex Richmond
King Richmond
WilliaKming
and
Queen
Middlesex
Cumberland
Henrico
New Kent
Chesterfield
Amelia
Hopewell
Charles City
James City
York
Prince Edward
Nottoway
Colonial
Heights Petersburg
Prince George
Surry
Lunenburg Mecklenburg
Dinwiddie Brunswick
Sussex Southampton
Isle of Wight
Suffolk
Gloucester
Housing Market Area
The Richmond Housing Market Area (HMA) consists of 13 counties and 4 independent cities in central Virginia and is coterminous with the Richmond, VA Metropolitan Statistical Area. For purposes of this analysis, the HMA is divided into two submarkets: the Central Richmond submarket, which includes Henrico and Chesterfield Counties and the city of Richmond, and the Greater Richmond submarket, which includes Amelia, Caroline, Charles City, Dinwiddie, Goochland, Hanover, King William, New Kent, Powhatan, Prince George, and Sussex Counties and the independent cities of Colonial Heights, Hopewell, and Petersburg. The principal city of Richmond is also the state capital; it is approximately 100 miles south of Washington, D.C.
Summary
Economy
Economic conditions in the Richmond HMA are robust, with nonfarm payrolls growing by 23,800 jobs, or 3.7 percent, during the 12 months ending May 2016. Hiring was strong across several sectors, with more than one-third of the job gains in the professional and business services
Market Details
Economic Conditions................2 Population and Households......6 Housing Market Trends.............9 Data Profiles............................19
sector, which increased by 8,700 jobs, or 8.5 percent. During the 3-year forecast period, nonfarm payroll growth is expected to moderate to an average increase of 1.9 percent a year.
Sales Market
The sales housing market in the HMA is slightly soft but has improved significantly since the housing crisis of the late 2000s. During the 12 months ending April 2016, total home sales increased 10 percent, to 22,900, and the average home sales price increased 5 percent, to $243,600. During the 3-year forecast period, demand is estimated for 12,475 new homes (Table 1). The 1,640 homes currently under construction and some of the
estimated 15,800 other vacant units that may become available will meet a portion of that demand.
Rental Market
The rental housing market in the HMA is balanced--an improvement from 2010, when the market was soft. The overall rental vacancy rate is estimated at 5.9 percent, down from 8.9 percent in 2010. The apartment market is also balanced, and rents have increased an average of 3 percent annually from 2010 to 2016. During the next 3 years, demand is estimated for 6,475 new market-rate rental units (Table 1). The 2,890 units currently under construc tion will meet demand during the first year and a portion of the second year.
Summary Continued
2
Table 1. Housing Demand in the Richmond HMA During the Forecast Period
Richmond HMA
Central Richmond Greater Richmond
Submarket
Submarket
Sales Units
Rental Units
Sales Units
Rental Units
Sales Units
Rental Units
Total demand
12,475 6,475 8,675 5,725 3,800
750
Under construction 1,640 2,890
950 2,600
690
290
Notes: Total demand represents estimated production necessary to achieve a balanced market at the end of the forecast period. Units under construction as of June 1, 2016. A portion of the estimated 15,800 other vacant units in the HMA will likely satisfy some of the forecast demand. The forecast period is June 1, 2016, to June 1, 2019.
Source: Estimates by analyst
R i c h m o n d , VA ? C O M P R E H E N S I V E H O U S I N G M A R K E T A N A LY S I S
Economic Conditions
The Richmond HMA in central Virginia has a service-based economy, with concentrations in finance, law, government, and health care. In the early 20th century, the Federal Reserve Bank of Richmond was established in the HMA; today, it ranks third out of the 12 Federal Reserve Bank Districts in terms of assets, behind New York City and San Francisco. Capital One Financial Corporation is the largest private-sector employer in the HMA, with nearly 11,300 employees (Table 2). The HMA is also home to 1 of the 13 United States Courts of Appeals, making it
Table 2. Major Private-Sector Employers in the Richmond HMA
Name of Employer
Nonfarm Payroll Sector
Number of Employees
Capital One Financial Corporation Virginia Commonwealth University Health
System Authority Hospital Corporation of America Virginia
Health System Bon Secours Richmond Health System Wal-Mart Stores, Inc. Dominion Resources, Inc. Food Lion SunTrust Banks Inc. Altria Group Inc. Amazon
Financial activities Education & health services
Education & health services
Education & health services Wholesale & retail trade Transportation & utilities Wholesale & retail trade Financial activities Manufacturing Wholesale & retail trade
11,262 9,313
7,628
7,136 5,605 5,433 3,963 3,810 3,800 3,800
Notes: Excludes government-sector employers. The number of employees shown for Virginia Commonwealth University Health System Authority does not include the 5,978 public-sector employees at Virginia Commonwealth Unviersity.
Source: Richmond Times-Dispatch
a regional law center. In addition to the influence of those government entities, the influence of government on the HMA is furthered by the city of Richmond's being the state capital and by the HMA's abutting the Washington, D.C. metropolitan area. Major federal government employers include Fort Lee Army Base (AB) in the city of Petersburg and the Defense Supply Center in Chesterfield County, which, combined, employ nearly 15,000 military and civilian personnel and contractors. Fort Lee AB, in particular, has a significant impact on the southern part of the HMA by supporting 28,000 direct, indirect, and induced jobs and by having a combined economic impact of $2.4 billion on the six counties and independent cities that directly surround the base (University of Illinois at Chicago). The HMA has been a regional center for health care since the Virginia Commonwealth University (VCU) Medical Center was founded in the 1800s. Three of the five largest private employers in the HMA are in the healthcare industry: VCU Health System Authority, Hospital
Economic Conditions Continued
3
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Corporation of America (HCA) Virginia Health System, and Bon Secours Richmond Health System make up about one-fourth of the total jobs in the education and health ser vices sector. The presence of a large medical school, VCU Medical Center, and a skilled workforce has led to investment in biotechnology and re search of health care and life sciences. A concentration of those jobs is at the Virginia BioTechnology Research Park, adjacent to VCU Medical Center, with approximately 2,400 jobs among several organizations. The largest organization at the park is Altria Group, Inc. (parent company to Philip Morris USA), which is headquartered in Henrico County and has 3,800 employees throughout the HMA.
through 2007. The sector that added the most jobs during that time was the education and health services sector, which increased by an average of 3,500 jobs, or 5.5 percent, a year. The education and health services sector has been the fastest-growing sector in the HMA since 2000 (Figure 1), adding jobs each year. Offsetting some of the job growth from 2003 through 2007 were significant declines in the manufacturing sector, which shrank by an average of 1,800 jobs, or 3.9 percent, a year. Losses in the manufac turing sector have been widespread since 2000, but one of the largest single losses during this time occurred when Honeywell, Inc., sold its Richmondbased performance fibers business in 2004, resulting in the loss of 390 jobs.
The economy in the HMA is currently strong. The 12 months ending May 2016 had the fastest year-over-year rate of growth in nonfarm payrolls since 2000. After a slight decline in nonfarm payrolls in 2002, the economy added an average of 8,900 jobs, an increase of 1.5 percent, annually
Like the nation as a whole, the Richmond HMA began to lose jobs in 2008 as a result of the national recession and the housing crisis. Non farm payrolls in the HMA declined by an average of 10,300 jobs, or 1.7 percent, a year from 2008 through 2010, with more than three-fourths
Figure 1. Sector Growth in the Richmond HMA, Percentage Change, 2000 to Current
Total nonfarm payroll jobs Goods-producing sectors Mining, logging, & construction Manufacturing Service-providing sectors Wholesale & retail trade Transportation & utilities Information Financial activities Professional & business services Education & health services Leisure & hospitality Other services Government
? 50 ? 40 ? 30 ? 20 ? 10 0 10 20 30 40 50 60 70 80 90 Note: Current is based on 12-month averages through May 2016. Source: U.S. Bureau of Labor Statistics
Economic Conditions Continued
4
R i c h m o n d , VA ? C O M P R E H E N S I V E H O U S I N G M A R K E T A N A LY S I S
of those losses occurring in 2009. During the economic downturn, 9 of 11 sectors lost jobs, with the most significant losses in the goodsproducing sectors: the manufacturing and the mining, logging, and con struction sectors. Those two sectors combined accounted for approximately 70 percent of the losses from 2008 through 2010. Although the manufac turing sector had already been losing jobs before the downturn, losses accelerated to an average of 3,000 jobs, or 8.1 percent, a year. During that period, memory chip manufacturer Qimonda AG had layoffs and an eventual closing that resulted in a total loss of 2,550 jobs at its facility in eastern Henrico County. The decline in the mining, logging, and construction sector was even more severe than the decline in the manufacturing sector, in large part because of a significant slowdown in residential construction caused by the housing crisis. During the 3-year economic downturn, the mining, logging, and construction sector lost an average of 4,200 jobs, or a decrease of 10.4 percent, a year. In 2009, one of the largest builders in the HMA, Prospect Homes of Richmond, Inc., filed for chapter 11 bankruptcy after its home sales dropped 40 percent in 2008, forcing it to lower staffing levels by 70 percent. Although Prospect Homes of Richmond, Inc., was one of the most well-known casualties of the housing crisis, the industry as a whole suffered when the number of homes permitted declined by nearly one-half from the start of the housing crisis in 2007 through the bottom in 2010.
Despite an overall decline in jobs from 2008 through 2010, the education and health services and the government sectors experienced some growth.
During that time, the education and health services sector grew by an average of 3,500 jobs, or 4.5 percent, a year--a strong rate of growth, albeit a slowdown from the 5.5-percent rate from 2003 through 2007. All the gains in the education and health services sector from 2008 through 2010 were in the healthcare and social assistance industry. Growth in the government sector as a whole was slight, at an average increase of 200 jobs, or 0.2 percent, a year; however, the increase was not evenly distributed across the subsectors. During that time, the state government sector declined by an average of 500 jobs a year, whereas average annual increases in the federal and local government subsectors of 500 and 300 jobs, respectively, more than made up for the decline. Growth in the federal government subsector resulted largely from the implementa tion of the 2005 Defense Base Closure and Realignment (BRAC) Commission recommendations for Fort Lee AB. From 2005 to 2016, the number of active-duty military and civilian employees at Fort Lee AB increased by approximately 2,400 (not including on-base contractors). In addition to affecting an increase in government payrolls, the BRAC recommendations had positive effects on other sectors in the region. Two contractors in Chester field County were awarded more than $25 million in prime contracts directly from the federal government for BRAC-related construction projects, which helped to mitigate some of the losses in the construction industry during the housing crisis.
More than a year after the national recession officially ended in June 2009, total nonfarm payrolls in the HMA began to increase. From 2011 through 2015, nonfarm payrolls
Economic Conditions Continued
5
R i c h m o n d , VA ? C O M P R E H E N S I V E H O U S I N G M A R K E T A N A LY S I S
increased by an average of 11,900 jobs, or 1.9 percent, annually, with all the losses from the 3-year downturn recovered by 2014. Growth a ccelerated further during the 12 months ending May 2016, to an average increase of 23,800 jobs, or 3.7 percent, compared with the number of jobs in the previous 12 months (Table 3). The professional and business services sector is the largest sector in the HMA (Figure 2) and, of all the sectors, has contributed the most to the economic recovery in the HMA. From 2011 through 2015, the professional and business services sector increased by an average of 2,900 jobs, or 3.0 percent, a year, but, in the
Table 3. 12-Month Average Nonfarm Payroll Jobs in the Richmond HMA, by Sector
12 Months Ending
Absolute Percent
May 2015 May 2016 Change Change
Total nonfarm payroll jobs Goods-producing sectors Mining, logging, & construction Manufacturing Service-providing sectors Wholesale & retail trade Transportation & utilities Information Financial activities Professional & business services Education & health services Leisure & hospitality Other services Government
638,800 65,600 34,800 30,800
573,100 96,900 23,000 7,600 49,500
102,300 94,000 58,800 31,100
109,800
662,600 67,900 37,200 30,700
594,800 99,100 26,600 7,400 50,800
111,000 96,300 61,700 32,200
109,600
23,800 2,300 2,400 ? 100
21,700 2,200 3,600 ? 200 1,300 8,700 2,300 2,900 1,100 ? 200
3.7 3.5 6.9 ? 0.3 3.8 2.3 15.7 ? 2.6 2.6 8.5 2.4 4.9 3.5 ? 0.2
Notes: Numbers may not add to totals because of rounding. Based on 12-month averages through May 2015 and May 2016.
Source: U.S. Bureau of Labor Statistics
Figure 2. Current Nonfarm Payroll Jobs in the Richmond HMA, by Sector
Government 16.5%
Mining, logging, & construction 5.6% Manufacturing 4.6%
Other services 4.9%
Wholesale & retail trade 15.0%
Leisure & hospitality 9.3%
Transportation & utilities 4.0% Information 1.1%
Education & health services 14.5%
Financial activities 7.7%
Professional & business services 16.8%
Note: Based on 12-month averages through May 2016. Source: U.S. Bureau of Labor Statistics
past 12 months, the sector increased by an average 8,700 jobs, or 8.5 percent. Two large additions to this sector from 2011 through 2015 were Cuore Group, a call center and sales company that opened in the city of Midlothian in 2011, adding 772 jobs, and Aditya Birla Minacs, a business process outs ourcing company that opened in Henrico County in 2013, adding 700 jobs. The sector with the third fastest rate of growth during the 12 months ending May 2016 was the mining, logging, and construction sector, which increased by 2,400 jobs, or 6.9 percent, as resi dential construction increased. Since the recovery began, the sector increased by an average of 800 jobs, or 2.3 percent, a year from 2011 through 2015; however, payrolls in the sector remain 7,800 jobs below the 2007 peak. One of the more recent large-scale construction projects was the $10 million Bon Secours Washington Redskins Training Center, which opened in 2013 in downtown Richmond. The training center was estimated to have a $10.5 million economic impact on the HMA in 2013 (Center for Sport Leadership, VCU).
The three sectors to decline during the 12 months ending May 2016 were the manufacturing, information, and government sectors, which declined by 100, 200, and 200 jobs, or 0.3, 2.6, and 0.2 percent, respectively. The de cline in manufacturing is relatively unchanged from the 2011-through-2015 rate but is significantly slower than the 2008-through-2010 decline of 8.1 percent a year. Despite the continued manufacturing job losses since 2011, the Rolls-Royce Crosspointe advanced aircraft manufacturing and research facility in Prince George County added nearly 300 jobs. Losses in the government sector during the past 12
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