Perhaps Phil Conein sums it up best. Asked to explain why his company, Tec Head, settled downtown rather than in a suburban office park, he doesn’t spout statistics, tax incentives or economic theory. He chose the Shockoe Bottom area of Richmond, "because it has a good vibe," including a grab bag of history, Bohemia and convenience. "This is where the business and commerce of Richmond started. It’s a very historical area," chirps Conein, alluding to William Byrd’s layout of Richmond in 1737. "The Bottom is becoming known as a very creative place for designers and agencies. My employees love it down here. About 20 percent of them live nearby, so they can either walk to work or ride their bikes to work."

VCU's engineering school anchors the school's Main Street corridor. Photos courtesy Richmond Times-Dispatch

This new breed of employee – the technology professional living in newly rehabbed loft apartments along the city’s riverfront and biking in jeans to the office – is reshaping Richmond’s image as a stodgy, conservative town. Start-up technology and Internet companies aren’t looking for upscale offices in Innsbrook, Arboretum or other suburban business complexes. Paralleling trends in San Francisco and other Knowledge Economy towns, they are taking space in rehabilitated warehouses and other historic buildings. "We were one of the first companies to move to the Bottom in 1991," says Conein, whose company provides information technology staffing and Web-development services. "We did it because the rent was cheap. But we also felt that Shockoe Bottom had a lot of promise."

Not so in the 1980s. Back then, promise was hard to come by. A decaying inner city triggered an exodus from downtown. Longtime Richmond business landmarks folded or left for greener pasture. The retail stretch of Broad Street resembled a ghost town – in some areas, it still does – especially after Miller & Rhoads and Thalhimer’s closed their downtown department stores. City Hall’s efforts to revive downtown retail were expensive fiascos: Main Street Station (originally opened as a shopping mall and later turned into state offices) and Sixth Street Marketplace (a city subsizided mall that has never met revenue projections) proved that politicians had no business getting into the development business. Meanwhile, despite private-sector efforts to convert the old Tobacco Row warehousing district into a residential com-

plex, the city’s high crime rate — at one point Richmond’s homicide rate made it one of the top murder capitals of the country—discouraged people from even contemplating living downtown.

The biggest ray of hope through most of the 1990s was the continued presence of the city’s financial institutions. Then, in a series of transactions in 1997 and 1998, out-of-state holding companies acquired Richmond’s homegrown banks and brokerage houses, calling into question the business community’s commitment to the central business district. Despite one of the strongest economic expansions in U.S. history, downtown Richmond hasn’t seen the construction of a new office tower in years. Yet since 1997 more than $1.5 billion has been spent on new construction projects downtown and its immediate periphery.

What’s going on? Aggressive building by Virginia Commonwealth University accounts for a sizable chunk of that sum, but the rest of the investment has come in dribs and drabs, representing a broad grassroots support for the downtown area.

A floodwall completed in 1994 may be the single-biggest factor, stimulating the revitalization of Shockoe Bottom as an entertainment district. Prior to its construction, area businesses avoided locating there for fear of flooding. "Things in the last 10 years have changed a lot in Shockoe Bottom and Shockoe Slip," observes David Northam, property manager with McCormack Baron Management Services, the first company to redevelop tobacco warehouses into apartments. "The floodwall permitted business owners to get flood insurance that previously they couldn’t afford." The emergence of Central Virginia’s lively restaurant and nightclub scene then made the area appealing to the singles crowd. Young people wanted to work downtown and, thanks to the city’s success in bringing down the crime rate, live downtown.

A prime example is Experient Technologies, an Internet start-up that provides mobile e-learning software. "We asked our employees what they thought, and 90 percent of them said they really wanted to be downtown instead of in the West End," says CEO Michael Glotz. "That really shocked me. But they said they liked the idea of being able to walk around downtown during lunch hour."

Typical downtown buildings.

Glotz originally planned to move to a rehabbed building facing the Canal turning basin, but the renovations took longer than anticipated. The city’s zoning and building codes, designed more for suburban-style growth, created problems for the developer. Desperate for space to accommodate his fast-growing company, Glotz announced he had no choice but to leave downtown for an office in Innsbrook. Alarmed, city officials sprang into action. "The collective force of the city was after us to stay in downtown Richmond," he says. "The city really swung us with its enterprise zone incentives."

Businesses locating downtown can benefit from real estate tax abatement, property-improvement tax credits, cash incentives, job training and other economic blandishments. But the city no longer has the same interest in priming the economic pump by exclusively investing its own funds, says John Woodward, economic development director. Skittish over city-backed bombs like the Main Street Station shopping center and Sixth Street Marketplace retail shops, the city expects private developers to assume the burden – and risk – of making projects work. "The biggest difference between then and now," says Woodward, "is we’re not putting all our eggs in one basket. We have multiple projects in all quadrants of downtown. Instead of just (using) big government spending, we’re trying to do projects that are a mix of the public and private sectors."

The Virginia Biotechnology Research Park is a case in point. Formed in conjunction with VCU, the state and the city, the six-building facility houses 35 private companies and research organizations that employ about 900 people. The biotech park serves as a breeding ground for new ideas and technology transfer. Coupled with a city-sponsored business incubator, which is in its infancy, and a private business accelerator, the biotech park gives Richmond a "great opportunity to build multi-nodal technology in the downtown area," notes Robert T. Skunda, the park’s president and chief executive officer.

Richmond's Canal Walk: a downtown development with (San Antonio) Texas-sized aspirations.

A few blocks to the south, construction on a $160 million expansion of Richmond Center is snarling traffic with its torn-up streets. The 625,000-square-foot facility is considered an anchor for plans to resuscitate one of the city’s most blighted areas: the Broad and Grace street corridors.

The expansion also reflects a rare feat in modern urban government: regional cooperation. While downtown and suburban leaders wrangle over infrastructure improvements in other cities, the city of Richmond and counties of Chesterfield, Henrico and Hanover have bought into the logic that bringing more conventions and tourists to the region benefits everyone. The four localities are funding the Richmond Center expansion jointly.

On the western edge of downtown, VCU appears to be single-handedly trying to revive the midtown Broad Street corridor. The university raises the hackles of some preservationists for its willingness to tear down buildings viewed as historic, but many residents of the neighboring, upscale Fan district see the development as positive. The school is adding a $27 million Life Sciences Center and a $65 million Gateway Center nearby and already has spent more than $50 million erecting the 7,500-seat Siegel Center, School of the Arts and a welcome center.

Another element of a hoped-for tourism boom lies in ambitious plans to convert 1.25 miles of unsightly industrial riverfront into a tony mix of residential and office development reminiscent of the canal development in San Antonio, Texas. More than a decade of painstaking property assembly came to fruition with the debut of Richmond’s Canal Walk, a meandering walkway along the banks of the Haxall and Kanawha canals. The 32-acre development along the Walk is one of the largest and most desirable tracts open for urban development on the East Coast. Economic impact studies indicate the riverfront development eventually could anchor as many as 6,000 new jobs downtown.

Private developer Fulton Hill Properties is awaiting final approval on federal historic tax credits for rehabilitating the former Lady Bird Hat factory, says James McCarthy, executive director of Richmond Riverfront Redevelopment Corp. The building, situated near a resurrected 19th century canal-boat-turning basin, is slated to house retail shops and restaurants. "We’re not building a theme park," says McCarthy, whose organization oversaw the canal restoration project. "This is a long-term development where the canal and canal walk act as a linear spine. We’ll have 11 sites along the path of the two canals when it’s completed. The sites will be privately owned. What we’re after are private developers to develop urban uses on canal side."

Despite the flurry of activity, Richmond’s downtown still faces significant obstacles. Redeveloping archaic buildings is expensive, meaning that a downtown location will continue to be an expensive one. Overcoming suburbanites’ negative images also remains a constant challenge. Until the city can improve its schools, affluent families with school-age children are likely to prefer living in the counties. Parking downtown is still a problem, and the city’s recent efforts to begin enforcing downtown parking regulations – after years of letting them slide – isn’t endearing to visitors.

A second challenge is more deeply rooted: finding a place at the table for Richmond’s growing minority-business community. "The economic empowerment of the minority business community is critical," Woodward contends. "Until we reach a point where folks feel comfortable with that, our full potential for growth is going to be inhibited."

But there’s no denying the air of optimism. Hip, young knowledge workers like working in an urban environment. The growth of a vibrant technology industry portends continued demand for downtown office space, especially with phone companies installing massive broadband capacity through the central business district. By sticking to fundamentals – like controlling crime and investing in infrastructure – City Hall is playing a catalytic role, not a distracting one. If the city can find a way to ensure that prosperity isn’t just a white, yuppie phenomenon, downtown’s future would seem bright.

Return to Virginia Business - March 2001