New CoStar Group research center to employ 732 people
In one of the biggest office deals in downtown Richmond this year, CoStar Group Inc., a major provider of real estate information and analysis, plans to establish a research operations headquarters that is expected to create 732 jobs.
State and local officials said the $8.17 million project will have an economic impact of $250 million on the Richmond area.
CoStar will lease 125,000 square feet in the top three floors of the Foundry Park building on the north bank of the James River at 501 S. Fifth Street. The research facility will share the building with the headquarters of WestRock, a Fortune 500 paper company formed after the merger of MeadWestvaco and RockTenn in July 2015. Before the merger, the building was MeadWestvaco’s headquarters.
Gov. Terry McAuliffe announced the project Monday in a ceremony at the state Capitol, presenting Andrew Florance, the founder and CEO of CoStar, a state flag that flown above the 228-year-old Capitol.
McAuliffe approved a $4 million grant from the Commonwealth’s Opportunity Fund for the project. CoStar also is eligible to receive state benefits from the Virginia Enterprise Zone Program, administered by the Virginia Department of Housing and Community Development. Suport for the company’s employee training activities will be provided through the Virginia Jobs Investment Program.
Founded 30 years ago, CoStar has been recognized as one of the country’s fastest growing companies. Its corporate headquarters is Washington, D.C. Currently, CoStar employs about 3,300 employees worldwide. In an average month, CoStar says about 25 million people visit its websites to buy, lease or find information about office, industrial and retail properties.
Florance said Richmond was picked for the research center after a yearlong search that initially involved 20 cities across the country. The other two finalists in the selection process were Kansas City, Mo., and Charlotte, N.C.
CoStar expects to ramp up quickly in Richmond. It expects to hire 20 people this week and open its Richmond office next month. It is expected to have 200 employees by the end of the year. Most of the employees will be local hires. Fifty to 75 veteran employees will be transferred from locations such as San Diego, Glasgow and London.
Florance said that, at full employment, the Richmond site will have about as many employees as CoStar’s Washington headquarters.
Asked why Richmond was picked, Florance quipped, ”because it has the best restaurants in the U.S.”
He quickly added that the presence of universities in the area was a key element. He said the company needs a highly educated, skilled workforce and it also plans to work with schools as research partners.
“Higher education in Richmond is fantastic,” Florance said, citing not only the Virginia Commonwealth University and the University of Richmond but also the University of Virginia, Virginia Tech and James Madison University.
Florance said other factors in the company’s choice were cost of living and quality of life, including Richmond’s growing arts scene.
The CEO stressed these factors are important because the company wants to retain its employees in part because of the importance of their relationships with CoStar customers.
Positions at the Richmond research facility will include market analysts and software developers.
Florance said that while CoStar would have a big impact on the Richmond area, it also is a global economic engine helping support billions of dollars of transactions.
The news was welcomed by local real estate brokers who are familiar with CoStar’s brand.
Brokers Amy Broderick and Brian Berkey of Cushman & Wakefield |Thalhimer in Richmond represented CoStar in the lease, locally. Ken Campbell, Kit Tyler, and Matt Hamilton of Colliers/Richmond represented WestRock.
Broderick said, “The story from our perspective is that it shows that downtown Richmond is becoming a big draw for the millennial workforce. That’s the target for CoStar. They’re looking for young, well educated workers, and they see the value that downtown Richmond brings to that search.”
In addition to local institutions of higher learning, Broderick said CoStar asked for data on the number of apartments downtown. “They looked at those numbers and that the apartments are drawing the younger population who can then walk to the building.”
Andrew Cook, director or research for CBRE/ Richmond, said the deal would help boost what has been a soft downtown office market. “It’s very exciting. It’s going to do a lot for downtown,’” he said.
Recently, downtown’s Central Business District has been glutted with space. The relocation last year of the McGuireWoods law firm to Gateway Plaza left a big hole in the James Center. Riverfront Plaza also saw a number of downsizings in 2015.
“This year when WestRock announced they were putting up two floors for sublease, that continued to overwhelm the downtown market with too much space, which was driving down rents,” said Cook. “The CoStar lease does take some space off the market.”
The 310,000-square-foot WestRock building is considered Class A “plus, plus,” said Cook, because it’s relatively new — built in 2009 — compared to other office towers and has prime views of the James River.
Asked if Richmond’s major real estate brokerages should be concerned about losing research talent, Cook said, “It’s a bit early, but I assume that would be on the minds of local market directors.”