Highwoods Properties, a major office landlord, has transferred the management and leasing responsibilities for its entire 2.2 million-square-foot Richmond portfolio to Cushman & Wakefield | Thalhimer. This strategic shift involves approximately two dozen properties and includes the transition of about 20 local Highwoods employees to the Thalhimer team.
The agreement, which became effective September 1, signals a significant change in how Highwoods operates within the Richmond market. The company will retain ownership of the assets while outsourcing day-to-day operations to a local real estate services firm.
Key Takeaways
- Highwoods Properties has outsourced management of its 2.2 million-square-foot Richmond office portfolio to Cushman & Wakefield | Thalhimer.
- The deal includes 25 commercial properties, primarily located in the Innsbrook and Stony Point areas.
- Approximately 20 Highwoods employees have transitioned to Thalhimer to continue servicing the portfolio.
- Highwoods' CFO cited Richmond's reduced scale within the company's overall portfolio as a key reason for the operational change.
- The move follows Highwoods' recent sale of a Stony Point office building to VCU Health for $16 million.
A Strategic Operational Pivot
Highwoods Properties, a real estate investment trust (REIT) based in Raleigh, North Carolina, has long been a prominent player in Richmond's commercial real estate landscape. The new arrangement with Thalhimer covers a substantial portfolio, with the majority of the properties located in the Innsbrook corporate park.
Under the terms of the deal, Thalhimer will now oversee all leasing, property management, maintenance, and administrative services for the Highwoods-owned buildings. This allows Highwoods to maintain its investment in the region without the overhead of a full-scale local office.
Brendan Maiorana, the Chief Financial Officer for Highwoods, explained the reasoning behind the decision. He noted that Richmond has evolved into a smaller component of the company's broader national footprint. Highwoods primarily operates in nine markets across the Southeastern United States.
"Having an office with a full team (there requires) … a certain investment in terms of that level of infrastructure. We felt like it was probably easier to have a firm like Thalhimer do the property operations, leasing, maintenance, all those things," Maiorana stated.
This move is part of a larger strategy for Highwoods. The company made a similar arrangement in Pittsburgh, Pennsylvania, where it handed over property management to the global real estate firm JLL. This indicates a model of retaining asset ownership in select markets while leveraging local expertise for operational management.
Portfolio at a Glance
- Total Size: 2.2 million square feet
- Number of Properties: 25
- Innsbrook: 20 buildings
- Stony Point: 4 buildings (approx. 371,000 sq. ft.)
- Shockoe Slip: 1 building (123,000 sq. ft. HQ of The Martin Agency)
Continuity and Personnel Transitions
A key aspect of the agreement is the integration of Highwoods' local team into Thalhimer's operations. Around 20 employees, who were responsible for the portfolio under Highwoods, have now become Thalhimer employees. This ensures that tenants and properties continue to be serviced by familiar personnel.
Eric Robison, President of Thalhimer, emphasized the smooth transition and the shared values between the two firms. In a statement, he noted the long-standing professional relationship that has existed between the companies for years.
"Thalhimer and Highwoods share many of the same core values and we are confident Thalhimer will be a good home for Highwoods Richmond," Robison said. He added that the transitioned employees will service the properties "the same way they always have."
Maiorana echoed this sentiment, confirming that Highwoods' ownership interest and commitment to its Richmond portfolio remain unchanged. The primary difference is the operational structure, which is now managed through Thalhimer's platform.
Key Leadership Changes
The transition also involves significant changes in leadership for the portfolio. Jane DuFrane, the longtime vice president and market lead for Highwoods in Richmond, is preparing for retirement after a 30-year career with the company.
Meanwhile, Kristie Inge, a veteran with over two decades at Highwoods, has moved to Thalhimer. She has assumed the role of Senior Vice President and will be responsible for leading the leasing efforts for the former Highwoods properties.
The Role of REITs in Commercial Real Estate
A Real Estate Investment Trust (REIT) like Highwoods Properties is a company that owns, and in most cases operates, income-producing real estate. REITs allow individuals to invest in large-scale property portfolios in the same way they invest in other industries – through the purchase of stock. To qualify as a REIT, a company must pay out at least 90% of its taxable income to shareholders as dividends, making them a popular choice for income-focused investors.
Market Context and Future Outlook
The operational shift comes at a time when the office real estate market is navigating significant changes. According to Highwoods' CFO, the company has not identified sufficient opportunities to expand its presence in the Richmond area, contributing to the decision to streamline local operations.
This strategic realignment also coincides with recent transactional activity. Shortly after the management deal was finalized, Highwoods completed the sale of a four-story office building in the Stony Point area to VCU Health for $16 million. Maiorana described this as a "select disposition" of a noncore asset.
He indicated that Highwoods will likely continue to engage in capital recycling, a common practice for REITs that involves selling certain properties to reinvest the proceeds into other assets or markets with higher growth potential. However, he clarified that any future sales would be within the company's normal course of business.
For Thalhimer, the agreement significantly expands its third-party management portfolio, solidifying its position as a dominant force in the regional commercial real estate services market. The addition of 2.2 million square feet of Class A office space represents a major strategic win for the Richmond-based firm.
The long-term implications for the Richmond office market remain to be seen. With Highwoods maintaining ownership, the properties will remain under institutional control. However, the day-to-day leasing and management decisions will now be driven by Thalhimer's local market team, potentially bringing a new perspective to leasing strategies and tenant relations across this significant portfolio.
