Directors Message Hampton Roads Real Estate Market Review and - - PDF document

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Old Dominion University Hampton Roads Real Estate Market Review and Forecast 2007

Presented by: E.V. Williams Center for Real Estate and Economic Development

Director’s Message

John R. Lombard, PhD

Assistant Professor, Department of Urban Studies and Public Administration, College of Business and Public Administration Director, E. V. Williams Center for Real Estate and Economic Development

A Message from the Dean

Nancy Bagranoff, DBA

Dean, College of Business & Public Administration, Old Dominion University

Executive Committee Executive Committee

Chair: Joyce Hartman Executive Director: John Lombard Vice Chair: Tom Dillon Programs Chair: Stephanie Sanker Publications Chair: Brian Dundon Membership Chair: Craig Cope Curriculum Co-Chairs: John Crunkleton, Brad Sanford Sponsorship Chair: Cliff Moore By-Laws Chair: Andrew Keeney Past Chair: William E. King At Large: Jonathan Guion Aubrey Layne

Sponsorship Committee Sponsorship Committee

Cliff Moore, W.M. Jordan Brad Sanford, Dominion Realty Advisors Larry Colorito, Axial Advisory Group

Program Committee Program Committee

Stephanie Sanker, GVA Advantis Joyce Hartman, Sperry Van Ness Peggy Koch, GVA Advantis David Chapman, Old Dominion University

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Research Committee

Brian Dundon, Brian J. Dundon & Assoc. John Lombard, PhD, ODU Beth Hancock, City of Chesapeake Joy Learn, Resource Bank Sandi Prestridge, City of Norfolk Maureen Rooks, Thalhimer Bradley Sanford, Dominion Realty Advisors Lane Shea, Harbor Group Kristi Sutphin, City of Portsmouth

Our Proud Sponsors

Atlantic Mortgage & Investment Axial Advisory Group Bank of America BB&T The Breeden Company Burgess & Nipple Cavalier Land, Inc. CB Richard Ellis Chesapeake Economic Development Cherry, Bekaert & Holland, LLP Clancy & Theys Clark Nexsen CMSS Architects Collins Enterprises Continental Realty Services, Inc. CoStar Group CREW Creative Office Environments Davenport - Lefcoe Development Dominion Realty Advisors Drucker and Falk, LLC Emporia - Greensville Industrial Development Corp. First American Title Insurance Company First Potomac Realty Trust Great Atlantic Management Company GVA Advantis Hampton Economic Development Harbor Group International

Our Proud Sponsors

Hayes, Seay, Mattern & Mattern, Inc. Kaufman & Canoles LandMark Design Group Laureate Capital Mortgage Bankers Liberty Property Trust McDonald Development Company Mideastern Builders The Morgan Real Estate Group NAI Harvey Lindsay Nancy Chandler & Associates, Realtors Newport News Economic Development Authority Norfolk Economic Development Portsmouth Economic Development Resource Bank Rose and Womble Realty Co. Runnymede Corporation S.L. Nusbaum Realty Company Sam Segar & Associates Sperry Van Ness Commercial Real Estate Advisors Suffolk Economic Development Sun Trust Real Estate Finance Group Thalhimer Cushman Wakefield Towne Bank Tri City Developers, LLC Virginia Beach Economic Development Vanasse Hangen Brustlin, Inc. Williams Mullen W.M. Jordan Company Wall, Einhorn & Chernitzer, P.C. Wexford Science & Technology, LLC

Special thank you to

Inside Business

for their sponsorship

• ver the past five

years.

Residential Market Review

• J. Van Rose, Jr. MIRM

President Rose & Womble Enterprises Principal Owner of Rose & Womble Realty Lifetime Teacher & Motivator Travels the country sharing his knowledge and unique perspective.

15 Year New Construction and Resale History

50 0 0 10 0 0 0 150 0 0 2 0 0 0 0 2 50 0 0 19 9 2 19 9 3 19 9 4 19 9 5 19 9 6 19 9 7 19 9 8 19 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6

Resale NC

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January New Home Sales 1994 - 2007

50 1 00 1 50 200 250 300 350 400 450

N u m b e r o f S a le s

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Year

Hampton Roads Housing Stats

• Average Price of SF New Home

$445,316

• An Increase of $38,048 or 9.3% in
• ne year
• Average Price of SF Existing Home

$270,511

• An Increase of $45,317 or 7.8% in
• ne year

$346,963 $557,004 $210,041 $301,537 $470,764 $169,227 $281,289 $448,731 $167,442

$0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000

VB Ches Suff Resale NC Diff

2006 Southside Average Closing Prices Resale and New Construction Single Family Detached Homes

$184,406 $270,955 $89,549 $221,057 $399,538 $178,481 $305,931 $430,514 $124,583 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 Ports Norf I/W Resale NC Diff

2006 Southside Average Closing Prices Resale and New Construction Single Family Detached Homes 2006 Peninsula Average Closing Prices Resale and New Construction Single Family Detached Homes

$193,421 $334,388 $140,967 $212,773 $337,119 $191,102 $357,686 $465,010 $107,324 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 $500,000 Hamp NN YC Resale NC Diff $390,943 $444,199 $53,256 $404,194 $363,733 ($40,461) ($50,000) $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000

JCC WMSB Resale NC Diff

2006 Peninsula Average Closing Prices Resale and New Construction Single Family Detached Homes

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A Market In Transition

Sales By Month Jan 2005 through Nov 2006

500 1000 1500 2000 2500 3000 Units per Month

Date

Growth of Home Sizes & Price Per S. F.

2 0 0 3 $ 2 6 0 K $ 1 0 4 SF 2 ,5 7 0 SF 2 0 0 4 $ 3 2 7 K $ 1 2 3 SF 2 ,6 7 3 SF 2 0 0 5 $ 4 1 6 K $ 1 4 9 SF 2 ,7 8 1 SF 2 0 0 6 $ 4 4 5 $ 1 6 1 SF 2 ,6 7 2 SF 2 0 0 7 $ 3 9 4 $ 1 5 2 SF 2 ,5 8 9 SF

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00% >$1000K $901K-$1000K $801K-$900K $701K-800K $601K-$700K $501K-$600K $401K-$500K

<$401K

New Construction Price Points

6 1 %

New Construction Product Mix

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Mixed Use High Rise Tow nhome Att Condo SFD Condo SFD Custom SFD Production 46% 7% 4% 31% 8% 3% 1%

Current Active Listings by Month

2,000 4,000 6,000 8,000 10,000 12,000 Units January February March April May June July August September October November December Month 2004 2005 2006

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Average Market Time By Month

10 20 30 40 50 60 70 80 90

A verag e M arket T im e

Jan Feb M ar Apr May Jun Jul Aug Sep Oct Nov

Month 2004 2005 2006

Existing Homes – Sales and Listings by Month December 2005 – November 2006

500 1000 1500 2000 2500 3000 3500 Dec 05 Jan 06 Feb 06 Mar 06 Apr 06 May 06 Jun 06 Jul 06 Aug 06 Sep 06 Oct 06 Nov 06

Sales Listings

Future of Hampton Roads

SOUTHSIDE MLS ACTIVE DETACHED LISTINGS BY PRICE RANGE - FEBRUARY 2007

6 6 4 4 3 5 8 5 12 4 29 18 36 50 65 44 70 44 112 76 113 60 61 65 20 43 199 52 30 7 9 15 16 39 29 5 28 14 43 33 59 100 97 120 137 219 264 699 608 463 447 545

• 50

50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 < $100K $100K - $150K $150K - $200K $200K - $250K $250K - $300K $300K - $350K $350K - $400K $400K - $450K $450K - $500K $500K - $550K $550K - $600K $600K - $650K $650K - $700K $700K - $750K $750K - $800K $800K - $850K $850K - $900K $900K - $950K $950K - $1MIL $1MIL - $1.1MIL $1.1MIL - $1.2MIL $1.2MIL - $1.3MIL $1.3MIL - $1.4MIL $1.4MIL - $1.5MIL $1.5MIL - $1.750MIL $1.750MIL - $2MIL > $2MIL Price Range Number of Active Listings

New Construction Resale

PENINSULA MLS

ACTIVE DETACHED LISTINGS BY PRICE RANGE - FEBRUARY 2007

2 1 1 3 2 2 3 6 2 13 25 36 31 49 61 44 44 21 19 18 1 39 138 14 10 5 8 4 6 10 4 11 2 15 13 19 28 25 36 34 64 73 217 258 229 126 165

• 20

20 40 60 80 100 120 140 160 180 200 220 240 260 280 < $100K $100K - $150K $150K - $200K $200K - $250K $250K - $300K $300K - $350K $350K - $400K $400K - $450K $450K - $500K $500K - $550K $550K - $600K $600K - $650K $650K - $700K $700K - $750K $750K - $800K $800K - $850K $850K - $900K $900K - $950K $950K - $1MIL $1MIL - $1.1MIL $1.1MIL - $1.2MIL $1.2MIL - $1.3MIL $1.3MIL - $1.4MIL $1.4MIL - $1.5MIL $1.5MIL - $1.750MIL $1.750MIL - $2MIL > $2MIL Price Range Number of Active Listings

New Construction Resale

380 400 420 440 460 480 500 2005 2006 2007 2008 Year

Defense Budget in Billions 2005-2008

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Hampton Roads Share

Proposed 2008 Government Spending –

$5.5 Billion to Northrop Grumman

Newport News Shipyard

$288 Million for Construction Projects at

Hampton Roads Military Facilities

Hampton Roads Share

Homeland Security - Includes Hampton Roads

in Share of $1.143 Billion Dollars in Grants

APM Terminals $450 Million Dollar Portsmouth

Facility to Open in 2007

$2.2 Billion Dollar Expansion

Craney Island Marine Cargo Terminal

Mixed Use In Hampton Roads Mixed Use In Hampton Roads

Bellharbour Station at SoNo Chesapeake 580 Units Bryans Cove Chesapeake 596Units Culpepper Landing Chesapeake 983 Units Gateway at SoNo Chesapeake 108 Units H20 Hampton 500 Units Benns Grant Isle of Wight Co. 1098 Units

• St. Lukes Village

Isle of Wight Co. 430 Units Governors Grove at Five Forks James City Co. 132 Units New Town James City Co. 1000+ Units Asheton Newport News 1578 Units City Center Newport News 420 Units Patrick Henry Place Newport News 700 Units

Mixed Use In Hampton Roads

Spectrum at Willoughby Norfolk

327 Units Hampton Roads Crossing Suffolk 600 Units Harbour View Station Suffolk 1000 Units Obici Place Suffolk 225 Units Blenheim Park Virginia Beach 1000 Units City View Virginia Beach 600+ Units City Walk Virginia Beach 450 Units Cascades at Woods Corner Virginia Beach 192 Units High Street Williamsburg 482 Units Yorktown Green York County 74 Units

TOTALS 13,075

2007 Multifamily Market: Review and Assessment

Aubrey L. Layne, Jr. President Great Atlantic Management

GREAT ATLANTIC

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• Deal Activity and Headlines
• Economic and Operating

Environment

• Outlook

Deal Activity Deal Activity -

• 2006

2006

• Unit Volume Down

Unit Volume Down

• Core Pricing Flat

Core Pricing Flat

HR Apartment Deal Volume and Price

1,000 2,000 3,000 4,000 5,000 6,000 7,000 1998 1999 2000 2001 2002 2003 2004 2005 2006 volume in units $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 price in $ volume price Sources: Great Atlantic, Real Data

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Biggest Deal in 2006

• Alta Cove Now Empirian Chesapeake
• $63 Million and $168,000 Per Unit

Bonaventure Group Enters HR

• 702 Units in 2006
• 540 Units in 2005

Economic and Operating Environment

Apartment Cap Rates, Interest Rates and Spreads

1% 2% 3% 4% 5% 6% 7% 8% 9% 2 1 2 2 2 3 2 4 2 5 2 6 2 7 50 100 150 200 250 300 350 400 450 spread (bps) 10-Year Treasury avg cap rate spread (bps)

cap rates interest rates

spread

Sources: Capital Analytics, Federal Reserve

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Renter's Monthly Cash Flow Advantage

$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 2000 2001 2002 2003 2004 2005 2006 Hom e P&I and Rent $0 $100 $200 $300 $400 $500 $600 $700 $800 Renter's Advantage home P&I avg rent renter savings Sources: ODU, Real Data

Home Owner Vacancy

In Dwellings With 2 or More Units 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 9 2 9 3 9 4 9 5 9 6 9 7 9 8 9 9 1 2 3 4 5 6 Source: US Census Dept.

Employment

• Ford Plant Closing
• BRAC – 2008, Mostly on Peninsula
• 2007 Unemployment 3.7%

HR Apartments Under Construction and Starts

500 1000 1500 2000 2500 3000 1 9 9 8 1 9 9 9 2 2 1 2 2 2 3 2 4 2 5 2 6 Apartm ent Units Under Construction Starts Source: Real Data

HR Vacancy Rates and Rent Growth

0.0% 2.0% 4.0% 6.0% 8.0% 1 9 9 8 1 9 9 9 2 2 1 2 2 2 3 2 4 2 5 2 6 2 7 vacancy rent growth

Source: Real Data

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HR Rent Growth and Core Inflation

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 HR Rent Growth Core Inflation Sources: US Dept. of Labor, Real Data

• Buyers: Competitive Market
• Sellers: Relatively High Prices
• Owners: Positive Operating Environment
• Renters: More Choice and Modestly

Higher Rents

Outlook - 2007

Office Market Review

Vivian Turok

Senior Vice President Office Leasing Division Divaris Real Estate 30 years experience in office sales, leasing, tenant and landlord representation Bachelor of Social Science University of Cape Town South Africa

Hampton Roads Historical Vacancy Rate Trends

7.8% 9.7% 11.8% 14.3% 13.1% 10.1% 8% 6.9% 2 4 6 8 10 12 14 16 1999 2000 2001 2002 2003 2004 2005 2006

Office Market Rental Rates

• Class A = $20.00 per square foot
• Class B = $15.42 per square foot
• Class C = $12.39 per square foot

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Pembroke Six, Virginia Beach I nterstate Corporate Center, Norfolk Southern Boulevard, Virginia Beach Social Security Building, Norfolk

Commonwealth of Virginia Leases Signed in 2006

Convergence III, Virginia Beach Rosemont Interstate Center, Virginia Beach

World Trade Center, Norfolk Amerigroup, Virginia Beach

Chesapeake Leases

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Innovation Research Park Lockheed Martin Modeling Center

2006 Developments

Gallery I and II, Virginia Beach Liberty III, Chesapeake Central Center Office Building, Norfolk Amerigroup II, Virginia Beach

2006 Developments

BECO Building, Chesapeake HRRA Building, Chesapeake Bridgeway Technology Center, Suffolk

2006 Developments

Merchants Walk South, Newport News One City Center, Newport News

2007 Developments

Two Columbus Center, Virginia Beach

2007 Developments

Dominion Enterprises, Norfolk Oakbrooke Professional Center, Chesapeake Convergence III, Virginia Beach Harbourview Medical Building, Suffolk

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2008 Projects

Commander Corporate Center, Norfolk Pavilion Center II, Virginia Beach The Fairways at Lake Wright, Norfolk

Wachovia Center, Norfolk Downtown Norfolk

Bon Voyage Incentives

Hampton Roads Market Conditions

Rental rates are on the rise Fewer landlord incentives Lowest vacancy rates in 10 years

Office Market Forecast

Building construction will increase Town Center developments Healthcare and port-related users will play a role in growing our market base BRAC’s uncertainty effect on our military users

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LEEDTM Market Transformation

October 2006

• 596 Certified Projects
• 1,581+ Registered Projects

O v e r 3 , L E E D A c c r e d i t e d P r

• f

e s s i

• n

a l s ! Projects in all 50 States and 24 Countries HSMM

Buildings Consume 12% of potable water 39% of primary energy 40% of raw materials 48% of US carbon emissions 70% of US electricity

Green Buildings Save:

30 – 50% of energy 35% of carbon emissions 40% of water 70% of solid waste

R e c y c l i n g b i n s Bicycle racks

Liberty III, 1317 Executive Blvd, Chesapeake

Hybrid parking G r e e n c l e a n i n g p r

• g

r a m

RETAIL MARKET REVIEW

Presented by: Chris Rouzie Thalhimer Retail Brokerage Group

February 28, 2007 13.11% 12.83% 11.64% 11.19% 9.41% 7.55% 6.81%

5.00% 7.00% 9.00% 11.00% 13.00% 15.00% 2001 2002 2003 2004 2005 2006 2007 Hampton Roads – Retail Vacancy

1,130,3291,031,550 1,250,400 749,458 456,610 1,211,699 2,594,843

500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 2001 2002 2003 2004 2005 2006 2007 Hampton Roads – New Construction Square Feet

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New Projects

Williamsburg - 2005 Williamsburg Marketcenter

Williamsburg Marketcenter

New Town New Town & Settler’s Market

New Town & Settler’s Market

Settler’s Market New Town

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Marquis Development

Marquis

City Center

City Center

Mercury Plaza Peninsula Town Center NetCenter

Mercury Plaza

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Peninsula Town Center

Edinburgh

Edinburgh

Proposed

Landstown Commons

Landstown Commons

Harbour View East

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Harbour View East

Grocery Sector

Hampton Roads – Number of Stores in Region

89 40 28 13 9 8 6 6 4 2

20 40 60 80 100

Food Lion Farm Fresh Supermarket Independent Wal Mart Supercenter Kroger Harris Teeter Fresh Pride DECA Commissary Super Kmart Ukrops

Source: Trade Dimensions 2006 CBSA

28% 25% 22% 4% 1% 5% 4% 8% 2% 1% Wal Mart Food Lion Farm Fresh Supermarket Independent Fresh Pride Market Harris Teeter Kroger DECA Commissary Super Kmart Ukrops

Hampton Roads – Grocery Group Market Share

Source: Trade Dimensions 2006 CBSA

Food Lion – Bloom Store Food Lion – Bottom Dollar Store

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Farm Fresh

Haygood Shopping Center

• Mt. Pleasant Marketplace

Bennett’s Creek The Market @ Harbor Heights Orchard Square

Harris Teeter

Ferrell Parkway Hanbury Village

Expanding Footprint

RETAIL MARKET REVIEW

Presented by: Chris Rouzie Thalhimer Retail Brokerage Group

February 28, 2007

Industrial Market Review

Clay Culbreth, SIOR, CCIM GVA Advantis, Senior Director, Industrial Brokerage

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Industrial Reporters

Bobby Beasley Billy King Ken Benassi Pat Mumey Ron Biesecker Bobby Phillips Charles Dickinson Worth Remick Abe Ellis Stephanie Sanker Trip Ferguson Bill Throne Christine Kaempfe Chip Worley

McDonald Development Proposed Site Plan Ashley Capital’s 2601 Indian River Road Chesapeake Bridgeway Commerce Center III Suffolk Vacancy Percentage For the Last 10 Years

1 2 3 4 5 6 7 8 9 10 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

200 PortCentre Parkway Portsmouth

212,000 square foot total $3.95 per square foot 10 year term

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301 and 500 Westpark Lane Hampton

515,000 square feet total Sold: 6/1/06 $62.13 per square foot $32,000,000

2820 Crusader Circle Virginia Beach

155,000 square feet total Sold: 8/ 1/ 06 $31.00 per square foot $4,882,500

Sample of Up and Coming Developments

Virginia Regional Commerce Park Virginia Regional Commerce Park Suffolk Suffolk Northgate Commerce Park Northgate Commerce Park Suffolk Suffolk Enterchange at Suffolk Enterchange at Suffolk 1,000,000 square foot total 300,000 square foot total 770,000 square foot total

Representative Building Sales Transactions

First Data 54,000 square foot total $94.44 per square foot Sold: 5/ 06 $5,100,000 IBS America 14,400 square foot total $63.54 per square foot Sold: 11/ 06 $915,000 Viasys 31,000 square foot total $136.55 per square foot Sold: 4/ 06 $1,400,000

Trade Street

Site

Office/Warehouse Condos

Oakbrooke Business & Technology Center Chesapeake Riverwalk Commerce Park Chesapeake

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Charlie Taylor

I nve stme nt Marke t I nve stme nt Marke t

Jona than Guion, SIOR Jona than Guion, SIOR

February 28, 2007

National Market Influences National Market Influences F

• re ig n Capital

Co ndo Co nve rsio n Marke t Mo bility o f Capital Privatizatio ns and Me g a De als Inflow of Foreign Capital

$16 billion $21 billion 2006 2005

20% drop in foreign capital

Condo Conversion Market Condo Conversion Market L a rg e st blo c k o f buye rs in 2005 Off the ra da r in 2006

Mobility of Capital Mobility of Capital

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Privatization and Mega Deals Privatization and Mega Deals

RE I T me rg e rs and ac quisitio ns inc re ase d to $100 billio n 31 po rtfo lio s/ pro pe rtie s value d

• ve r $1 billio n

Hampton Roads Market Hampton Roads Market

Local portfolio sales declined Dollar volume off by 25%

Hampton Roads Transactions Hampton Roads Transactions

Alta Co ve Apartme nts

$63 millio n

Do ve L anding

$32 millio n

Hampto n Ro ads Re se arc h Quad

Building s I a nd I I I $28.75 millio n

L ibe rty Pro pe rty T rust (3 b uilding po rtfo lio )

$13 millio n

Hampton Roads Transactions Hampton Roads Transactions

Ric hmo nd Ro a d F

• o d L

io n

$14.5 millio n Che sape ake Cro ssing Sho pping Ce nte r 12 millio n

We st Pa rk Ware ho use s

$32 millio n

I nve stme nt Marke t I nve stme nt Marke t

Jona than Guion, SIOR Jona than Guion, SIOR

February 28, 2007

Old Dominion University Old Dominion University Hampton Roads Real Estate Hampton Roads Real Estate Market Review and Forecast Market Review and Forecast

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Presented by: E.V. Williams Center for Real Estate and Economic Development