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

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3/12/2009 Old Dominion University Directors Message Hampton Roads Real Estate Market Review and Forecast John R. Lombard, PhD 2009 Associate Professor, Department of Urban Studies and Public Administration, College of Business and

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SLIDE 1

3/12/2009 1

Old Dominion University Hampton Roads Real Estate Market Review and Forecast 2009

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

Director’s Message

John R. Lombard, PhD

Associate 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

D C ll f B i Dean, College of Business & Public Administration, Old Dominion University

Industry Professional Advisors to the Center (IPAC)

Jeff Ainslie, Ainslie-Widener

  • G. Robert Aston, Jr. , TowneBank

Ramon W. Breeden, Jr., The Breeden Companies Sandy M. Cohen, Divaris Real Estate, Inc. Craig Cope, Liberty Property Trust Cecil V Cutchins Olympia Associates Cecil V. Cutchins, Olympia Associates Robert L. Dewey, Willcox & Savage, PC Thomas M. Dillon, Fulton Bank

  • N. Joseph Dreps, BB&T

Pamela J. Faber, LeClair Ryan Joel Flax, Goodman & Company David M. Gianascoli, Gee’s Group Real Estate John Gibson, Ellis-Gibson Warren Harris, City of Virginia Beach Economic Development Aubrey L. Layne, Jr., Great Atlantic Management, LLC Miles B. Leon, S.L. Nusbaum Realty Co. Michael W. McCabe, Harvey Lindsay Commercial Real Estate

Industry Professional Advisors to the Center (IPAC)

Michael Newsome, Clark Whitehill Corp. Harrison Perrine, Perrine Investments Don Perry, Continental Development Victor L. Pickett, Grandbridge Real Estate Capital, LLC Thomas E. Robinson, Robinson Development Group Jim V Rose Rose and Womble Realty Co LLC Jim V. Rose, Rose and Womble Realty Co., LLC Brad Sanford, Dominion Realty Advisors Burrell F. Saunders, CMSS Architects, PC Reese Smith, Reese Smith & Associates Tony Smith, Robinson Development Group Deborah Stearns, GVA Advantis Richard Thurmond, William E. Wood Jon S. Wheeler, Wheeler Investments Robert T. Williams, Tri-City Developers, LLC Rod Woolard, City of Norfolk Economic Development Steven Wright, City of Chesapeake Economic Development

Save The Date

CREED Annual Business Meeting and Luncheon Tuesday, June 2, 11:30 AM – 1:00 PM Featured Speaker Frank Nothaft

Chief Economist, Freddie Mac

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SLIDE 2

3/12/2009 2

Executive Committee Executive Committee

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

Research Committee

Albert Duncan Brian Dundon, Brian J. Dundon & Assoc. Beth Hancock, City of Norfolk J L F l B k Joy Learn, Fulton Bank Sandi Prestridge, City of Norfolk Maureen Rooks, Thalhimer/Cushman & Wakefield Bradley Sanford, Dominion Realty Advisors Lane Shea, Harbor Group Kristi Sutphin, Isle of Wight County

Special thank you to

Inside Business

for their sponsorship

  • ver the past six years.

REAL ESTATE INVESTMENT MARKET UPDATE

10

Presented by: Jordan E. Slone, Chairman & CEO HOUSING VS COMMERCIAL REAL ESTATE 3 Key Reasons this is a Housing Recession and not a Commercial Real Estate Recession 1. Residential construction doubled over 5 year 1. Residential construction doubled over 5 year period from 2001 to 2006 2. Over-reliance of residential boom on speculative investors 3. Residential lending practices allowed “no money down”

11

Current Real Estate Cycle

12

Source: Real Capital Analytics, October 2008
  • Market is headed to the bottom of the current real

estate cycle with exuberance ending and fundamentals dominating.

  • Capital market moved out of line with property level

fundamentals and was further exaggerated by the leverage markets.

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SLIDE 3

3/12/2009 3

PERCEPTION IS

13

IS REALITY

14

Appreciation/Depreciation in Property Values

15

  • As of December 2008, Commercial Property Values have declined 14.9%
  • ver the last year.
  • Apartments have dropped by –13.6%, followed by Office at –13.5%,

Industrial at -13.9% and Retail at –8.5%

  • Assets purchased in 2007 will require an increase in NOI to overcome the

increase in capitalization rate in order to retain value.

  • Assets purchased in the early 2000’s have still appreciated.
Source: Moody’s Investor Services, data through December 2008

Where have all the Lenders gone?

US CMBS Issuance

100 150 200 250 Total ($ Millions)

16

  • 50
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Commercial Mortgage Alert
  • After posting huge increases over the last three years, 2008 US

CMBS issuance dropped to volumes not seen in over a decade.

The first step in a correction: Sales volume slows as bid/offer widens

Sales volume changes between 4Q 2008/2007 Number Total $

  • Avg. PSF/PPU

Properties Volume Sold Office CBD

  • 74%
  • 88%
  • 2%

Suburban

  • 81%
  • 70%
  • 3%

Total

  • 80%
  • 80%
  • 12%

Retail Mall and Other 73% 80% 45%

17

Retail Mall and Other

  • 73%
  • 80%
  • 45%

Strip

  • 71%
  • 81%
  • 22%

Total

  • 72%
  • 81%
  • 22%

Apt Mid/High Rise

  • 55%
  • 77%
  • 11%

Garden

  • 40%
  • 59%
  • 20%

Total

  • 42%
  • 62%
  • 22%

Hotel Full-Service

  • 60%
  • 86%
  • 25%

Limited Svc.

  • 76%
  • 79%
  • 16%

Total

  • 68%
  • 85%
  • 25%
Source: Real Capital Analytics

Key Themes for 2009: The Bad News

  • Deteriorating economy is exacerbating the decline of

CRE fundamentals:

– Cap rate compression assumptions unwinding – Pro-forma underwriting assumptions no longer hold – Rating agency assumptions that resulted in lower subordination levels are being revisited, which has led to wide-sweeping ratings changes

  • Commercial real estate values expected to decrease

roughly 30-35% peak-to-trough given tighter underwriting standards, less available liquidity and higher cost of capital

  • Rating agency downgrades have and will continue to

affect bonds issued in 2005-2007

18

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SLIDE 4

3/12/2009 4

Key Themes for 2009: The Good News

  • Significant governmental intervention:
  • Agency MBS
  • $500bn “buy” program from the Fed
  • $20bn/month from Treasury
  • TARP, TALF, TAF, etc.
  • $787bn stimulus package
  • TALF 1 0 to be directed at the consumer (e g autos student loans

19

TALF 1.0 to be directed at the consumer (e.g. autos, student loans, cards, small business). Subsequent rounds (TALF 2.0) to address CMBS and private-label (prime) RMBS

  • Limited CMBS refinance risk in 2009
  • $17 billion of fixed-rate and $1.5 billion of floating-rate

securitized loans need to refinance in 2009

  • Insurance company and commercial bank whole loans due to be

refinanced in 2009 were originated years ago, which allowed them to build equity

  • Loan extensions

General

  • TARP bail out funds have not had any immediate effect on

banks lending abilities. Banks need to use the funds to cover losses and operations, little will trickle into real liquidity for new lending

  • Loan extensions

Harbor Group’s Outlook and Expectations

20

  • 2009 – Big money to be made buying debt
  • Gap between buyer and seller expectations is expected to

narrow and transaction volume expected to increase

  • Second six months of 2009 and 2010 – Great opportunities

to buy real estate Office

  • Transaction volume down for large assets due to lack of

financing sources. Hard to sell unless assumable debt is included. Owners who do not need to sell hold assets so as to not

Harbor Group’s Outlook and Expectations

21

  • Owners who do not need to sell, hold assets so as to not

take a hit on pricing due to bottom feeding in the market.

  • Smaller assets continue to trade as banks have some

money to lend; however, banks want to be able to diversify that pool of funds across assets.

  • Asset management key to retaining value.

Multi-Family

  • Owners who do not need to sell, hold assets so as to not

take a hit on pricing due to bottom feeding in the market.

Harbor Group’s Outlook and Expectations

22

  • Freddie Mac and Fannie Mae continue to be more

conservative with their debt and are unable to finance acquisitions of distressed assets. Agency financing available to refinance stabilized assets.

  • Vultures with cash feasting on bank REOs.

MARCH 11TH, 2009

ODU/CREED 2008 Industrial Market Overview

INDUSTRIAL OVERVIEW Bill Throne

MARCH 11TH, 2009

ODU/CREED 2008 Industrial Market Overview

INDUSTRIAL OVERVIEW

Thanks owed to the Reporters: Ron Biesecker Thalhimer/Cushman and Wakefield Christine Kaempfe Thalhimer/Cushman and Wakefield Pat Mumey Thalhimer/Cushman and Wakefield Scott Wermers Thalhimer/Cushman and Wakefield Scott Wermers Thalhimer/Cushman and Wakefield Abe Ellis Thalhimer/ Cushman and Wakefield Bobby Phillips Thalhimer/Cushman and Wakefield Worth Remick CB Richard Ellis Charles Dickenson Harvey Lindsay Billy King Harvey Lindsay Bobby Beasley Harvey Lindsay Chip Worley Harvey Lindsay Clay Culbreth GVA Advantis Brian Baker GVA Advantis Stephanie Sanker GVA Advantis

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SLIDE 5

3/12/2009 5

MARCH 11TH, 2009

ODU/CREED 2008 Industrial Market Overview

INTRODUCTION 2008 “HIGH CUBE” CHALLENGED INDUSTRIAL CORE STILL HEALTH 2009 FORECAST CONCLUSION

MARCH 11TH, 2009

ODU/CREED 2008 Industrial Market Overview

JOB GROWTH

2008

UNEMPLOYMENT FINANCIAL MARKETS RECENT ANNOUNCEMENTS

MARCH 11TH, 2009

ODU/CREED 2008 Industrial Market Overview

2008

Nestle Waters (January 2008) Chesapeake ( 2008) C ArvinMeritor (January 2008) Chesapeake Montague Farms (May 2008) Windsor Kraft Foods/Planters Peanuts (June 2008) Expansion/Suffolk OOCL Logistics (July 2008) Suffolk Polaris (July 2008) Chesapeake ADS (August 2008) Expansion/VB Cryomax (Sept 2008) Chesapeake Greatwide Logistics (October 2008) Suffolk US Auto Parts (January 2009) Chesapeake Greatwide Logistics (January 2009) Expansion/Suffolk

MARCH 11TH, 2009

ODU/CREED 2008 Industrial Market Overview

GVA ADVANTIS –Now 16 Locations

2008

MARCH 11TH, 2009

ODU/CREED 2008 Industrial Market Overview

G V A

TOTAL TRANSACTION VOLUME

$1,038,781,427

TOTAL SQUARE FEET

15,837,107

2008

A D V A N T I S

NUMBER OF DEALS

1,374

TOTAL ACRES

42,316

TOTAL MANAGED PROPERTIES

13,825,847 Square Feet

TOTAL CONSTRUCTION VOLUME $51,000,000

MARCH 11TH, 2009

ODU/CREED 2008 Industrial Market Overview

“HIGH CUBE” SPACE CHALLENGED

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SLIDE 6

3/12/2009 6

MARCH 11TH, 2009

ODU/CREED 2008 Industrial Market Overview

PORT BENEFITS ARE LEGITIMATE

“HIGH CUBE” SPACE CHALLENGED

ECONOMY MAY WORK TO OUR FAVOR APPLAUD THE “PIONEERS” ONE OR TWO TENANTS…

MARCH 11TH, 2009

ODU/CREED 2008 Industrial Market Overview

INDUSTRIAL CORE STILL HEALTHY

MARCH 11TH, 2009

ODU/CREED 2008 Industrial Market Overview

INDUSTRIAL CORE STILL HEALTHY

MARCH 11TH, 2009

ODU/CREED 2008 Industrial Market Overview

INDUSTRIAL CORE STILL HEALTHY

MARCH 11TH, 2009

ODU/CREED 2008 Industrial Market Overview

INDUSTRIAL CORE STILL HEALTHY

MARCH 11TH, 2009

ODU/CREED 2008 Industrial Market Overview

INDUSTRIAL CORE STILL HEALTHY

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SLIDE 7

3/12/2009 7

MARCH 11TH, 2009

ODU/CREED 2008 Industrial Market Overview

2009 FORECAST

MARCH 11TH, 2009

ODU/CREED 2008 Industrial Market Overview

2009 FORECAST

MARCH 11TH, 2009

ODU/CREED 2008 Industrial Market Overview

WAVERTON COMMERCE PARK

2009 FORECAST

MARCH 11TH, 2009

ODU/CREED 2008 Industrial Market Overview

WAVERTON COMMERCE PARK

2009 FORECAST

MARCH 11TH, 2009

ODU/CREED 2008 Industrial Market Overview

THINK REGIONALLY

CONCLUSION

THANK THE MILITARY HAVE FAITH IN THE PORT OF VIRGINIA WORK FOR OUR INDUSTRIAL COMMUNITY

Hampton Roads Office Market

Katherine C. Campbell Offi S l & L i Office Sales & Leasing

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SLIDE 8

3/12/2009 8

Hampton Roads Office Market

22 Submarkets 22 Submarkets

DOWNTOWN NORFOLK AIRPORT/ NORTHAMPTON CENTRAL NORFOLK CHESAPEAKE/ GREENBRI ER HILLTOP/ OCEANFRONT CORPORATE LANDING KEMPSVILLE LYNNHAVEN LITTLE NECK

528 Buildings 528 Buildings

LITTLE NECK MILITARY CIRCLE NEWTOWN/ WITCHDUCK PEMBROKE/ CENTRAL BUSINESS DISTRICT PORTSMOUTH SUFFOLK DOWNTOWN HAMPTON DOWNTOWN NEWPORT NEWS HAMPTON ROADS CENTER COLISEUM CENTRAL NEWMARKET OYSTER POINT SUBURBAN NEWPORT NEWS WILLIAMSBURG/ JAMES CITY/ YORK COUNTY

Hampton Roads Office Market

2008 Absorption 435,000 sf 2006 Absorption 300,000 sf 2007 Absorption 100,000 sf

Hampton Roads Office Market

Favorable interest rates and lending standards of 2006 and 2007 resulted in 400,000 sf of office condo development

Hampton Roads Office Market

  • Downtown Norfolk

3,295,000 rsf (multi-tenant)

  • Suburban Southside

14,600,000 rsf (multi-tenant) (multi-tenant)

  • Peninsula

6,500,000 rsf (multi-tenant)

Hampton Roads Office Market

Downtown Norfolk Downtown Norfolk

Hampton Roads Office Market

Downtown Norfolk Downtown Norfolk 2009 Forecast 2009 Forecast Bank of America Building

  • 150,000 sq ft

Wachovia Center

  • 75,000 sq ft
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SLIDE 9

3/12/2009 9

Hampton Roads Office Market

Downtown Norfolk Downtown Norfolk

Hampton Roads Office Market

Southside Suburban Southside Suburban

  • Overall Absorption

560,000 sf

Virginia Beach CBD, Central Norfolk Newtown/Witchduck, Harbourview

  • Greenbrier Absorption

(136,000 sf)

  • New Construction

750,000+ sf New Construction 750,000 sf

YE 2007 YE 2008

  • Avg. Rent

% Vacant

  • Avg. Rent

% Vacant Class A $19.77 7.48% $20.22 11.66% Class B $14.66 13.02% $14.78 10.62% Class C $11.14 2.68% $11.18 6.46% Total $15.20 7.73% $19.08 11.20% A & B Only $16.79 10.25% $19.43 10.88%

Hampton Roads Office Market

Over 750,000 sf of new office space Face rents of $23.50 rsf to $26.50 rsf

Convergence Center III

  • 99,000 sf
  • 97% Leased
  • $23.50

Corporate Center VI

  • 59,000 sf
  • 31% Leased
  • $23.50

Two Columbus Center

  • 109,000 sf
  • 36% Leased
  • $26.50

Hampton Roads Office Market

Independence Place 73,345 sf Gold Level LEED Certified

Hampton Roads Office Market

Overall Absorption (95,000 sq ft) New Construction 56,000+ sq ft Oyster Point & Hampton Roads Center Peninsula Peninsula Oyster Point & Hampton Roads Center

  • 2 million square feet
  • 11% vacancy

Coliseum Central

  • 2008 19.75% vs. 2007 12.00%

Williamsburg

  • 2008 18.64% vs. 2007 12.49%

Hampton Roads Office Market

Oyster Point 2008 Class A Rents $19.55 Peninsula Peninsula Town Center I

  • 60,000 sf
  • $24.00 - $28.00 psf

Cedar II

  • 27,000 sf
  • $22.00 psf
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SLIDE 10

3/12/2009 10

Hampton Roads Office Market

2008 YE Office Market 24,414,000 sf 2008 YE Vacancy 2,840,000 sf (8.6%) 2009 New Construction 372,000 sf USAA Building 360,000 sf 2009 YE Offi M k t 25 146 000 f 2009 YE Office Market 25,146,000 sf 2009 Absorption?

  • 435,000 sf ~ 12.5% vacancy
  • 217,500 sf ~ 13.3% vacancy

Hampton Roads Office Market Hampton Roads Office Market

Snow Ballet China White Moondance Sentimental Whispering Wind Garlic Clove Crumb Cookie Queen Anne’s Lace Whispering Wind Delicate White Moonlit Snow Dogwood Blossom Airy Mist Gypsum

Hampton Roads Office Market

Crossways I Crossways Center Crossways Commerce Center II Crossways Commerce Center I Annex Crossways Commerce Center I Center Crossways II

2009 HAMPTON ROADS REAL ESTATE MARKET REVIEW AND FORECAST CONSUMER SPENDING AS SHARE OF GDP

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SLIDE 11

3/12/2009 11

RETAILING IN U.S. ECONOMY

  • Retailing = 70%+ of U.S. GDP
  • “Hiccups” have major implications
  • “Perfect Storm” for consumers

2008/2009: –Wealth evaporated –Credit over-extended –Jobs uncertain

U.S. RETAILING STATISTICS

  • 148,000 stores CLOSED in 2008
  • 73,000 stores projected to close

, p j during first half of 2009

  • Net decline of 40,000 stores in 2009

FAREWELL OLD FRIENDS

  • Mervyn’s
  • Boscov’s
  • Linens n Things
  • Steve & Barry’s
  • CompUSA
  • Movie Gallery
  • B. Moss
  • Bombay
  • Steve & Barry’s
  • A & N Stores
  • Geoffrey Beene
  • The Sharper

Image

  • Bombay

Company

  • Circuit City
  • Value City
  • KB Toys

RETAIL INDUSTRY DYNAMICS

  • Operate fewer stores to maximize

profitability per unit

  • Eliminate marginal units
  • Pressure on every deal:

D d t – Downward pressure on rent – Upward pressure on tenant allowance – Caps on CAM charges and extra fees – Store sizes decreasing

RETAILERS’ WOES

  • Reduced capital for expansion hurts

public companies where stock value is based on sales growth fueled by unit growth.

  • Curtailed consumer spending hurts ALL

retailers and shifts focus to “profit margin.” This is problematic since U.S. retailing model is “high volume/low margin.”

TOTAL TAXABLE RETAIL SALES

MILLIONS CHANGE SOUTHSIDE 2006 $11,849.6 ‐‐‐ 2007 $12 243 0 +3 8% 2007 $12,243.0 +3.8% 2008 $11,922.9 ‐2.6% PENINSULA 2006 $5,629.6 ‐‐‐ 2007 $5,936.3 +4.8% 2008 $5,712.1 ‐3.8%

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SLIDE 12

3/12/2009 12

SOUTHSIDE TAXABLE RETAIL SALES PENINSULA TAXABLE RETAIL SALES

SOUTHSIDE CLOTHING PENINSULA CLOTHING SOUTHSIDE FURNITURE PENINSULA FURNITURE

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SLIDE 13

3/12/2009 13

SOUTHSIDE BUILDING MATERIALS PENINSULA BUILDING MATERIALS

SOUTHSIDE AUTOS/PARTS PENINSULA AUTOS/PARTS 2008 TOTAL TAXABLE SALES 2008 BY QUARTER

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SLIDE 14

3/12/2009 14

2009 MARKET STUDY DATA

  • 50.37 million SF (+157,800 SF)
  • Net absorption: 128,600 SF
  • Average rent: $16.41 PSF

– Southside rent: $16.78 ( + $0.10 PSF) – Peninsula rent: $15.63 ( + $0.22 PSF)

2009 MARKET STUDY DATA

  • Vacancy: 7.67% = 3.86 million SF

– Southside vacancy: 6.48% ( - .22%) – Peninsula vacancy: 9.97% ( + .53%)

  • Big Box vacancy: 1.78 million SF

(Unchanged from 2008 and at lowest point since 1998)

TOP 5 SOUTHSIDE NODES

  • SQ. FT.

VACANCY

GREENBRIER 4,140,568 3.7% MILITARY HIGHWAY / JANAF 3,373,001 3.4% PEMBROKE 2,753,504 8.7% PEMBROKE 2,753,504 8.7% CHESAPEAKE SQUARE 2,111,322 2.8% LITTLE CREEK ROAD / WARDS CORNER 2,023,794 11.8%

TOP 5 PENINSULA NODES

  • SQ. FT.

VACANCY

PATRICK HENRY / OYSTER POINT 4,534,709 3.4% WILLIAMSBURG 4,385,688 9.6% , , COLISEUM CENTRAL 2,510,870 9.0% DENBIGH 1,458,959 19.2% NEWMARKET / MAIN 1,389,156 16.8%

WORDS TO LIVE BY 2008 = PRUDENCE 2009 = PATIENCE, PERSISTENCE

RETAIL ALLIANCE

(757) 446‐1600 (757) 446 1600 WWW.RETAIL‐ALLIANCE.COM

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SLIDE 15

3/12/2009 15

2009 Multi-Family 2009 Multi-Family

M k t R i & F t M k t R i & F t Market Review & Forecast Market Review & Forecast

March 11, 2009 March 11, 2009

Dan W. Johnson

Senior Vice President CB Richard Ellis

Dan W. Johnson

Senior Vice President CB Richard Ellis

TOPICS TOPICS

Market data as of October 2008 Conclusions and consensus from multi-family executives New additions to the supply Market data as of October 2008 Conclusions and consensus from multi-family executives New additions to the supply

The Operational Side The Operational Side

Where are the jobs coming from to occupy new supply? Forecasting Where are the jobs coming from to occupy new supply? Forecasting National sales Sales in Hampton Roads National sales Sales in Hampton Roads

The Investment Side The Investment Side Call to Action and Closing Call to Action and Closing

Multi Multi-

  • Family Occupancy

Family Occupancy

Major Southeastern Cities Major Southeastern Cities

Multi Multi-

  • Family Occupancy

Family Occupancy

Major Southeastern Cities Major Southeastern Cities

89.2% 90.0% 90.8% 90.8% 90.9% 92.4% 93.1% 900% 92.0% 94.0%

Occupancy Levels in Major Southeastern Markets

Occupancy Levels in Major Southeastern Markets

84.0% 88.2% 88.4% 80.0% 82.0% 84.0% 86.0% 88.0% 90.0%

Jacksonville, FL (1/09) Columbia, S C (11/08) Greensboro, N C (10/08) Greenville, SC (12/08) Charleston, SC (9/08) Savannah, GA (8/08) Raleigh, NC (2/09) Charlotte, N C (9/08) Richmond, VA (2/09) Norfolk, V A (11/08)

Source: Real Data

Rent growth here has cooled down for the time being. Rent growth here has cooled down for the time being. Rent growth here has cooled down for the time being. Rent growth here has cooled down for the time being.

A verage Rents, Second H alf

$745 $785 $823 $862 $871 $800 $900

Average Rents, Second Half

$592 $619 $660 $693 $745 $500 $600 $700 2000 2001 2002 2003 2004 2005 2006 2007 2008 Year Source: Real Data

Virginia Beach is still the rent leader. Virginia Beach is still the rent leader. Virginia Beach is still the rent leader. Virginia Beach is still the rent leader.

Submarket Rental Rates

York Chespaeake
  • Va. Beach

Submarket Rental Rates

$750 $775 $800 $825 $850 $875 $900 $925 $950 Newport News Portsmouth Norfolk Hampton Overall Williamsburg Suffolk Source: Real Data
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SLIDE 16

3/12/2009 16

Vacancy, by October, had crept up to 6.9%. Vacancy, by October, had crept up to 6.9%. Vacancy, by October, had crept up to 6.9%. Vacancy, by October, had crept up to 6.9%.

Ham pton Roads Vacancies

6.9% 8.0% 9.0%

Hampton Roads Vacancies

3.8% 3.9% 3.4% 2.8% 4.1% 3.8% 4.4% 5.1% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 Y ear

Source: Real Data

Submarket Vacancy Comparisons Submarket Vacancy Comparisons

66% 6.7% 7.2% 7.6% 8.6% 7.7% 7.0% 8.0% 9.0%

Source: Real Data

5.2% 5.3% 6.6% 2.0% 3.0% 4.0% 5.0% 6.0% Chesapeake N

  • rfolk

H am pton Virginia Beach N ew port N ew s W m sburg/ Y

  • rk

Suffolk Portsm

  • uth

Vacancy

New Additions to Supply New Additions to Supply

1,670 units under construction 1,670 units under construction As of October As of October 1,985 units are planned (some will take a while) 1,985 units are planned (some will take a while) Where are they? Where are they?

Under Construction or Planned Under Construction or Planned

500 600 700 800 900

U nder Construction

100 200 300 400 C hesapeake H ampton Portsmouth N

  • rfolk

N ewport N ew s Virginia Beach Williamsburg C ities

Planned

Source: Real Data

Where is the job growth? Where is the job growth?

Tracking Net Job C reation/ Los s A nnouncements C hesapeake Suffolk P
  • rtsm
  • uth
N
  • rfolk

Tracking Net Job Creation / Loss Announcements

  • 8 -7
  • 6 -5 -4 -3 -2 -1
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 N ewport N ews Virginia B each H am pton York C
  • ./ G
louchester Isle of W ight W illiam sburg/J.C . C ty H undreds

Source: Hampton Roads Economic Development Alliance and recent Virginian Pilot articles

Countervailing Forces Countervailing Forces Countervailing Forces Countervailing Forces

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SLIDE 17

3/12/2009 17

Our Trump Card: Rent vs. Buy

Rent vs. M

  • rtgage Costs

$1,500 $1,600 $1,700 $1,800 $1,900 & I, 30 yr. $1,300 $1,400 $1,500 $1,600 $1,700 Mortgage C

  • s

t Monthly R ent $700 $800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 , 1 9 9 7 1 9 9 8 1 9 9 9 2 2 1 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 2 1 M

  • rtgage Payment (P &

$500 $600 $700 $800 $900 $1,000 $1,100 $1,200 ,

Conclusion and Consensus Conclusion and Consensus

  • 1. That was correct
  • 1. That was correct

Finding: Oct. 08 vacancy was 6.9% Finding: Oct. 08 vacancy was 6.9% Consensus: Consensus:

2 It has risen by 30 to 40 basis points since then 2 It has risen by 30 to 40 basis points since then

  • 2. It has risen by 30 to 40 basis points since then
  • 2. It has risen by 30 to 40 basis points since then
  • 1. If viewed as effective rents, they got it right
  • 1. If viewed as effective rents, they got it right

Finding: Rent growth stopped. In fact, rents Finding: Rent growth stopped. In fact, rents declined 0.8% in LH 2008 declined 0.8% in LH 2008 Consensus: Consensus:

  • 2. Most owners struggling to hold at current
  • 2. Most owners struggling to hold at current
  • levels. “Flat is the new up!”
  • levels. “Flat is the new up!”

Conclusion and Consensus Conclusion and Consensus

Question: Question: Have delinquencies and uncollected increased?

Have delinquencies and uncollected increased?

Consensus: Consensus: Yes, but only by 5 to 10% over last year

Yes, but only by 5 to 10% over last year

Question: Question: What are the most challenging submarkets?

What are the most challenging submarkets?

Question: Question: What are the most challenging submarkets?

What are the most challenging submarkets?

Consensus: Consensus: Williamsburg, some parts of Newport

Williamsburg, some parts of Newport News, Eastern Va. Beach News, Eastern Va. Beach And the next year? And the next year? Chesapeake and Norfolk Chesapeake and Norfolk

Conclusion and Consensus Conclusion and Consensus

Question: Question: What is the strongest marketing tool at this time?

What is the strongest marketing tool at this time?

Consensus: Consensus: Early renewals, no matter what it takes!

Early renewals, no matter what it takes!

Question: Question: Have you altered credit policies for delinquent payers?

Have you altered credit policies for delinquent payers?

Consensus: Consensus: No clear consensus. As some owners say, “workouts

No clear consensus. As some owners say, “workouts won’t work,” but others, citing not only unemployment, but won’t work,” but others, citing not only unemployment, but underemployment, are allowing some flexibility. underemployment, are allowing some flexibility.

Question: Question: Where will the vacancy bottom out?

Where will the vacancy bottom out?

Consensus: Consensus: 8% to high 9% depending on submarket

8% to high 9% depending on submarket

The Investment Side The Investment Side

Apartment Sales Nationally Hampton Roads Apartment Sales Nationally Hampton Roads Multi-Family Sales Largest Deals of 2008 Multi-Family Sales Largest Deals of 2008

National Multi-Family Sales

$100,000,000,000 $90,000,000,000 $80,000,000,000 $70,000,000,000

G arden apts. M id/H ighrise Source: RCA Historical All Type 2001-2008

$70,000,000,000 $60,000,000,000 $50,000,000,000 $40,000,000,000 $30,000,000,000 $20,000,000,000 $10,000,000,000 $0 2001 2002 2003 2004 2005 2006 2007 2008

slide-18
SLIDE 18

3/12/2009 18

Multi Multi-

  • Family Sales

Family Sales

Hampton Roads Hampton Roads

Volum e of Sales and Cap Rates 250,000,000 300,000,000 7.2 7.4 7.6 50,000,000 100,000,000 150,000,000 200,000,000 2004 2005 2006 2007 2008 6 6.2 6.4 6.6 6.8 7 % Volum e of Sales C ap R ates Source: Real Data

Largest Multi Largest Multi-

  • Family Sale 2008

Family Sale 2008

Buyer: Harbor Group International Buyer: Harbor Group International

Property: Runaway Bay Apartments Property: Runaway Bay Apartments

Second Largest Multi Second Largest Multi-

  • Family Sale 2008

Family Sale 2008

Buyer: Harbor Group International Buyer: Harbor Group International

Property: Mariner’s Cove Apartments Property: Mariner’s Cove Apartments

Third Third-

  • Largest Multi

Largest Multi-

  • Family Sale 2008

Family Sale 2008

Buyer: Harbor Group International Buyer: Harbor Group International

Property: Waterman’s Crossing Apartments Property: Waterman’s Crossing Apartments

Time for Operational Excellence Time for Operational Excellence

Challenge Challenge all all your old assumptions. your old assumptions. Select and invest carefully in your staff. Select and invest carefully in your staff. Challenge them to do more in Challenge them to do more in-

  • house.

house. Work very closely with your vendors. Work very closely with your vendors. Think of them as your partners. Think of them as your partners.

Time for Operational Excellence Time for Operational Excellence

Tenant retention is absolutely Tenant retention is absolutely key. key. Investment here is better than Investment here is better than turnover costs or vacancy. turnover costs or vacancy. Ramp up your Ramp up your outreach marketing.

  • utreach marketing.
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SLIDE 19

3/12/2009 19

Don’t let them take

…and, whatever you do, …and, whatever you do,

Don t let them take away your…

Thank You! k

RESIDENTIAL RESIDENTIAL MARKET UPDATE MARKET UPDATE 2008 2008

Van Rose, MIRM Van Rose, MIRM President, Rose and President, Rose and Womble Womble New Homes New Homes

15 Year Closing 15 Year Closing New Construction & Resale History New Construction & Resale History

Source:

slide-20
SLIDE 20

3/12/2009 20 Hampton Roads Housing Stats Hampton Roads Housing Stats 2008 2008

  • Average Price of SF New Home

Average Price of SF New Home $400,451 $400,451 A Decrease of $30,680 or 7.1% A Decrease of $30,680 or 7.1% A Decrease of $30,680 or 7.1% A Decrease of $30,680 or 7.1%

  • Average Price of SF Existing Home

Average Price of SF Existing Home $267,123 $267,123 A Decrease of $16,384 or 5.8% A Decrease of $16,384 or 5.8%

Source:

2008 2008 SALES SALES

  • RESALE: 14,621

RESALE: 14,621 20.3% 20.3% NEW HOMES: 2,855 NEW HOMES: 2,855 16.2% 16.2%

Source:

Market Share for Existing Homes Detached Sales by Price Range

19% 6% 7% 6% 6% 16%

Source:

68% 72%

Market Share for New Construction Detached Sales by Price Range

19% 23% 17% 20%

Source:

25% 33% 29% 34%

Market Share for Existing Homes Market Share for Existing Homes Attached Sales by Price Range Attached Sales by Price Range

28% 4% 3% 3% 4% 28% 65% 65%

Source:

Market Share for New Construction Market Share for New Construction Attached Sales by Price Range Attached Sales by Price Range

21% 13% 6% 13% 6% 60% 60% 21%

Source:

slide-21
SLIDE 21

3/12/2009 21

Average Market Time Average Market Time Existing Homes Existing Homes

Source:

2009 2009

Resale 10,544 units 11.3 months supply

Inventory

New Homes 1,695 units 8.5 months supply

Source: *Inventory on 02/23/09. Based on sales pace of last 6 months

Hampton Roads Residential Inventory Hampton Roads Residential Inventory 2007 to 2009 2007 to 2009

Source:

Hampton Roads Residential Inventory by Price Range

15% 13% 26% 14% 7%

Source:

34% 31% 24% 9% 27%

Existing Existing Home Home Inventory Inventory Inventory Inventory By City/ By City/ County County

Source:

slide-22
SLIDE 22

3/12/2009 22

New New Homes Homes Inventory Inventory Inventory Inventory By City/ By City/ County County

Source:

Challenging Credit Credit Environment

Hampton Roads Short Sale/Foreclosure Market Share

Source: Source: Source:

slide-23
SLIDE 23

3/12/2009 23

New Homes Inventory Will Be Absorbed by 4th Quarter 2009

Southside ATT <$200,000 2.7 Mo Southside ATT $200K-$250K 3.6 Mo Southside ATT $250K-$300K 5.3 Mo Peninsula DET $200K-$250K 4.2 Mo Peninsula ATT <$200,000 4.5 Mo

5

Southside DET $200K-$250K 5.4 Mo Southside DET $250K-$300K 5.8 Mo Peninsula ATT $200K-$250K 4.7 Mo Peninsula ATT $250K-$300K 3.2 Mo

Buyer Confidence Will Buyer Confidence Will Begin to Return Begin to Return

Hampton Roads Hampton Roads Employment to Permit Ratio Employment to Permit Ratio Hampton Roads Housing Demand Hampton Roads Housing Demand

3,700 Units

Shortfall Shortfall

2,000 Units

slide-24
SLIDE 24

3/12/2009 24 New, affordable product offerings New, affordable product offerings will raise new home sales numbers will raise new home sales numbers

New Construction Product Mix New Construction Product Mix 2008 Closings 2008 Closings

Source:

Average SFD Home Size Average SFD Home Size

YTD 2009 Average: 2,435 2005 Average: 2,742 AND THE AND THE Hampton Roads

Top 5 Builders

WINNERS WINNERS ARE…….. ARE……..

Source:

# 5

94

# 4

157

slide-25
SLIDE 25

3/12/2009 25

# 3

218

# 2

275

# 1

314

Old Domini Old Dominion Unive

  • n University

Ham Hampton Roads Real Estate ton Roads Real Estate

Thank you for attending! Thank you for attending! Please Join Us for the Reception Please Join Us for the Reception

p Market Review and Forecast Market Review and Forecast

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