Inside Business Beth Hancock Joy Learn for their sponsorship - - PDF document

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

Presented by: The Center for Real Estate and Economic Development

Executive Committee Executive Committee

• Melody Bobko
• Ron Bray
• Craig Cope
• John Crunkleton
• Tom Dillon
• Brian Dundon
• Joan Gifford
• Thor Gormley
• Jonathan Guion
• Warren Harris
• Joyce Hartman
• Andrew Keeney
• Billy King
• John Lombard
• Betsy Mason
• Don Perry
• Van Rose
• Dick Thurmond

Sponsorship Sponsorship Committee Committee Don Perry, Chair Ron Bray Jonathan Guion Cliff Moore

Programs Committee Programs Committee

Joyce Hartman, Chair Jonathan Guion John Lombard

Research & Editorial Committee Research & Editorial Committee

Brian Dundon, Chair

Beth Hancock Joy Learn Sandi Prestridge Maureen Rooks Lane Shea

Special thank you to

Inside Business

for their sponsorship

• ver the past two years.

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Thank You

Jonathan Guion

For leadership of the CREED Advisory Board throughout the past two years

ODU’s College of Business and Public Administration ODU’s College of Business and Public Administration

The Robert M. Stanton Chair

• f Real Estate and Economic Development
• $1.5 million lead gift is largest planned gift by an ODU

alumnus

• $4.5 million total endowment
• Endowment will allow:

– Chaired professorship – Expanded curriculum in real estate and economic development – Enhanced CREED activities

Presented by

Donald R. Crigger, CCIM

Senior Director Advantis/GVA

2003 OFFICE MARKET REVIEW

NATIONAL CLIMATE

POSITIVE INFLUENCES

• IMPROVING ECONOMY
• CORPORATE PROFITS FUELED BY

PRODUCTIVITY GAINS

• JOB GROWTH SHOULD FOLLOW GRADUALLY

(LATE 2004 & 2005)

NATIONAL CLIMATE

NEGATIVE INFLUENCES

• HIGH VACANCY DUE TO LIMITED DEMAND
• SIGNIFICANT SUBLEASE INVENTORY
• INCREASING OCCUPANCY DENSITY

(INCREASED NEARLY 10% IN LAST 10 YEARS)

• TECHNOLOGY CONTINUES TO REPLACE

WORKERS

• OFFSHORING OF OFFICE JOBS

(INDIA & CHINA)

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NATIONAL CLIMATE

FORECAST

• VERY GRADUAL IMPROVEMENT
• SUBLEASE AND PHANTOM SPACE WILL DAMPEN

STATISTICAL RECOVERY

(BOTH IN TERMS OF RENTAL RATES AND VACANCY)

• FLIGHT TO QUALITY

(INCREASING DENSITY AT SAME PRICE)

REQUIRING EMPLOYEES TO LIVE IN LESS SPACE, MUST INCREASE QUALITY & AMENITIES

5 YEAR NATIONAL VACANCY & ABSORPTION TRENDS

POSITIVE INFLUENCES FOR 2004

• LIMITED DEVELOPMENT SINCE 2000

(SUPPLY CONTROLLED)

HAMPTON ROADS CLIMATE

POSITIVE INFLUENCES

• “TOWN CENTER” PROJECTS BUOYED ABSORPTION

(MET PENT UP DEMAND)

• VACANCY DECREASING WITH LIMITED SUBLEASE

INVENTORY (LOW TEENS)

• DEFENSE & PORT REMAIN IN GROWTH MODE
• LIMITED CLASS “A” SUBURBAN INVENTORY

HAMPTON ROADS CLIMATE

NEGATIVE INFLUENCES

• CONTINUED LACK OF NEW PROSPECT ACTIVITY

FROM OUTSIDE REGION

• NORTHEAST NO LONGER AS FERTILE FOR

PROSPECTING

• SHRINKING RENTAL RATE DIFFERENTIAL WITH

COMPETING MARKETS

• MODERATE ABSORPTION IN 2004 - IMPROVING IN 2005

HAMPTON ROADS CLIMATE

FORECAST

• CONTINUED BUILD-TO-SUIT ACTIVITY WITH

SPECULATIVE DEVELOPMENT RETURNING BY 2005

• SUBURBAN RE-DEVELOPMENT AS DEMAND WARRANTS
• RETENTION STRATEGIES WILL BE AS IMPORTANT AS

RECRUITMENT INITIATIVES

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343,000 657,000 823,000 108,000 551,000 200,000 400,000 600,000 800,000 1,000,000 1999 2000 2001 2002 2003 Square Feet Net Absorption

HAMPTON ROADS HISTORICAL ABSORPTION TRENDS

7.80% 9.70% 11.80% 14.30% 13.10% 0.00% 5.00% 10.00% 15.00% 20.00% 1999 2000 2001 2002 2003 Vacancy Rate

HAMPTON ROADS HISTORICAL VACANCY RATE TRENDS

NEW DEVELOPMENTS 2004

LOCKHEED MARTIN GLOBAL VISION INTEGRATION CENTER

BRIDGEWAY TECHNOLOGY CENTER II

AMERIGROUP CORPORATION

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AOR/US ONCOLOGY

LARGE LEASE TRANSACTIONS

SUNTRUST AT 150 WEST MAIN 53,120 SF SENTARA HEALTHCARE AT CROSSWAYS I 40,211 SF AMSEC LLC AT BATTLEFIELD TECH CENTER I 57,429 SF

SIGNIFICANT INVESTMENT SALES

SELLER: THE HAYMAN COMPANY BUYER: BERMAN KAPPLER SALES PRICE: $11,500,000 TOTAL SF: 155,500 PRICE PSF: $73.95

Multi-Family Market Overview

Wendy Drucker Drucker & Falk, LLC Newport News, VA

• The Established

Market

• New Development
• Curve Balls

The Established Market

Vacancy 2.8%

• Projected Revenue Growth 3.7%+
• 1258 units absorbed
• Cap rates 7.27-8.31

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1400 Apartments Under Construction 1800 In Pipeline 1 Bedroom Rental Rates $1000+

New Development

Land Prices

• Increased 10%-15% per year
• $11,000-$12,000 per unit

New Development More Bells and

Wh Whistles! istles!

Clubhouses Swimming Pool Waterscapes

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Coffee Bars

Café, Billiards

Child Friendly Facilities Movie Theatre

Walking Trails

Mixed Mixed us use “vill e “village” ” co comm mmunitie unities, mid- s, mid-rise, rise, high-ri high-rise

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Elegant Building Lobbies

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Curve Balls

Military Deployment Rain!

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Hurricane Isabel

Insurance Costs

Asbestos

Lead

MOLD!

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What’s in store for 2004?

Presented by

J.V. Rose, Jr.

President Rose & Womble Realty

Residential Market Review

5000 10000 15000 20000 25000 1995 1996 1997 1998 1999 2000 2001 2002 2003

R esale N ew Construction

9 Year History of Resale and New Construction Closings Hampton Roads Housing Stats - 2003

• 7,049 Building Permits
• 4,759 Closed New Home Sales
• New Home Closings Total Volume =

$1,158,560,096 up 7.0 %

• 20,612 Closed Existing Home Sales
• Existing Home Closings Total Volume =

$3,293,498,753 up 19.9 %

Hampton Roads Housing Stats - 2003

• Average Price of SF New Home

$254,895

• An Increase of $25,779 or 11.2 %

in one year

• Average Price of SF Existing Home

$172,873

• An Increase of $20,359 or 13.3 %

in one Year

Market Share 1993 vs. 2003

19% 81% 44% 56%

NC

NC Resale Resale

1993 2003

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Virginia Beach 2003 Average Price Increase for a Single Family Home Virginia Beach 2003 Average Price Increase for a Single Family Home

NC 2002 $274,902 2003 $291,308 6.0 % Resale 2002 $192,683 2003 $219,648 14.0 %

Chesapeake 2003 Average Price Increase for a Single Family Home

NC 2002 $231,967 2003 $258,383

• 11. 4 %

Resale 2002 $164,174 2003 $190,597 16.1 %

Suffolk 2003 Average Price Increase for a Single Family Home

NC 2002 $197,634 2003 $245,946 24.4 % Resale 2002 $153,654 2003 $174,261 13.4 %

$219,648 $291,308 $71,660 $190,597 $258,383 $67,786 $174,261 $245,946 $71,685 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 VB Ches Suff Resale NC Diff

Southside Resale VS. New Construction Average Closing Prices for 2003 Single-Family Detached Homes

$106,849 $238,477 $131,628 $132,823 $209,187 $76,364 $200,943 $270,191 $69,248 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 Ports Norf I/W Resale NC Diff

Southside Resale VS. New Construction Average Closing Prices for 2003 Single-Family Detached Homes

$118,791 $211,687 $92,896 $113,604 $173,047 $59,443 $252,544 $260,395 $7,851 $241,495 $254,304 $12,809 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000

H NN JCC YC Resale NC Diff.

Peninsula Resale VS. New Construction Average Closing Prices for 2003 Single-Family Detached Homes

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Average Consumer Lot Costs Chesapeake

• Greystone - $109,000
• Ravanna
• $120,000
• Edinburgh - $180,626
• Cahoon Plantation - $118,888

Average Consumer Lot Costs Suffolk

• Governors Pointe - $139,352
• Nansemond Pointe - $80,375
• Nansemond River Estates - $90,360
• The Riverfront - $139,900

Average Consumer Lot Costs Virginia Beach

• Morgans Walk - $127,800
• Lago Mar - $154,658
• Indian River Plantation - $189,968
• Victoria Park - $140,000 - $175,000

Average Consumer Lot Costs Peninsula

• J Landfall - $160,000
• J Stonehouse - $113,000
• J Fords Colony - $118,502
• Y Port Myers - $82,910

RESIDENTIAL HOUSING FORECAST

• 1. Extremely Positive!!!

RESIDENTIAL HOUSING FORECAST

REASONS:

• 1. Hampton Roads Economics

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Hampton Roads Economic Stats - 2003

• Employment has Grown Faster in Hampton Roads

Than In The U.S. and Virginia Since Late in 2000

• Hampton Roads Has Been Buffered from Recession by

Increases in Military Pay and Housing Allowances

• Median Family Income

National Average $ 42,900 Chesapeake $ 53,800 Virginia Beach $ 53,242

• Average MSA Military Pay $ 50,613
• Estimated 53,000 Retired Military in HR

RESIDENTIAL HOUSING FORECAST

REASONS:

• 2. Hampton Roads Housing Demand

Percent of Households That Purchased A Home in 2003 Compared To The Total Number of Households In The MSA

Charlotte NC MSA Hampton Roads MSA

Total Closings = 26,370 11 % of HH Total Households = 239,368 Total Closings = 25,371 4.3 % of HH Total Households = 579,107

Raleigh/Durham MSA

Total Closings = 36,862 7.4 % of HH Total Households = 492,966

RESIDENTIAL HOUSING FORECAST

REASONS:

• 3. Hampton Roads Housing Supply

Number of Homes Listed in December 1998-2003 and February 2004

8582 6902 6449 5200 4082 2925 2764

2000 4000 6000 8000 10000 1998 1999 2000 2001 2002 2004 2004

RESIDENTIAL HOUSING FORECAST

REASONS:

• 4. Effects of Interest Rates

(Mortgage Instruments)

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Interest Rate Affect On Housing Affordability

1999 2000 2001 2002 2003 MI $39,704 $42,448 $51,000 $53,900 $56,302 IR 8.2% 7.3% 7.3% 5.5% 5.25%

= = = = =

$154,000 $173,000 $210,000 $260,000 $300,000

RESIDENTIAL HOUSING FORECAST

REASONS:

• 5. Military Influence

Defense Spending In Billions 1990 - 2004

379.9 355.1 329 291 221 219 203 218 223 230 238 258 270 295 298

50 100 150 200 250 300 350 400

500 1000 1500 2000 2500 3000 3500 100K 100K-199K 200-299K 300K-399K 400K-499K 500K + 2000 2001 2002 2003

New Construction Closings By Price Points 2000, 2001, 2002, 2003

• 121
• 899

+295 +133 +74 +32

Presented By:

Clay Culbreth, SIOR, CCIM

• Sr. Director Industrial Properties

Advantis/GVA

2004 ODU Real Estate Review

Industrial Market Forecast

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Stihl

350,000 S.F. 2820 Crusader Circle

155,000 S.F.

140 Industrial Blvd.

210,672 S.F.

2615 Elmhurst Lane

77,612 S.F.

804 Greenbrier Circle

75,000 S.F.

220 E Street

48,000 S.F.

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Gateway

422,000 S.F.

ABB Building

100,000 S.F.

Excell Cedar Building

70,772 S.F. on 12.5 Acres

Givens Liberty Warehousing, Inc. Valeo

69,000 S.F.

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Newport News, Inc.

360,000 S.F.

Survivor All-Stars 2004

Old Dominion Unive Old Dominion University sity Real Estate Center Real Estate Center 2004 Retail Market Overview 2004 Retail Market Overview

Presented By

• H. Blount Hunter

RETAIL SALES TREND

0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Southside Peninsula Virginia US

RETAIL MARKET OVERVIEW

• 46.4 million SF GLA (shopping centers)
• 30.3 million SF Southside (65 percent)
• 16.1 million SF Peninsula (35 percent)

Retail SF and population are generally “balanced”

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2003 AVERAGE RENT

$13.46 $13.18 $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00 $18.00 $20.00 AVERAGE Southside Peninsula

LEASING DYNAMICS

749,000 SF new construction 831,000 SF estimated absorption Overall vacancy rate: 11.9 percent

↓ DOWN 0.5 percent from 2002 ↓ DOWN 1.6 percent from 2001

Average small shop asking rent: $13.32

↑ UP $0.49 PSF from 2002 ↑ UP $1.05 PSF from 2001

RETAIL SUBMARKETS

• 24 retail submarkets Southside

– 6 regional malls 14.9 million SF – 419,500 SF new construction

• 10 retail submarkets Peninsula

– 2 regional malls 7.3 million SF – 330,000 SF new construction

RETAIL PRODUCT TYPE

2 4 6 8 10 12

Neighborhood Community Regional Power Freestanding Specialty Festival Outlet

MSA

VACANCY BY PRODUCT TYPE

0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00%

Neighborhood Community Regional Power Freestanding Specialty Festival Outlet

“BIG BOX” VACANCY

3.5 million SF “Big Box” vacancy

– 67 percent of total retail vacancy – Disproportionate problem on Peninsula

• 45 percent of “big box” vacancy is on Peninsula
• 77 percent of Peninsula’s vacancy is in “big boxes”

– Reflects modest decline compared to 2002 but still suffering from sharp increases in 2000 and 2001

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“SWEET SPOTS”

“Sweet Spots” exist throughout the region:

– Williamsburg and Route 17 corridor – Northern Newport News – Coliseum Central – Northern Suffolk – Hilltop and Pembroke areas in Va. Beach – Victory Crossing in Portsmouth – Downtown Norfolk – Greenbrier and 664 corridor

NEW PLAYERS

Kohl’s A.C. Moore Bass Pro Shops Shoe Carnival Moe’s Southwest Grill

• P. F. Chang’s

The Sharper Image K & G Superstore Dick’s Sporting Goods Jared’s Jewelers California Pizza Kitchen Cold Stone Creamery

EXPANDING RETAILERS

• Wal*Mart
• Farm Fresh
• Burlington Coat Factory
• Home Depot
• Lowe’s Home Improvement
• Pier 1
• Ross Dress for Less

NOTABLE SALES IN 2003

Lynnhaven Mall sold for $256 million ($197 PSF)

– TWICE the combined sales price of $112 million for Greenbrier Mall and Military Circle in 2002

Smaller centers sold for $9 - $100 PSF

“WORD ON THE STREET”

→There’s more interest in this market than ever before, and by a broader range of retailers and restaurants →Many “big box” vacancies reflect “wait and see” attitudes by landlords who are not investing capital to re-demise large spaces for smaller tenants

“WORD ON THE STREET”

→The grocery store war isn’t over…it’s entering a new phase with Wal*Mart just beginning to flex its muscles →Out parcel sites are scarce but eagerly sought by many types of users →Retailers aren’t bashful in making demands for tenant allowance or in putting pressure on rents

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“WORD ON THE STREET”

→It remains difficult to convey local market nuances to out-of-town site selectors →This market’s orientation to “small investor property owners” continues to surprise and beguile regional and national retailers →Finding new sites for retail development is tough, especially in Chesapeake

“WORD ON THE STREET”

→All eyes are on Williamsburg for its population growth and quality of consumer base →Infill opportunities for existing retailers are not being promoted by retail tenant representatives →“Workhorse” retail areas such as Janaf and Coliseum are being overlooked despite strong sales and new investment

Thank you

for your support of The Center for Real Estate and Economic Development.

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

Presented by: The Center for Real Estate and Economic Development