Old Dominion University Old Dominion University Director s Message - - 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 2008 2008

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

Director Director’ ’s Message 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 A Message from the Dean

Nancy Bagranoff, DBA

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

TED CONSTANT CONVOCATION CENTER ENGINEERING & COMPUTATIONAL SCIENCES BUILDING

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UNIVERSITY VILLAGE HEALTH SCIENCES BUILDING INNOVATION RESEARCH PARK

BARON & ELLIN GORDON ART GALLERIES UNIVERSITY QUADS STUDENT HOUSING FOLKES-STEVENS INDOOR TENNIS CENTER

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Executive Committee Executive Committee

Chair: Tom Dillon Executive Director: John Lombard Vice Chair: Brad Sanford Program Chair: Stephanie Sanker Research 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

Sponsorship Committee Sponsorship Committee

Fred Facka (Chair), Smith Barney - Citigroup Stephanie Sanker, GVA Advantis Tom Dillon, Resource Bank Erica Ferron, Old Dominion University

Program Committee Program Committee

Stephanie Sanker, GVA Advantis Tom Dillon, Resource Bank David Chapman, Old Dominion University

Research Committee 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

Ashley Capital, LLC Atlantic Mortgage & Investment Company Axial Advisory Group, LLC Bank of America Real Estate Banking BB&T Cavalier Land, Inc. CB Richard Ellis Cherry, Bekaert, & Holland, L.L.P. City of Chesapeake – Economic Development City of Hampton – Economic Development City of Norfolk – Department of Development City of Portsmouth – Dept. of Economic Development City of Suffolk – Dept. of Economic Development City of Virginia Beach – Dept. of Economic Development Clark Nexsen CREED Continental Realty Services, Inc. Creative Office Environments, LLC

Our Proud Sponsors Our Proud Sponsors

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Davenport Group & Lefcoe Development Co Dominion Realty Advisors Drucker & Falk, LLC ECS Mid-Atlantic, LLC First Potomac Realty Trust Grandbridge Real Estate Capital Great Atlantic Management Co. GVA Advantis Hampton Roads Security Corporation Harbor Group Management Harvey Lindsey Commercial Real Estate Innovative Research Park - ODU Kaufman & Canoles LandMark Design Group, Inc. Liberty Property Trust McDonald Development Company McPhillips Roberts & Deans Mid Eastern Builders, Inc.

Our Proud Sponsors Our Proud Sponsors

ODU Real Estate Foundation Resource Bank/Fulton Bank S.L. Nusbaum Realty Co. Sam Segar & Associates, Inc. Sperry Van Ness - Virginia Beach SunTrust Real Estate Finance Thalhimer/Cushman & Wakefield The Cost Segregation Group The Runnymede Corporation Tri City Developers, LLC Virginia Housing Development Authority W.M. Jordan Company Wachovia Bank Wall, Einhorn & Chernitzer, P.C. Wells Fargo Real Estate Group Wexford Science & Technology, LLC Wheeler Interests Williams Mullen

Our Proud Sponsors Our Proud Sponsors

Special thank you to

Inside Business

for their sponsorship

• ver the past six

years.

Commercial Real Estate Investment Market Update

Presented To: Presented By:

• J. Scott Adams, CCIM

Mid-South Regional President March 12, 2008

OVERVIEW

Housing versus Commercial Real Estate Changes in the Capital Markets Commercial Real Estate as an Investment Class Trends by Property Type

• Office
• Industrial
• Multi-Family
• Retail

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 period from 2001 to 2006 2.Over-reliance of residential boom on speculative investors 3.Residential lending practices allowed “no money down”

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BOOM IN SUPPLY OF NEW HOUSING

Commercial Real Estate

Source: Real Capital Analytics

CAPITAL MARKET CHANGES

Variables Loan to value ratio Debt service coverage Interest only periods Reserves Definitions Value for loan basis Net Operating Income Occupancy Capital for loan proceeds

LAX UNDERWRITING & AGGRESSIVE LENDING

Source: Real Capital Analytics

US COMMERCIAL PROPERTY SALES Commercial Real Estate is now a “Major Food Group”

Alternative investment opportunities not rock solid either Underlying fundamentals remain healthy Commercial real estate with predictable and transparent contractual cash flows Key perspective is returns on a “risk adjusted basis”

US COMMERCIAL PROPERTY SALES

Source: Real Capital Analytics; minimum value of $5 million

Office, Industrial, Multifamily & Retail Properties

ANALYSIS OF INVESTMENT RETURNS How Investment Returns have been so Great

Moderate growth in net operating income

• Growth in rents
• Rising occupancy

Sharp decline in capitalization rates

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EVOLUTION OF INVESTMENT RETURNS

Office, Industrial, Retail, Multi-Housing: NCREIF Weighted Source: TWR Investment Database

Last 5 Years vs. Next 5 Years

Big Difference!

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% $0 $50 $100 $150 $200 $250

2003 2004 2005 2006 2007 Average Cap Rate Total Price (in billion)

NATIONAL OFFICE SALES

Higher volume and lower cap rates

The Good News: Economic expansion has been increasingly driven by office-occupying industries The Bad News: Softening economy will lead to slower growth in rents and less space absorption

2007 HAMPTON ROADS OFFICE SALES

LANDMARK TRANSACTIONS

Gee’s Group Portfolio 150 W. Main

150 W. Main Lynnhaven Corporate Center I Silver Oak Southport Centre Twin Oaks I & II

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% $0 $5 $10 $15 $20 $25 $30 $35 $40

2003 2004 2005 2006 2007 Average Cap Rate Total Price (in billion)

NATIONAL INDUSTRIAL SALES

Higher volume and lower cap rates

The Good News: Export business and business to business services are expected to continue to grow The Bad News: Impacted by the slowing economy especially with goods related to housing and retailers

2007 HAMPTON ROADS INDUSTRIAL SALES

LANDMARK TRANSACTIONS

Commonwealth Storage

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% $0 $20 $40 $60 $80 $100 $120

2003 2004 2005 2006 2007 Average Cap Rate Total Price (in billion)

NATIONAL MULTI-FAMILY SALES

Slow down in volume growth and cap rate decline

The Good News: More people will decide to rent rather than pursue home ownership The Bad News: Shadow competition of rental supply created by unsold homes and condos listed for rent

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HAMPTON ROADS MULTI-FAMILY TRANSACTIONS

LANDMARK TRANSACTIONS

The Heights and The Myrtles at Olde Towne Portfolio

The Myrtles The Heights

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% $0 $10 $20 $30 $40 $50 $60 $70 $80

2003 2004 2005 2006 2007 Average Cap Rate Total Price (in billion)

NATIONAL RETAIL SALES

Higher volume and lower cap rates

The Good News: Continued growth in lifestyle & town centers; new concepts continue to emerge The Bad News: Future performance impacted by slowdown in employment & consumer demand

HAMPTON ROADS RETAIL TRANSACTIONS

LANDMARK TRANSACTIONS

Denbigh Village Lynnhaven North

Denbigh Village Lynnhaven North

FINAL THOUGHTS

“The retailers that have the right merchandise at the right price are still doing significant business. There are winners and losers in market share, and consumers are voting every day with their purchases.”

• Daniel Hurwitz, President & CEO of Developers Diversified Realty Corp.

This concept applies to all of us in the commercial real estate profession and not just for retailer sales.

INDUSTRIAL MARKET REVIEW

INDUSTRIAL MARKET REVIEW

Robert L. “Bobby” Phillips, Jr. First Vice President Industrial Brokerage Global Supply Chain Solutions

March 12, 2008

INDUSTRIAL MARKET REVIEW

Industrial Reporters

Ron Biesecker & Christine Kaempfe – Greenbrier Chip Worley – Bainbridge Patrick Mumey, SIOR – Cavalier Worth Remick – Norfolk Commerce Park/Central Norfolk Charles Dickinson – Norfolk Industrial Park Billy King, SIOR – West Side/Midtown Norfolk and Isle of Wight Brian Baker – Lynnhaven Bobby Beasley – Greenwich/Cleveland and Airport Industrial Park Abe Ellis, SIOR – Portsmouth Bill Throne, CCIM – Suffolk Clay Culbreth, CCIM, SIOR & Stephanie Sanker, CCIM – Copeland/Lower Peninsula Bobby Phillips – Oyster Point/ Middle Peninsula & Williamsburg Extended Trip Ferguson – Oakland/Upper Peninsula

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INDUSTRIAL MARKET REVIEW INDUSTRIAL MARKET REVIEW

US Population Density Most of the nation’s population and consumer demand is still heavily located in the eastern- half of the country.

Port of Virginia

INDUSTRIAL MARKET REVIEW INDUSTRIAL MARKET REVIEW

http://www.transportationfortomor row.org/final_report/

INDUSTRIAL MARKET REVIEW

Hong Kong, China Suez Canal Panama Canal Port of Virginia

Via Panama Canal Distance: 11,021 nautical miles Via Suez Canal Distance: 11,705 nautical miles

Panama vs. Suez Canal Panama vs. Suez Canal

INDUSTRIAL MARKET REVIEW

Projected Coastal Freight Growth

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INDUSTRIAL MARKET REVIEW INDUSTRIAL MARKET REVIEW

Virginia Inland Port (VIP)

Future Craney Island Terminal

Norfolk International Terminals (NIT) Norfolk, VA Newport News Marine Terminal (NNMT)

Portsmouth Marine Terminal (PMT)

Modern Terminals Modern Terminals

APM Terminal

INDUSTRIAL MARKET REVIEW

APM/Maersk Terminal in Portsmouth June 2007

Phase 1 - complete 2007 Total Acreage: 230 Pier Length: 3200 ft. Depth: 55 ft. Cranes: 6 Capacity: 1 Million TEUs Cost: $500 Million

Phase 2 - as volume dictates Total Acreage: 291 Pier Length: 4000 ft. Depth: 55 ft. Cranes: 12 Capacity: 2.2 Million TEUs Cost: $250 Million

INDUSTRIAL MARKET REVIEW

Future Craney Island Marine Terminal

Future Craney Island Marine Terminal Phase 1 Phase 1 – – June 2017 June 2017

Total Acreage: 220 Pier Length: 3000 ft. Depth: 52 ft. Cranes: 6 Capacity: 1.5M TEUs Cost: $1.2B

Phase 2 Phase 2 – – June 2032 June 2032

Total Acreage: 600 Pier Length: 8000 ft. Depth: 52 ft. Cranes: 15 Capacity: 5M TEUs Cost: $1.06B

INDUSTRIAL MARKET REVIEW

• Inc. 378,800

• Inc. 800,000

• Corp. Inc.

• J. Crew

Distribution Facilities in Virginia

INDUSTRIAL MARKET REVIEW

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INDUSTRIAL MARKET REVIEW

Hampton Roads Industrial Sub-Markets

INDUSTRIAL MARKET REVIEW

Wal-Mart Distribution Facility – James City County

INDUSTRIAL MARKET REVIEW

Endeavor Center • James City County

70,000 SF Multi-Tenant Warehouse/Distribution 35,000 SF leased to Freemont Die 35,000 SF Available Divisible to 10,000 SF

INDUSTRIAL MARKET REVIEW

AAFES Dan Daniels Distribution Center • Oakland Industrial Park, Newport News

INDUSTRIAL MARKET REVIEW

West Park 2 - Hampton

High Street Equity Advisors 180,000 SF Warehouse/Distribution Completed 2007 Divisible to 12,000 SF

INDUSTRIAL MARKET REVIEW

West Park 1 & 3 - Hampton

Gateway Warehouses remain available for sublease 515,000 SF in 2 buildings

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INDUSTRIAL MARKET REVIEW

2000 Enterprise Parkway - Hampton

135,000 SF Guardian Storage Lease (2007) First Potomac Realty Trust

INDUSTRIAL MARKET REVIEW

Enterchange at Hampton

Building 1 – 243,219 SF; 211,119 SF Available

Building 2 – 470,244 SF; 109,497 SF Available Devon USA – Richmond, VA Copeland Industrial Park

INDUSTRIAL MARKET REVIEW

Bridgeway Commerce Center • Suffolk

Liberty Property Trust Three Warehouse/Distribution buildings totaling 424,000 SF Building I – 130,000 SF, fully leased Building III – 168,000 SF Building II – Pad ready, 126,000 SF

INDUSTRIAL MARKET REVIEW

Bridgeway Business Center

Ashley Capital 750,000 SF multi-tenant Warehouse/Distribution Completed 81,204 modern renovation 2007 Dixie Group Lease – 81,204 SF plus 3 acre “wareyard”

INDUSTRIAL MARKET REVIEW

Cavalier Industrial Park • Bay Warehouses • Chesapeake

Newly completed 94,330 SF Multi-tenant Warehouse/Distribution Divisible to 15,835 SF First Potomac Realty Trust

INDUSTRIAL MARKET REVIEW

Cavalier Industrial Park • Johnson Controls Facility Sale

December 2007 $6.4 million Sold to USUI International

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INDUSTRIAL MARKET REVIEW

Cavalier Industrial Park • 3800 Cook Boulevard

Modern renovation and re-tenanting through 2007 Sold to Exeter Property Group - 2007 64,000 SF Available

INDUSTRIAL MARKET REVIEW

7.40% 7.50% 5.99% 6.13% 5.20% 7.55% 10.51% 2.50% 4.50% 6.50% 8.50% 10.50% 12.50% 14.50% 2002 2003 2004 2005 2006 2007 2008

Hampton Roads – Industrial Market Vacancy Rate (as of the first month of the year)

Source: ODU Real Estate Market Review 2008

INDUSTRIAL MARKET REVIEW

INDUSTRIAL MARKET REVIEW

INDUSTRIAL MARKET REVIEW

INDUSTRIAL MARKET REVIEW Ford Assembly Plant

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INDUSTRIAL MARKET REVIEW

Airport Industrial Park II – 5901 Thurston Avenue

$6,700,000 – 2007 Fully Leased – 6 tenants 142,500 SF; 17 acres $47.50/SF to Cambridge Hanover

INDUSTRIAL MARKET REVIEW

Airport Industrial Park • 5828 Ward Court

TruGreen Lease 20,000 SF $120/SF - $2,400,000

INDUSTRIAL MARKET REVIEW

Prologis/NYK Logistics Import Deconsolidation Facility

100′ x 1,255’ 125,500 SF cross dock Completed 2007

INDUSTRIAL MARKET REVIEW

Prologis/NYK Logistics Import Deconsolidation Facility

INDUSTRIAL MARKET REVIEW

Northgate Commerce Park

Duke Realty purchased 2007 Two (2) 150,000 SF Buildings Available for Sublease 36 additional acres for development

INDUSTRIAL MARKET REVIEW

Northgate Commerce Park

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INDUSTRIAL MARKET REVIEW

Northgate Commerce Park

Pending acquisition of 15 acres Final stages of approval for 216,000 SF rear loaded distribution property 30′ clear height 50’ x 50’ column spacing Potential Mid 2009 delivery Ample car/trailer parking KTR Capital

INDUSTRIAL MARKET REVIEW

Suffolk – Bypass to Distribution

INDUSTRIAL MARKET REVIEW

Virginia Regional Commerce Center • Suffolk

Building A nearing completion 2nd Quarter ‘08 400,000 SF Multi-Tenant Distribution Divisible to 60,000 SF Four (4) building complex planned totaling 1,100,00 SF

INDUSTRIAL MARKET REVIEW

Virginia Commerce Center

McDonald Development Building 100 • 385,320 SF 3 Buildings planned totaling 1,373,720 SF CSX rail available

INDUSTRIAL MARKET REVIEW

Target Area - Suffolk

INDUSTRIAL MARKET REVIEW

58 Bypass at Carolina Road

Liberty Property Trust Commerce Center Hampton Roads Devon USA Enterchange @ Suffolk 73 acres; 2 Buildings planned 321,859 SF + 440,259 SF = 762,118 SF potential

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INDUSTRIAL MARKET REVIEW

Office Market Review Office Market Review 2008 2008

Scott Godbout

Senior Vice President Director of Office Division Harvey Lindsay Commercial Real Estate

Hampton Roads Hampton Roads Absorption Trends Absorption Trends

551,000 804,000 608,000 300,000 102,741 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 2003 2004 2005 2006 2007 Square Feet

Buildings Delivered in 2007 Buildings Delivered in 2007

Southside Southside

Convergence Center III 99,000 sf Dominion Enterprises 220,000 sf Harbour View Medical Arts I 47,000 sf

Buildings Delivered in 2007 Buildings Delivered in 2007

Southside Southside

4111 Monarch Way 100,000 sf Circle South 48,000 sf Mast One 60,000 sf

Buildings Delivered in 2007 Buildings Delivered in 2007

Peninsula Peninsula

Langley Federal Credit Union 11,000 sf 1030 Loftus Blvd. 26,380 sf Two City Center 90,000 sf

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Projects Under Projects Under Development Development

Corporate Center VI 58,897 sf Independence Place 75,000 sf 1741 Corporate Landing 45,000 sf

Projects Under Projects Under Development Development

Wachovia Center 250,000 Sq. Ft. Two Columbus Center 104,000 Sq. Ft.

Hampton Roads Vacancy Rates Hampton Roads Vacancy Rates Class A/ B Class A/ B

4% 6% 8% 10% 12% 14% 16% 18%

2003 2004 2005 2006 2007 Norfolk CBD Southside Suburban Peninsula

The Real Estate Cycle The Real Estate Cycle

Absorption of Excess Supply Declining Prices, Rents, Construction High Vacancies Oversupply Accelerated New Construction I ncreasing Prices and Rents Low Vacancies

2005 2005 2008 2008 2003 2003

2008 Office Forecast 2008 Office Forecast

• Slight Uptick In Vacancy Rates

Slight Uptick In Vacancy Rates

• New Ceiling On Class A Rates

New Ceiling On Class A Rates

• Steady Slow Increase In Overall Rates

Steady Slow Increase In Overall Rates

• Landlord Incentives On the Rise

Landlord Incentives On the Rise

Market Market I nfluences I nfluences

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Thank You Thank You 2008 RETAIL MARKET REVIEW 2008 RETAIL MARKET REVIEW

Presented By: Bill Overman

Hampton Roads Retail Hampton Roads Retail

Per Person Average Per Person Average

Hampton Roads 29.5 SF Hampton Roads 29.5 SF National 18.2 SF National 18.2 SF

396 Properties Totaling 396 Properties Totaling 50,219,239 SF 50,219,239 SF

Hampton Roads Retail Hampton Roads Retail

Peninsula Peninsula 133 Properties 133 Properties Totaling 17,133,079 SF Totaling 17,133,079 SF Southside Southside 263 Properties 263 Properties Totaling 33,086,160 SF Totaling 33,086,160 SF

New Construction New Construction Since 2003 Since 2003

749,458 SF 456,610 SF 1,211,699 SF 2,594,843 SF 2,047,291 SF

500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 2003 2004 2005 2006 2007

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New Construction New Construction

Peninsula Peninsula 1,009,000 SF 1,009,000 SF (5.9% of Total SF) (5.9% of Total SF) Southside Southside 1,038,291 SF 1,038,291 SF (3.1% of Total SF) (3.1% of Total SF)

A Few Projects A Few Projects Delivered in 2007 Delivered in 2007

• Landstown

Landstown Commons Commons

• The Marquis

The Marquis

• Towne Place in Greenbrier

Towne Place in Greenbrier

Landstown Landstown Commons Commons The Marquis The Marquis Towne Place in Towne Place in Greenbrier Greenbrier

Mixed Use Mixed Use

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Virginia Beach Town Center Virginia Beach Town Center

City Center at Oyster Point City Center at Oyster Point New Town New Town Settler Settler’ ’s Market s Market Peninsula Town Center Peninsula Town Center

New New Construction Construction in Motion in Motion

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Little Creek & Tidewater Little Creek & Tidewater Marketplace at Marketplace at Harbour Harbour View View

Harbour Harbour View East View East Bennett Bennett’ ’s Creek Crossing s Creek Crossing

Edinburgh & Edinburgh & Cahoon Cahoon Commons Commons

Grocers in the News Grocers in the News

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Big Box Big Box

Target at Red Mill Walk Lowe’s buys Giant Square Vacancy Rates Since 2003 Vacancy Rates Since 2003

11.19% 9.41% 7.55% 6.81% 7.63%

5.00% 7.00% 9.00% 11.00% 13.00% 2003 2004 2005 2006 2007

Vacancy Rate Vacancy Rate

Southside 6.7% Southside 6.7% Peninsula 9.4% Peninsula 9.4% 2007 Rental Rates 2007 Rental Rates

Overall Average Overall Average $16.05 NNN $16.05 NNN Southside: Southside: $16.68 NNN $16.68 NNN Peninsula: Peninsula: $15.41 NNN $15.41 NNN

Emerging Markets Emerging Markets

Isle of Wight Isle of Wight Northern Suffolk Northern Suffolk Williamsburg Williamsburg Eastern North Carolina Eastern North Carolina

FORECAST FORECAST

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Market Cycle Market Cycle

Worth Quoting Worth Quoting

“ “The party is over. With the exception of The party is over. With the exception of quality product, markets with barriers to quality product, markets with barriers to entry, and those with a durable rent roll, entry, and those with a durable rent roll, commercial real estate will decrease 10 commercial real estate will decrease 10 percent to 12 percent in 2008. percent to 12 percent in 2008. What we What we’ ’re re experiencing now is not a market crash, experiencing now is not a market crash, but merely a return to normalcy. but merely a return to normalcy.” ”

Jerry Anderson, CCIM President Jerry Anderson, CCIM President Sperry Van Ness Sperry Van Ness

2008 Multi 2008 Multi-

• Family

Family Market Review Market Review

• F. Andrew Heatwole

Senior Vice President Ripley Heatwole Company, Inc.

• Historic & Current Multi-Family Development
• Economic & Operating Environment
• Outlook

Topics

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Historic & Current Multi-Family Development Hampton Roads Communities Under Construction/Proposed

1,112 units under construction 3,287 units proposed 691 units started after June 1, 2007

Source: Real Data

MidTown @ CityView, Virginia Beach 196 units Oxford New Town, Williamsburg Final 69 units

Source: Real Data

Economic & Operating Environment

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Top 3 Sales

Bristol @ Ghent, Norfolk $48,300,000 268 units $180,244 per unit Myrtles @ Olde Town, Portsmouth $36,000,000 246 units $146,341 per unit Mayflower, Virginia Beach $33,000,000 265 units $124,528 per unit

2007 Sales Statistics

Total Deals: 14 Total Units: 2,760

• Avg. Units/Deal:

197 Total Deal Volume: $277,676,159

• Avg. Price/Deal:

$19,834,000

• Avg. Price/Unit:

$100,607

Source: Cushman & Wakefield

Debt & Equity Markets

• Yesterday the Fed launched a new financial tool

called the “Term Securities Lending Facility” (TSLF). The Fed will lend up to 200 billion dollars in Treasury Securities. The collateral for the treasuries may be mortgage securities sold by Freddie and Fannie and private mortgage backed securities. The TSLF is designed to restore liquidity to the real estate debt and equity markets.

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Economic Overview

Source: Real Data

Outlook Outlook

Source: Real Data

• Employment growth projections appear to be good

for 2008 & 2009. Hampton Roads compares favorably to Charlotte and the Raleigh-Durham area regarding employment.

• Vacancy, while at an overall 10 year high of 5.1%, is

still relatively low and should remain at this level.

• Vacancy for properties which are 6 to 15 years old is
• nly 2.6%
• Effective Rent Growth overall should be in the 4% to

5% range.

Outlook

• Little impact has been felt from “Shadow Shock” on
• ccupancy levels. “Shadow Shock” is generally

defined as “unanticipated” supply from condo reversions and the “shadow” supply of vacant for rent investor owned condo units.

• Properties in lease up lowered rents .1% between

May ‘07 and November ‘07, after having raised rents 2.4% in the preceding 6 months

• B & C rated properties may well be the Rent Growth Stars of

2008

Outlook

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• Rent vs. Buy ratio favors increased rental demand.

Homeownership rates from 2005 – 2007 declined in the age groups of <35 years old, 35 – 44 years old, 45 – 54 years old, and >65 years old.

• Sales volume and cap rates should remain relatively
• stable. Red Capital Research continues to

recommend Hampton Roads as an area where investors should “accumulate assets.” Cushman & Wakefield also confirms continuing investor interest in Hampton Roads.

Outlook

• Hampton Roads is a High Barrier of Entry Market.

There are geographic and environmental constraints regarding available land, and political constraints regarding use.

• There have been relatively few units built during the

past 20 years. During the period from 1970 – 1989, there were 54,801 units built. From 1990 – 2009 (’08- ’09 estimate) approximately 17,257 units will be built. Cumulatively this is 37,544 fewer units or 1,877 fewer units per year on an annualized basis.

Outlook

Most Important Market Factor

• 70 million “Echo Boomers” will go through

college in the next 10 years and enter the marketplace.

RESIDENTIAL RESIDENTIAL MARKET UPDATE MARKET UPDATE

Van Rose, MIRM Van Rose, MIRM

President, Rose and President, Rose and Womble Womble New Homes New Homes March 12, 2008 March 12, 2008

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

Source:

5,000 10,000 15,000 20,000 25,000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Resale New Construction

Hampton Roads Housing Stats Hampton Roads Housing Stats

• Average Price of SF New Home

Average Price of SF New Home $434,672 $434,672

• A Decrease of $5,344 or 1.2%

A Decrease of $5,344 or 1.2%

• Average Price of SF Existing Home

Average Price of SF Existing Home $283,406 $283,406

• An Increase of $12,895 or 4.1%

An Increase of $12,895 or 4.1%

Source:

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2007 2007 SALES SALES

RESALE: 18,527 RESALE: 18,527 15.25% 15.25% NEW HOMES: 3,562 NEW HOMES: 3,562 10.23% 10.23%

Source:

Hampton Roads Residential Sales Hampton Roads Residential Sales 1999 to 2007 1999 to 2007

Source:

25% 25% 26% 26% 22% 18% 17% 18% 19% 5,000 10,000 15,000 20,000 25,000 30,000 1999 2000 2001 2002 2003 2004 2005 2006 2007

Resale New Construction

Market Share for Detached Sales by Price Range

Source:

658 9,560 791 2,511 436 877 506 951 0% 25% 50% 75% 100% Resale Detached New Construction Detached >$500,000 $400K to $500K $300K to $400K <$300,000

69% 18% 6% 7% 21% 18% 33% 28%

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

Source:

3061 84 1308 265 209 300 154 212 0% 25% 50% 75% 100% Resale Attached New Construction Attached >$400,000 $300K to $400K $200K to $300K <$200,000

65% 28% 4% 3% 24% 35% 31% 10%

Average Market Time Average Market Time Existing Homes Existing Homes

Source:

69 77 76 80 78 72 69 61 46 36 27 28 48 66 10 20 30 40 50 60 70 80 90 Days on Market

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

2007 2007 CLOSINGS CLOSINGS

RESALE: 18,667 RESALE: 18,667 15.5% 15.5% NEW HOMES: 4,131 NEW HOMES: 4,131 15.3% 15.3%

Source:

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2007 Southside Average Closing Prices 2007 Southside Average Closing Prices Single Family Detached Homes Single Family Detached Homes

Source:

$360,801 $522,277 $161,476 $305,322 $432,476 $127,154 $285,920 $438,994 $153,074 $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 Virginia Beach Chesapeake Suffolk

Resale NC Diff

2007 Southside Average Closing Prices 2007 Southside Average Closing Prices Single Family Detached Homes Single Family Detached Homes

Source:

$191,353 $255,588 $64,235 $235,014 $401,864 $166,850 $312,035 $462,416 $150,381 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 $500,000 Portsmouth Norfolk Isle of Wight

Resale NC Diff

2007 Peninsula Average Closing Prices 2007 Peninsula Average Closing Prices Single Family Detached Homes Single Family Detached Homes

Source:

$203,717 $327,355 $123,638 $220,499 $307,087 $86,588 $364,226 $451,107 $86,881 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 $500,000 Hampton Newport News York County

Resale NC Diff

2007 Peninsula Average Closing Prices 2007 Peninsula Average Closing Prices Single Family Detached Homes Single Family Detached Homes

Source:

$392,703 $453,475 $60,772 $441,871 $432,042

• $9,829

$263,049 $322,038 $58,989

• $50,000

$0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 $500,000 James City County Williamsburg Gloucester

Resale NC Diff

Average Sq Ft Average Sq Ft New Construction Single Family Detached New Construction Single Family Detached

2 0 0 3 $ 1 0 4 per sq ft 2 ,5 6 2 SF 2 0 0 4 $ 1 2 3 per sq ft 2 ,6 4 1 SF 2 0 0 5 $ 1 4 9 per sq ft 2 ,7 4 2 SF 2 0 0 6 $ 1 6 1 per sq ft 2 ,6 4 7 SF 2 0 0 7 $ 1 5 5 per sq ft 2 ,7 4 4 SF

Source:

New Construction Price Points New Construction Price Points

Source:

1% 3% 4% 2% 1% 8% 15% 29% 37% <$300,000 $300K to $400K $400K to $500K $500K to $600K $600K to $700K $700K to $800K $800K to $900K $900K to $1 million $1 million+

29 New Construction Product Mix New Construction Product Mix

Source:

21% 11% 8% 60%

Single Family Detached Multi-Story Condo Multi-Plex Condo Townhome/ Duplex

Single Family Building Permits January 2008 vs January 2007

U.S.

• 40%

Northeast

• 31%

31% South South

• 36%

36% Midwest Midwest

• 37%

37% West West

• 54%

54% Hampton Roads

• 19%

19%

Source: NAHB

CHALLENGES CHALLENGES FOR FOR 2008 2008

Resale 10,595 units 9 months supply New Homes 2,225 units 8.8 months supply

Inventory

Source:

Buyer Confidence Lack of Construction during 2nd half of 2008

30 Over 10,000 units of mixed use approved in Hampton Roads Credit: Perception versus Reality

PREDICTIONS PREDICTIONS FOR FOR 2008 2008

Product shortage in the 2nd half of 2008

Data Sources: Bureau of Economic Analysis, Regional Economic Modeling Inc., U.S. Census Bureau (Permits)-Note: 2007 permits are estimated)

1/29/2008

Hampton Roads Hampton Roads Employment to Permit Ratio Employment to Permit Ratio

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000

2000 2001 2002 2003 2004 2005 2006 2007

0.00 0.50 1.00 1.50 2.00 2.50 Change in Employment Permits Issued E/P Ratio

Deals will be gone by the 2nd half of 2008

31 Financing Financing will be will be King King Readjusting Readjusting

• f Supply/
• f Supply/

Demand Demand Imbalance Imbalance

New, affordable product New, affordable product

• fferings will raise new home
• fferings will raise new home

sales numbers sales numbers

Starting at $169,900

AND THE AND THE WINNERS WINNERS ARE ARE…… …….. .. Hampton Roads

Top 5 Builders

Source:

# 5

134

# 4

158

32

# 3

255

# 2

295

# 1

370

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