Multi-Family. Acknowledgements. Author. Data Analysis/ Layout. Financial Support. Disclosure. Charles Dalton. Real Data

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1 Multi-Family Acknowledgements Author Charles Dalton Data Analysis/ Layout Real Data Financial Support Disclosure The E. V. Williams Center for Real Estate and Economic Development (CREED) functions and reports are funded by donations from individuals, organizations and the CREED Advisory Board. The data used for this report is deemed reliable; however, neither Old Dominion University, the E. V. Williams Center for Real Estate and Economic Development, nor sponsoring companies and/or individuals makes any representation or warranty as to its accuracy. 73

2 2009 MULTI-FAMILY General Overview The Virginia Beach-Norfolk-Newport News Apartment Report, published by Real Data, is a detailed analysis of the rental market within conventional apartment communities in the Hampton Roads region. The area has been divided into nine submarkets: Chesapeake, Hampton, Newport News, Norfolk, Portsmouth, Suffolk, Virginia Beach, Williamsburg and York County. Combined, these areas contain a survey base of over 85,000 units within conventional apartment communities of 50 or more units each. The Virginia Beach-Norfolk-Newport News market is divided into two portions by the James River. The Peninsula area is north of the James River and contains Hampton, Newport News, Williamsburg and York County. The Tidewater area is south of the James River and contains Chesapeake, Norfolk, Portsmouth, Suffolk and Virginia Beach. The submarket with the highest concentration of units is Virginia Beach, which accounts for one-quarter of the region s apartment units. The occupancy rate in the Hampton Roads region is consistently one of the highest in the southeast, but has been falling during the last several years. As of October, the average occupancy rate was 93.1%. Submarket Percentages 2% As the overall economy moved into a full recession, development activity has slowed down. As of October 10% 4% York County Williamsburg 1% Chesapeake, there were just under 1,700 units under construction, and nearly 2,000 units were Suffolk proposed. The average quoted rental rate is $871, with one-bedroom rents averaging $779 per month, two-bedroom units with an average rental rate of $876, and three-bedroom units reporting an average quoted rental rate of $1,031. Rental rates from existing inventory increased by only $6.70 in the last twelve months. 26% Virginia Beach 8% Portsmouth 16% Norfolk 12% Hampton 22% Newport News 2009 Hampton Roads Real Estate Market Review 74

3 HISTORICAL APARTMENT DEVELOPMENT Virginia Beach-Norfolk-Newport News A total of 86,335 units were surveyed for this report. Development of apartment units in this market peaked during two time periods, the early 1970s and the late 1980s. Development during the 1990s and so far in the 2000s is minor compared to past development. Table I Historical Apartment Development 25,000 20,000 Number of Units 15,000 10,000 5,000 0 Pre

4 2009 MULTI-FAMILY MULTI-FAMILY PERMIT ACTIVITY HISTORICAL MULTI-FAMILY BUILDING PERMITS VIRGINIA BEACH-NORFOLK-NEWPORT NEWS Overall housing development in the region was at its peak from with more than 10,000 permits issued annually for single and multi-family housing. With the slow down in the overall housing market, residential permits issued fell to 6,317 in 2007 which was a 44% decrease compared to the peak of activity in Multi-family permit activity, which includes rental and for-sale units, was strongest in However, much of the permit activity has not been rental apartments, but instead for-sale condominiums and townhouses, especially in recent years when a decline in interest rates made it easier for many people to get into the for-sale arena. Multi-family permits have increased in the last twelve months but remain well below the levels of Table II Annual Multi-Family Permit Activity Permits Issued 3,200 3,000 2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1, ,102 1,216 1, ,519 2, (thru Nov.) 2,292 2,339 3,085 1,159 1,315 1, Hampton Roads Real Estate Market Review 76

5 Table III Multi-Family Permits Past 12 Months Number of Permits Nov Dec Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. APARTMENT DEVELOPMENT ACTIVITY As of October, there were nearly 1,700 apartment units under construction within eleven communities in the Virginia Beach-Norfolk-Newport News market. There are an additional 1,985 apartment units in the planning stage. Table IV Apartment Development Activity (as of October ) 1, Under Construction Proposed Number of Units Chesapeake Hampton Newport News Norfolk Portsmouth Suffolk Virginia Beach Williamsburg York County 77

6 2009 MULTI-FAMILY DEMAND Demand for housing can be measured by calculating the number of housing units absorbed within a given time frame. Absorption is defined as the net change in occupied units. Therefore, positive absorption occurs when previously vacant or newly built dwellings become occupied. Based on historical performance, the Virginia Beach-Norfolk-Newport News area is expected to absorb between 600 and 900 units annually. The collapse of the housing markets nationwide and the weakening economy has caused a significant drop in demand for rental housing in. Absorption was negative (-774) rental units in the last year, the weakest demand in over 10 years. Table V Absorption Units Absorbed (Demand) The only areas to see a positive demand for rental housing were Chesapeake, Williamsburg and Virginia Beach Hampton Roads Real Estate Market Review 78

7 Table VI Submarket Absorption Absorption (Annual) Chesapeake Hampton Newport News Norfolk Portsmouth Suffolk Virginia Beach Williamsburg York County VACANCY The overall vacancy rate for the Virginia Beach-Norfolk-Newport News market at the end of was 6.6%. While this is the highest the vacancy rate has been in nearly 10 years, the market is still relatively healthy. However, based on the current development pipeline and a lingering recession, vacancy rates are expected to rise above 8% in Table VII Overall Vacancy Vacancy Rate (Annual)

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9 Multi-Family Submarkets Southside Chesapeake Norfolk Portsmouth Peninsula Hampton Newport News York County Suffolk Virginia Beach Williamsburg 81

10 2009 MULTI-FAMILY Every submarket experienced an increase in vacancy rates over the past year. The most significant increases were in Hampton, Portsmouth and York County. Table VIII Submarket Vacancy Rates October 2007 October Rate 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Chesapeake Hampton Newport News Norfolk Portsmouth Virginia Beach Williamsburg York County Overall RENTAL RATES As of October, the average rental rate in Virginia Beach-Norfolk-Newport News was $871. With increased competition from the for-sale housing market and an overall weak housing market, apartment communities have begun offering greater concessions to help boost traffic and demand. This has caused rents for existing communities to drop by nearly 1% in the last half of. Table IX Average Rental Rates (New & Existing Communities) $900 $800 $700 Average Rental Rate $600 $500 $400 $300 $200 $100 $ Hampton Roads Real Estate Market Review 82

11 AVERAGE RENTS Average overall rents ranged from a low of $800 in Newport News to a high of $944 in Virginia Beach. Newport News, Portsmouth, Norfolk, and Williamsburg all reported rents lower than the average rent of $871, while Suffolk, Chesapeake, York County and Virginia Beach all reported rents higher than the average overall rent. Table X Average Rent by Submarket October $1000 $900 Average Rent (lowest to highest) $800 $700 $600 $500 $400 $300 $200 $100 $0 Newport News Portsmouth Norfolk Hampton Overall Williamsburg Suffolk York County Chesapeake Virginia Beach 83

12 2009 RETAIL MANAGEMENT There were nearly 450 conventional apartment communities with more than 50 units surveyed in the Hampton Roads region in October. Out of more than 85,000 apartment units surveyed, the top fifteen firms manage nearly half of these units in the Virginia Beach-Norfolk-Newport News apartment market. Table XI Top 10 Management Companies S.L. Nusbaum Great Atlantic Drucker & Falk Lawson Companies Breeden Management WMCI AIMCO Perrel Management PRG Real Estate Ripley-Heatwole REGIONAL TRENDS Roanoke Roanoke has fewer than 10,000 conventional apartment units within communities of at least 30 units. The area reached its highest occupancy level in over 10 years with an overall occupancy of 95.5% as of August. Development activity has been very moderate over the last several years which have enabled occupancy rates to rise. As occupancies have risen so have rents; rents have been rising steadily for the last three years with annual rent growth averaging 3.5% per year. The average rental rate was $647 as of August. Richmond The Richmond metro area contains approximately 60,000 conventional apartment units within communities of at least 50 units. Richmond has consistently had one of the higher occupancy rates in the southeast due to limited development activity. As of August, the area's occupancy rate was 94.2% with an average rental rate of $816 per month. Developers have taken notice of the area's low vacancies, and consequently construction activity has been on the rise in with nearly 2,000 new units underway. Rent growth has been in the 3% range for the last several years but slowed to 2% in Hampton Roads Real Estate Market Review 84

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