Old Dominion University Hampton Roads Real Estate Market Review and Forecast Presented by: The Center for Real Estate and Economic Development 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 Committee Don Perry, Chair Ron Bray Jonathan Guion Cliff Moore Programs Committee Joyce Hartman, Chair Jonathan Guion John Lombard 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 over the past two years.
Thank You Jonathan Guion For leadership of the CREED Advisory Board throughout the past two years ODU s College of Business and Public Administration The Robert M. Stanton Chair of 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 2003 OFFICE MARKET REVIEW Presented by Donald R. Crigger, CCIM Senior Director Advantis/GVA 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)
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 HAMPTON ROADS CLIMATE POSITIVE INFLUENCES LIMITED DEVELOPMENT SINCE 2000 (SUPPLY CONTROLLED) TOWN CENTER PROJECTS BUOYED ABSORPTION (MET PENT UP DEMAND) VACANCY DECREASING WITH LIMITED SUBLEASE INVENTORY (LOW TEENS) DEFENSE & PORT REMAIN IN GROWTH MODE HAMPTON ROADS CLIMATE NEGATIVE INFLUENCES LIMITED CLASS A SUBURBAN INVENTORY CONTINUED LACK OF NEW PROSPECT ACTIVITY FROM OUTSIDE REGION NORTHEAST NO LONGER AS FERTILE FOR PROSPECTING SHRINKING RENTAL RATE DIFFERENTIAL WITH COMPETING MARKETS HAMPTON ROADS CLIMATE FORECAST MODERATE ABSORPTION IN 2004 - IMPROVING IN 2005 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
HAMPTON ROADS HISTORICAL ABSORPTION TRENDS HAMPTON ROADS HISTORICAL VACANCY RATE TRENDS 1,000,000 20.00% Square Feet 800,000 600,000 400,000 200,000 0 823,000 343,000 657,000 108,000 551,000 15.00% 10.00% 5.00% 7.80% 9.70% 11.80% 14.30% 13.10% Vacancy Rate 1999 2000 2001 2002 2003 Net Absorption 0.00% 1999 2000 2001 2002 2003 NEW DEVELOPMENTS 2004 LOCKHEED MARTIN GLOBAL VISION INTEGRATION CENTER AMERIGROUP CORPORATION BRIDGEWAY TECHNOLOGY CENTER II
LARGE LEASE TRANSACTIONS AOR/US ONCOLOGY SUNTRUST AT 150 WEST MAIN 53,120 SF AMSEC LLC AT BATTLEFIELD TECH CENTER I 57,429 SF SENTARA HEALTHCARE AT CROSSWAYS I 40,211 SF SIGNIFICANT INVESTMENT SALES Multi-Family Market Overview SELLER: THE HAYMAN COMPANY BUYER: BERMAN KAPPLER SALES PRICE: $11,500,000 TOTAL SF: 155,500 PRICE PSF: $73.95 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
1400 Apartments Under Construction Land Prices 1800 In Pipeline 1 Bedroom Rental Rates $1000+ New Development Increased 10%-15% per year $11,000-$12,000 per unit New Development Clubhouses More Bells and Whistles! Swimming Pool Waterscapes
Café, Billiards Coffee Bars Movie Theatre Child Friendly Facilities Walking Trails Mixed use village communities, mid-rise, high-rise
Elegant Building Lobbies
Curve Balls Military Deployment Rain!
Hurricane Isabel Asbestos Insurance Costs MOLD! Lead
What s in store for 2004? Residential Market Review Presented by J.V. Rose, Jr. President Rose & Womble Realty 9 Year History of Resale and New Construction Closings Hampton Roads Housing Stats - 2003 25000 20000 15000 10000 5000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 Resale New Construction 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 Market Share 1993 vs. 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 NC 44% NC Resale 56% Resale 1993 2003 19% 81%
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 % Southside Resale VS. New Construction Average Closing Prices for 2003 Single-Family Detached Homes $300,000 $291,308 $219,648 $258,383 $245,946 $250,000 $190,597 $200,000 $174,261 $150,000 $71,660 Resale 2002 $153,654 $100,000 $67,786 $71,685 2003 $174,261 13.4 % $50,000 $0 VB Ches Suff Resale NC Diff Southside Resale VS. New Construction Average Closing Prices for 2003 Single-Family Detached Homes Peninsula Resale VS. New Construction Average Closing Prices for 2003 Single-Family Detached Homes $300,000 $250,000 $238,477 $209,187 $200,943 $270,191 $300,000 $250,000 $211,687 $252,544 $260,395 $241,495 $254,304 $200,000 $200,000 $173,047 $132,823 $118,791 $150,000 $100,000 $50,000 $106,849 $131,628 $76,364 $69,248 $150,000 $100,000 $50,000 $113,604 $92,896 $59,443 $7,851 $12,809 $0 Ports Norf I/W $0 H NN JCC YC Resale NC Diff Resale NC Diff.
Average Consumer Lot Costs Chesapeake Average Consumer Lot Costs Suffolk Greystone - $109,000 Ravanna - $120,000 Edinburgh - $180,626 Cahoon Plantation - $118,888 Governors Pointe - $139,352 Nansemond Pointe - $80,375 Nansemond River Estates - $90,360 The Riverfront - $139,900 Average Consumer Lot Costs Virginia Beach Average Consumer Lot Costs Peninsula Morgans Walk - $127,800 Lago Mar - $154,658 Indian River Plantation - $189,968 Victoria Park - $140,000 - $175,000 J Landfall - $160,000 J Stonehouse - $113,000 J Fords Colony - $118,502 Y Port Myers - $82,910 RESIDENTIAL HOUSING FORECAST RESIDENTIAL HOUSING FORECAST 1. Extremely Positive!!! REASONS: 1. Hampton Roads Economics
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 RESIDENTIAL HOUSING FORECAST REASONS: 2. Hampton Roads Housing Demand Average MSA Military Pay $ 50,613 Estimated 53,000 Retired Military in HR Percent of Households That Purchased A Home in 2003 Compared To The Total Number of Households In The MSA Charlotte NC MSA Raleigh/Durham MSA Total Closings Total Closings = 26,370 = 36,862 11 % of HH 7.4 % of HH Total Households = Total 239,368 Households = 492,966 Hampton Roads MSA RESIDENTIAL HOUSING FORECAST REASONS: 3. Hampton Roads Housing Supply Total Closings = 25,371 4.3 % of HH Total Households = 579,107 Number of Homes Listed in December 1998-2003 and February 2004 RESIDENTIAL HOUSING FORECAST 10000 8000 6000 4000 2000 8582 6902 6449 5200 4082 2925 2764 REASONS: 4. Effects of Interest Rates (Mortgage Instruments) 0 1998 1999 2000 2001 2002 2004 2004
Interest Rate Affect On Housing Affordability RESIDENTIAL HOUSING FORECAST 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% = = = = = REASONS: 5. Military Influence $154,000 $173,000 $210,000 $260,000 $300,000 Defense Spending In Billions 1990-2004 298 295 270 258 238 230 223 218 203 219 221 291 329 355.1 379.9 400 350 300 250 200 150 100 New Construction Closings By Price Points 2000, 2001, 2002, 2003 3500-899 3000 +295 2500 2000 +133 1500-121 +74 +32 1000 500 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 50 0 0 100K 100K-199K 200-299K 300K-399K 400K-499K 500K + 2000 2001 2002 2003 2004 ODU Real Estate Review Industrial Market Forecast Presented By: Clay Culbreth, SIOR, CCIM Sr. Director Industrial Properties Advantis/GVA
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.
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.
Newport News, Inc. 360,000 S.F. Survivor All-Stars 2004 Old Dominion University Real Estate Center 2004 Retail Market Overview Presented By H. Blount Hunter RETAIL SALES TREND RETAIL MARKET OVERVIEW 0.09 0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Southside Peninsula Virginia US 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
2003 AVERAGE RENT LEASING DYNAMICS $20.00 $18.00 $16.00 $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 $13.46 $13.18 AVERAGE Southside Peninsula 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 RETAIL PRODUCT TYPE 24 retail submarkets Southside 6 regional malls 14.9 million SF 419,500 SF new construction 12 10 8 10 retail submarkets Peninsula 2 regional malls 7.3 million SF 330,000 SF new construction 6 4 2 0 Neighborhood Community Regional Power Freestanding Specialty Festival Outlet MSA VACANCY BY PRODUCT TYPE BIG BOX VACANCY 18.00% 16.00% 14.00% 3.5 million SF Big Box vacancy 67 percent of total retail vacancy 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Neighborhood Community Regional Power Freestanding Specialty Festival Outlet 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
SWEET SPOTS NEW PLAYERS 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 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
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 Hampton Roads Real Estate Market Review and Forecast Presented by: The Center for Real Estate and Economic Development