old dominion university director’s message hampton … · robert l. “bobby” phillips, jr....
TRANSCRIPT
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Old Dominion University Old Dominion University Hampton Roads Real Estate Hampton Roads Real Estate Market Review and ForecastMarket Review and Forecast
20082008
Presented by: Presented by: E.V. Williams E.V. Williams
Center for Real Estate Center for Real Estate and Economic Developmentand Economic Development
DirectorDirector’’s Messages Message
John R. Lombard, PhDAssociate 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 DeanA Message from the Dean
Nancy Bagranoff, DBADean, College of Business
& Public Administration, Old Dominion University
TED CONSTANTCONVOCATION CENTER
ENGINEERING & COMPUTATIONALSCIENCES BUILDING
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UNIVERSITY VILLAGE HEALTH SCIENCES BUILDING
INNOVATION RESEARCH PARK BARON & ELLINGORDON ART GALLERIES
UNIVERSITY QUADSSTUDENT HOUSING
FOLKES-STEVENSINDOOR TENNIS CENTER
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Executive CommitteeExecutive Committee
Chair: Tom DillonExecutive Director: John LombardVice Chair: Brad SanfordProgram Chair: Stephanie SankerResearch Chair: Brian DundonMembership Chair: Craig CopeCurriculum Co-Chairs: John Crunkleton, Brad SanfordSponsorship Chair: Fred FackaBy-Laws Chair: Andrew KeeneyPast Chair: Joyce HartmanAt Large: Jonathan Guion
Billy KingAubrey Layne
Sponsorship CommitteeSponsorship Committee
Fred Facka (Chair), Smith Barney - CitigroupStephanie Sanker, GVA AdvantisTom Dillon, Resource BankErica Ferron, Old Dominion University
Program CommitteeProgram Committee
Stephanie Sanker, GVA AdvantisTom Dillon, Resource Bank
David Chapman, Old Dominion University
Research CommitteeResearch Committee
Brian Dundon, Brian J. Dundon & Assoc. John Lombard, PhD, ODU
Beth Hancock, City of ChesapeakeJoy Learn, Resource Bank
Sandi Prestridge, City of NorfolkMaureen Rooks, Thalhimer
Bradley Sanford, Dominion Realty AdvisorsLane Shea, Harbor Group
Kristi Sutphin, City of Portsmouth
Ashley Capital, LLCAtlantic Mortgage & Investment Company
Axial Advisory Group, LLCBank of America Real Estate Banking
BB&TCavalier Land, Inc.CB Richard Ellis
Cherry, Bekaert, & Holland, L.L.P.City of Chesapeake – Economic Development
City of Hampton – Economic DevelopmentCity of Norfolk – Department of Development
City of Portsmouth – Dept. of Economic DevelopmentCity of Suffolk – Dept. of Economic Development
City of Virginia Beach – Dept. of Economic DevelopmentClark Nexsen
CREEDContinental Realty Services, Inc.
Creative Office Environments, LLC
Our Proud SponsorsOur Proud Sponsors
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Davenport Group & Lefcoe Development CoDominion Realty Advisors
Drucker & Falk, LLCECS Mid-Atlantic, LLC
First Potomac Realty Trust Grandbridge Real Estate CapitalGreat Atlantic Management Co.
GVA AdvantisHampton Roads Security Corporation
Harbor Group ManagementHarvey Lindsey Commercial Real Estate
Innovative Research Park - ODU Kaufman & Canoles
LandMark Design Group, Inc.Liberty Property Trust
McDonald Development CompanyMcPhillips Roberts & DeansMid Eastern Builders, Inc.
Our Proud SponsorsOur Proud Sponsors
ODU Real Estate FoundationResource Bank/Fulton Bank
S.L. Nusbaum Realty Co.Sam Segar & Associates, Inc.
Sperry Van Ness - Virginia BeachSunTrust Real Estate Finance
Thalhimer/Cushman & WakefieldThe Cost Segregation GroupThe Runnymede Corporation
Tri City Developers, LLCVirginia Housing Development Authority
W.M. Jordan CompanyWachovia Bank
Wall, Einhorn & Chernitzer, P.C.Wells Fargo Real Estate Group
Wexford Science & Technology, LLCWheeler InterestsWilliams Mullen
Our Proud SponsorsOur Proud Sponsors
Special thank you to
Inside Businessfor their sponsorship
over the past six
years.
Commercial Real EstateInvestment Market Update
Presented To:
Presented By:
J. Scott Adams, CCIMMid-South Regional President
March 12, 2008
OVERVIEW
Housing versus Commercial Real EstateChanges in the Capital MarketsCommercial Real Estate as an Investment ClassTrends 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
VariablesLoan to value ratioDebt service coverageInterest only periodsReserves
DefinitionsValue for loan basisNet Operating IncomeOccupancyCapital 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 eitherUnderlying fundamentals remain healthyCommercial real estate with predictable and transparent contractual cash flowsKey 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 WeightedSource: TWR Investment Database
Last 5 Years vs. Next 5 Years
Big Difference!
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2003 2004 2005 2006 2007
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NATIONAL OFFICE SALES
Source: Real Capital Analytics
Higher volume and lower cap rates
The Good News: Economic expansion has been increasingly driven by office-occupying industriesThe Bad News: Softening economy will lead to slower growth in rents and less space absorption
2007 HAMPTON ROADS OFFICE SALES
LANDMARK TRANSACTIONSGee’s Group Portfolio
150 W. Main
150 W. Main
Lynnhaven Corporate Center I
Silver Oak
Southport Centre
Twin Oaks I & II
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2003 2004 2005 2006 2007
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NATIONAL INDUSTRIAL SALES
Higher volume and lower cap rates
Source: Real Capital Analytics
The Good News: Export business and business to business services are expected to continue to growThe Bad News: Impacted by the slowing economy especially with goods related to housing and retailers
2007 HAMPTON ROADS INDUSTRIAL SALES
LANDMARK TRANSACTIONSCommonwealth Storage
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2003 2004 2005 2006 2007
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NATIONAL MULTI-FAMILY SALES
Slow down in volume growth and cap rate decline
Source: Real Capital Analytics
The Good News: More people will decide to rent rather than pursue home ownershipThe 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 TRANSACTIONSThe Heights and The Myrtles
at Olde Towne Portfolio
The Myrtles The Heights
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2003 2004 2005 2006 2007
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NATIONAL RETAIL SALES
Higher volume and lower cap rates
Source: Real Capital Analytics
The Good News: Continued growth in lifestyle & town centers; new concepts continue to emergeThe Bad News: Future performance impacted by slowdown in employment & consumer demand
HAMPTON ROADS RETAIL TRANSACTIONS
LANDMARK TRANSACTIONSDenbigh Village
Lynnhaven NorthDenbigh 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 PresidentIndustrial Brokerage
Global Supply Chain Solutions
March 12, 2008
INDUSTRIAL MARKET REVIEWIndustrial Reporters
Ron Biesecker & Christine Kaempfe – GreenbrierChip Worley – Bainbridge Patrick Mumey, SIOR – Cavalier Worth Remick – Norfolk Commerce Park/Central NorfolkCharles Dickinson – Norfolk Industrial ParkBilly King, SIOR – West Side/Midtown Norfolk and Isle of WightBrian Baker – LynnhavenBobby Beasley – Greenwich/Cleveland and Airport Industrial ParkAbe Ellis, SIOR – PortsmouthBill Throne, CCIM – SuffolkClay Culbreth, CCIM, SIOR & Stephanie Sanker, CCIM –
Copeland/Lower PeninsulaBobby Phillips – Oyster Point/ Middle Peninsula & Williamsburg ExtendedTrip 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.transportationfortomorrow.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 CanalPanama vs. Suez CanalINDUSTRIAL MARKET REVIEW
Projected Coastal Freight Growth
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INDUSTRIAL MARKET REVIEW INDUSTRIAL MARKET REVIEW
Virginia Inland Port (VIP)Front Royal, VA
Future Craney Island TerminalPortsmouth, VA
Norfolk International Terminals (NIT) Norfolk, VA
Newport NewsMarine Terminal (NNMT)
Newport News, VA
Portsmouth Marine Terminal (PMT) Portsmouth, VA
Modern TerminalsModern Terminals
APM TerminalPortsmouth, VA
INDUSTRIAL MARKET REVIEWAPM/Maersk Terminal in Portsmouth June 2007
Phase 1 - complete 2007
Total Acreage: 230 Pier Length: 3200 ft.Depth: 55 ft.Cranes: 6Capacity: 1 Million TEUsCost: $500 Million
Phase 2 - as volume dictates
Total Acreage: 291 Pier Length: 4000 ft.
Depth: 55 ft.Cranes: 12
Capacity: 2.2 Million TEUsCost: $250 Million
INDUSTRIAL MARKET REVIEW
Future Craney Island Marine Terminal
Future Craney Island Marine Terminal
Phase 1 Phase 1 –– June 2017June 2017Total Acreage: 220 Pier Length: 3000 ft.Depth: 52 ft.Cranes: 6Capacity: 1.5M TEUsCost: $1.2B
Phase 2 Phase 2 –– June 2032June 2032Total Acreage: 600 Pier Length: 8000 ft.Depth: 52 ft.Cranes: 15Capacity: 5M TEUsCost: $1.06B
INDUSTRIAL MARKET REVIEW
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CONTAINER VOLUME1 - 1,0001,001 - 2,5002,501 - 7,5007,501 - 15,00015,001 - 55,000
Kohl’s Corp.425,000 Rite Aid
Corp.265,000
AmeriServ Food Distribution
216,000
McLane Foods364,000
Country Vintner 120,000
CVS550,000
Value City Furniture350,000
Richfood Holdings, Inc.
1,300,000Hewlett Packard
1,440,000
DSC Logistics 700,000
Wal-Mart, Inc. 3,000,000
Newport News,Inc. 378,800
Lillian Vernon, Inc. 800,000
Dollar Tree, Inc. 476,000
QVCNetwork,
Inc.1,200,000
Sysco Food Systems 285,000
Ace Hardware 800,000
Wal-Mart 1,200,000
Jones Apparel Group, Inc.
900,000
Diversified Distribution Inc.
400,000
KB Toys 435,000
Nautica 525,000Hooker
Furniture Corp. Inc. 580,000
Mid Mountain
Foods 1,000,000
Camrett Logistics345,000
Volvo 1,000,000
Home Shopping Network 255,000
Hanover Direct
550,000
Advance Auto Parts 442,000
Orvis Co. 340,000
J. Crew 292,5000
Bausch & Lomb40,000
Ericsson, Inc. 107,000
Target Stores
1,600,000
Best Buy, Inc. 1,000,000
Wal-Mart 880,000
Banta Books 260,000
Von Holtzbrinck Publishing Svcs.
630,000
Family Dollar 970,000
Ferguson Enterprises 460,000 Home Depot
750,000
Target Stores
1,800,000
Distribution Facilities in VirginiaINDUSTRIAL MARKET REVIEW
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INDUSTRIAL MARKET REVIEW
Hampton Roads Industrial Sub-MarketsINDUSTRIAL 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 CenterAshley 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 REVIEW2007 ODU Hampton Roads Industrial Survey
Submarket TotalsBldgs
Submarket City Surveyed Reporter Total Sq Ft Vacancy Sq Ft Vacancy %
Greenbrier Area Chesapeake 274 Biesecker/Kaempfe 8,342,696 308,286 3.70%
Bainbridge/S. Elizabeth River Area Chesapeake 133 Worley 5,464,312 385,783 7.06%
Cavalier Indust rial Park Area Chesapeake 178 Mumey 5,781,645 596,380 10.32%
Norfolk Commerce Park/ Norfolk 142 Remick 7,076,668 2,609,090 36.87%Central Norfolk Area
Norfolk Indust rial Park Area Norfolk 339 King 10,196,798 655,962 6.43%
West Side/Midtown Norfolk Area Norfolk 261 Dickinson 6,441,519 290,845 4.52%
Lynnhaven Area Virginia Beach 253 Baker 7,449,758 730,961 9.81%
Greenwich/Cleveland Streets Area Virginia Beach 127 Beasley 3,141,006 60,102 1.91%
Airport Industrial Park Area Virginia Beach 70 Beasley 3,684,329 330,881 8.98%
City of Portsmouth Portsmouth 154 Ellis 4,004,464 297,805 7.44%
City of Suffolk Suffolk 115 Throne 11,535,116 1,477,357 12.81%
Isle of Wight Isle of Wight 27 King 2,788,716 355,766 12.76%
Southside Totals 2,073 75,907,027 8,099,218 10.67%
Copeland/Lower Peninsula Area Peninsula 363 Culbreth/Sanker 9,983,484 2,103,397 21.07%
Oyster Point/Middle Peninsula Area Peninsula 149 Phillips 4,109,297 67,657 1.65%
Oakland/Upper Peninsula Area Peninsula 97 Ferguson 4,611,983 254,733 5.52%
Williamsburg Extended Area Peninsula 60 Phillips 9,005,095 381,602 4.24%
Peninsula Totals 669 27,709,859 2,807,389 10.13%
Totals 2,742 Sanker 103,616,886 10,906,607 10.53%
INDUSTRIAL MARKET REVIEW2007 ODU Hampton Roads Industrial Survey
Submarket TotalsBldgs
Submarket City Surveyed Reporter Total Sq Ft Vacancy Sq Ft Vacancy %
Greenbrier Area Chesapeake 274 Biesecker/Kaempfe 8,342,696 308,286 3.70%
Bainbridge/S. Elizabeth River Area Chesapeake 133 Worley 5,464,312 385,783 7.06%
Caval ier Industrial Park Area Chesapeake 178 Mumey 5,781,645 596,380 10.32%
Norfolk Commerce Park/ Norfolk 142 Remick 7,076,668 2,609,090 36.87%Central Norfolk Area
Norfolk Indust rial Park Area Norfolk 339 King 10,196,798 655,962 6.43%
West Side/Midtown Norfolk Area Norfolk 261 Dickinson 6,441,519 290,845 4.52%
Lynnhaven Area Virginia Beach 253 Baker 7,449,758 730,961 9.81%
Greenwich/Cleveland Streets Area Virginia Beach 127 Beasley 3,141,006 60,102 1.91%
Airport Industrial Park Area Virginia Beach 70 Beasley 3,684,329 330,881 8.98%
City of Portsmouth Portsmouth 154 Ellis 4,004,464 297,805 7.44%
City of Suffolk Suffolk 115 Throne 11,535,116 1,477,357 12.81%
Isle of Wight Isle of Wight 27 King 2,788,716 355,766 12.76%
Southside Totals 2,073 75,907,027 8,099,218 10.67%
Copeland/Lower Peninsula Area Peninsula 363 Culbreth/Sanker 9,983,484 2,103,397 21.07%
Oyster Point/Middle Peninsula Area Peninsula 149 Phillips 4,109,297 67,657 1.65%
Oakland/Upper Peninsula Area Peninsula 97 Ferguson 4,611,983 254,733 5.52%
Williamsburg Extended Area Peninsula 60 Phillips 9,005,095 381,602 4.24%
Peninsula Totals 669 27,709,859 2,807,389 10.13%
Totals 2,742 Sanker 103,616,886 10,906,607 10.53%
INDUSTRIAL MARKET REVIEW2007 ODU Hampton Roads Industrial Survey
Submarket TotalsBldgs
Submarket City Surveyed Reporter Total Sq Ft Vacancy Sq Ft Vacancy %
Greenbrier Area Chesapeake 274 Biesecker/Kaempfe 8,342,696 308,286 3.70%
Bainbridge/S. Elizabeth River Area Chesapeake 133 Worley 5,464,312 385,783 7.06%
Cavalier Indust rial Park Area Chesapeake 178 Mumey 5,781,645 596,380 10.32%
Norfolk Commerce Park/ Norfolk 142 Remick 7,076,668 2,609,090 36.87%Central Norfolk Area
Norfolk Indust rial Park Area Norfolk 339 King 10,196,798 655,962 6.43%
West Side/Midtown Norfolk Area Norfolk 261 Dickinson 6,441,519 290,845 4.52%
Lynnhaven Area Virginia Beach 253 Baker 7,449,758 730,961 9.81%
Greenwich/Cleveland Streets Area Virginia Beach 127 Beasley 3,141,006 60,102 1.91%
Airport Industrial Park Area Virginia Beach 70 Beasley 3,684,329 330,881 8.98%
City of Portsmouth Portsmouth 154 Ellis 4,004,464 297,805 7.44%
City of Suffolk Suffolk 115 Throne 11,535,116 1,477,357 12.81%
Isle of Wight Isle of Wight 27 King 2,788,716 355,766 12.76%
Southside Totals 2,073 75,907,027 8,099,218 10.67%
Copeland/Lower Peninsula Area Peninsula 363 Culbreth/Sanker 9,983,484 2,103,397 21.07%
Oyster Point/Middle Peninsula Area Peninsula 149 Phillips 4,109,297 67,657 1.65%
Oakland/Upper Peninsula Area Peninsula 97 Ferguson 4,611,983 254,733 5.52%
Williamsburg Extended Area Peninsula 60 Phillips 9,005,095 381,602 4.24%
Peninsula Totals 669 27,709,859 2,807,389 10.13%
Totals 2,742 Sanker 103,616,886 10,906,607 10.53%
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 - SuffolkINDUSTRIAL MARKET REVIEW
58 Bypass at Carolina RoadLiberty 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 ReviewOffice Market Review20082008
Scott GodboutSenior Vice President
Director of Office Division
Harvey Lindsay Commercial Real Estate
Hampton Roads Hampton Roads Absorption TrendsAbsorption Trends
551,000
804,000
608,000
300,000
102,7410
100,000200,000300,000400,000500,000600,000700,000800,000900,000
2003 2004 2005 2006 2007
Square Feet
Buildings Delivered in 2007Buildings Delivered in 2007SouthsideSouthside
Convergence Center III 99,000 sf
Dominion Enterprises 220,000 sf
Harbour View Medical Arts I 47,000 sf
Buildings Delivered in 2007Buildings Delivered in 2007SouthsideSouthside
4111 Monarch Way 100,000 sf
Circle South 48,000 sf
Mast One 60,000 sf
Buildings Delivered in 2007Buildings Delivered in 2007PeninsulaPeninsula
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 DevelopmentDevelopment
Corporate Center VI 58,897 sf
Independence Place 75,000 sf
1741 Corporate Landing 45,000 sf
Projects Under Projects Under DevelopmentDevelopment
Wachovia Center 250,000 Sq. Ft.
Two Columbus Center 104,000 Sq. Ft.
Hampton Roads Vacancy Rates Hampton Roads Vacancy Rates Class A/BClass A/B
4%
6%
8%
10%
12%
14%
16%
18%
2003 2004 2005 2006 2007
Norfolk CBD Southside Suburban Peninsula
The Real Estate CycleThe Real Estate Cycle
Absorption ofExcess Supply
DecliningPrices, Rents,Construction
HighVacancies
Oversupply
Accelerated NewConstruction
Increasing Pricesand Rents
LowVacancies
20052005
20082008
20032003
2008 Office Forecast2008 Office Forecast
Slight Uptick In Vacancy RatesSlight Uptick In Vacancy Rates
New Ceiling On Class A RatesNew Ceiling On Class A Rates
Steady Slow Increase In Overall RatesSteady Slow Increase In Overall Rates
Landlord Incentives On the RiseLandlord Incentives On the Rise
Market Market InfluencesInfluences
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Thank YouThank You 2008 RETAIL MARKET REVIEW2008 RETAIL MARKET REVIEW
Presented By:
Bill Overman
Hampton Roads RetailHampton Roads Retail
Per Person AveragePer Person AverageHampton Roads 29.5 SFHampton Roads 29.5 SF
National 18.2 SFNational 18.2 SF
396 Properties Totaling396 Properties Totaling50,219,239 SF50,219,239 SF
Hampton Roads RetailHampton Roads Retail
PeninsulaPeninsula133 Properties133 Properties
Totaling 17,133,079 SFTotaling 17,133,079 SF
SouthsideSouthside263 Properties263 Properties
Totaling 33,086,160 SFTotaling 33,086,160 SF
New Construction New Construction Since 2003Since 2003
749,458 SF456,610 SF
1,211,699 SF
2,594,843 SF
2,047,291 SF
0
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 ConstructionNew Construction
PeninsulaPeninsula1,009,000 SF1,009,000 SF
(5.9% of Total SF)(5.9% of Total SF)
SouthsideSouthside1,038,291 SF1,038,291 SF
(3.1% of Total SF)(3.1% of Total SF)
A Few Projects A Few Projects Delivered in 2007Delivered in 2007
•• LandstownLandstown CommonsCommons
•• The MarquisThe Marquis
•• Towne Place in GreenbrierTowne Place in Greenbrier
LandstownLandstown Commons Commons The MarquisThe Marquis
Towne Place in Towne Place in GreenbrierGreenbrier
Mixed UseMixed Use
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Virginia Beach Town CenterVirginia Beach Town Center City Center at Oyster PointCity Center at Oyster Point
New TownNew Town SettlerSettler’’s Markets Market
Peninsula Town CenterPeninsula Town Center
New New Construction Construction
in Motionin Motion
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Little Creek & TidewaterLittle Creek & Tidewater Marketplace at Marketplace at HarbourHarbour ViewView
HarbourHarbour View EastView East BennettBennett’’s Creek Crossings Creek Crossing
Edinburgh & Edinburgh & CahoonCahoon CommonsCommons Grocers in the NewsGrocers in the News
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Big BoxBig Box
Target atRed Mill Walk
Lowe’s buysGiant Square
Vacancy Rates Since 2003Vacancy 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 RateVacancy Rate
Southside 6.7%Southside 6.7%
Peninsula 9.4%Peninsula 9.4%
2007 Rental Rates2007 Rental Rates
Overall AverageOverall Average $16.05 NNN$16.05 NNN
Southside:Southside: $16.68 NNN$16.68 NNN
Peninsula:Peninsula: $15.41 NNN$15.41 NNN
Emerging MarketsEmerging Markets
Isle of WightIsle of Wight
Northern SuffolkNorthern Suffolk
WilliamsburgWilliamsburg
Eastern North CarolinaEastern North Carolina
FORECASTFORECAST
22
Market CycleMarket Cycle
Worth QuotingWorth 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 weWhat 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 PresidentJerry Anderson, CCIM PresidentSperry Van NessSperry Van Ness
2008 Multi2008 Multi--Family Family Market ReviewMarket Review
F. Andrew Heatwole
Senior Vice President
Ripley Heatwole Company, Inc.
• Historic & Current Multi-Family Development
• Economic & Operating Environment
• Outlook
Topics
23
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
24
Top 3 Sales
Bristol @ Ghent, Norfolk$48,300,000268 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.
25
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 only 2.6%
• Effective Rent Growth overall should be in the 4% to 5% range.
Outlook• Little impact has been felt from “Shadow Shock” on
occupancy levels. “Shadow Shock” is generally defined as “unanticipated” supply from condo reversions and the “shadow” supply of vacant for rentinvestor 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
26
• 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.
RESIDENTIALRESIDENTIALMARKET UPDATEMARKET UPDATE
Van Rose, MIRMVan Rose, MIRMPresident, Rose and President, Rose and WombleWomble New HomesNew Homes
March 12, 2008March 12, 2008
15 Year Closing15 Year ClosingNew Construction & Resale HistoryNew Construction & Resale History
Source:
0
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 StatsHampton Roads Housing Stats
Average Price of SF New HomeAverage 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 HomeAverage 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:
27
2007 2007 SALESSALES
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 SalesHampton Roads Residential Sales1999 to 20071999 to 2007
Source:
25% 25%26%
26% 22%18% 17%
18%
19%
0
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
9,560791
2,511436
877 506951
0%
25%
50%
75%
100%
Resale Detached New ConstructionDetached
>$500,000
$400K to $500K
$300K to $400K
<$300,00069%
18%6%7%
21%
18%
33%
28%
Market Share for Attached Market Share for Attached Sales by Price RangeSales by Price Range
Source:
3061
84
1308
265
209
300
154
212
0%
25%
50%
75%
100%
Resale Attached New ConstructionAttached
>$400,000
$300K to $400K
$200K to $300K
<$200,00065%
28%
4%3%
24%
35%
31%
10%
Average Market Time Average Market Time Existing HomesExisting Homes
Source:
6977 76 80 78
72 6961
4636
27 28
48
66
0102030405060708090
Day
s on
Mar
ket
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
20072007CLOSINGSCLOSINGS
RESALE: 18,667 RESALE: 18,667 15.5%15.5%
NEW HOMES: 4,131 NEW HOMES: 4,131 15.3%15.3%
Source:
28
2007 Southside Average Closing Prices2007 Southside Average Closing PricesSingle Family Detached HomesSingle 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 Prices2007 Southside Average Closing PricesSingle Family Detached HomesSingle 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 Prices2007 Peninsula Average Closing PricesSingle Family Detached HomesSingle 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 Prices2007 Peninsula Average Closing PricesSingle Family Detached HomesSingle 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 FtAverage Sq FtNew Construction Single Family DetachedNew Construction Single Family Detached
2003 $104 per sq ft
2,562 SF
2004 $123 per sq ft
2,641 SF
2005 $149 per sq ft
2,742 SF
2006 $161 per sq ft
2,647 SF
2007 $155 per sq ft
2,744 SF
Source:
New Construction Price PointsNew 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 MixNew Construction Product Mix
Source:
21%
11%
8%
60%
Single FamilyDetached
Multi-StoryCondo
Multi-PlexCondo
Townhome/Duplex
Single Family Building PermitsJanuary 2008 vs January 2007
U.S. 40%
Northeast 31%31%
SouthSouth 36%36%
MidwestMidwest 37%37%
WestWest 54%54%
Hampton Roads 19%19%Source: NAHB
CHALLENGES CHALLENGES FOR FOR 20082008
Resale10,595 units9 months supply
New Homes 2,225 units8.8 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 20082008
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 RatioEmployment to Permit Ratio
02,0004,0006,0008,000
10,00012,00014,00016,00018,00020,000
2000 2001 2002 2003 2004 2005 2006 20070.00
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 KingKing
Readjusting Readjusting of Supply/ of Supply/ Demand Demand
ImbalanceImbalance
New, affordable product New, affordable product offerings will raise new home offerings will raise new home
sales numberssales numbersStarting at $169,900 AND THEAND THE
WINNERS WINNERS
AREARE…………....
Hampton Roads
Top 5 Builders
Source:
# 5
134
# 4
158
32
# 3
255
# 2
295
# 1
370
Old Dominion University Hampton Roads Real Estate
Market Review and Forecast
Thank you for attending!Thank you for attending!
Please Join Us for the ReceptionPlease Join Us for the Reception
Presented by: E.V. Williams
Center for Real Estate and Economic Development