old dominion university director’s message hampton … · robert l. “bobby” phillips, jr....

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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.


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


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


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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NATIONAL OFFICE SALES


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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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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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 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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NATIONAL RETAIL SALES



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


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


http://www.transportationfortomorrow.org/final_report/


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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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


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


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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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Hampton Roads Industrial Sub-MarketsINDUSTRIAL MARKET REVIEW

Wal-Mart Distribution Facility – James City County


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


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


West Park 2 - Hampton

High Street Equity Advisors

180,000 SF Warehouse/Distribution

Completed 2007



West Park 1 & 3 - Hampton

Gateway Warehouses remain available for sublease

515,000 SF in 2 buildings

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2000 Enterprise Parkway - Hampton

135,000 SF Guardian Storage Lease (2007)

First Potomac Realty Trust


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


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


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”


Cavalier Industrial Park • Bay Warehouses • Chesapeake

Newly completed 94,330 SF Multi-tenant Warehouse/Distribution


First Potomac Realty Trust


Cavalier Industrial Park • Johnson Controls Facility Sale

December 2007

$6.4 million

Sold to USUI International

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Cavalier Industrial Park • 3800 Cook Boulevard

Modern renovation and re-tenanting through 2007

Sold to Exeter Property Group - 2007

64,000 SF Available


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%






Caval ier Industrial Park Area Chesapeake 178 Mumey 5,781,645 596,380 10.32%
















Totals 2,742 Sanker 103,616,886 10,906,607 10.53%






Cavalier Indust rial Park Area Chesapeake 178 Mumey 5,781,645 596,380 10.32%
















Totals 2,742 Sanker 103,616,886 10,906,607 10.53%


Ford Assembly Plant

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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


Airport Industrial Park • 5828 Ward Court

TruGreen Lease

20,000 SF

$120/SF - $2,400,000


Prologis/NYK Logistics Import Deconsolidation Facility

100′ x 1,255’

125,500 SF cross dock

Completed 2007


Prologis/NYK Logistics Import Deconsolidation Facility


Northgate Commerce Park

Duke Realty purchased 2007

Two (2) 150,000 SF Buildings

Available for Sublease

36 additional acres for development



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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


Suffolk – Bypass to Distribution


Virginia Regional Commerce Center • Suffolk

Building A nearing completion 2nd Quarter ‘08

400,000 SF Multi-Tenant Distribution


Four (4) building complex planned totaling 1,100,00 SF


Virginia Commerce Center

McDonald Development

Building 100 • 385,320 SF

3 Buildings planned totaling 1,373,720 SF

CSX rail available


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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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

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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

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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

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

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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.

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

old dominion university director’s message hampton … · robert l. “bobby” phillips, jr....

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