Hampton Roads Real Estate Market Review 2012 by Inside Business

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HAMPTON ROADS REAL ESTATE MARKET REVIEW

E. V. WILLIAMS CENTER FOR REAL ESTATE AND ECONOMIC DEVELOPMENT WWW.ODU.EDU/CREED

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ASSOCIATE PUBLISHER Mike Herron Inside Business 757.222.3991

SPECIAL PUBLISHING MANAGER Olga Currie

GRAPHIC DESIGN

HAMPTON ROADS REAL ESTATE MARKET REVIEW

Pico Design & Illustration www.picodesign.net 757.493.0370

DIRECTOR OF SALES Bill Blake 757.222.3165

CONTENTS

ADVERTISING SALES Robin Simmons

Message From The Director

John Kinsley

CREED Executive Committee BUSINESS MANAGER Debbi Wilson

CREED IPAC Members

Inside Business 150 W. Brambleton Avenue

CREED Council Members

Norfolk, Virginia 23510 757.222.5353

Hampton Roads Retail Market Survey Hampton Roads Industrial Market Survey Hampton Roads Office Market Survey Hampton Roads Residential Market Survey Hampton Roads Multi-Family Market Survey

E. V. Williams Center for Real Estate & Economic Development www. o d u . e d u / c re e d

Data for Old Dominion University E.V. Williams Center for Real Estate and Economic Development Market Survey was collected in the fourth quarter â&#x20AC;&#x201D; 2011

Hampton Roads Capital Markets & Real Estate Finance Review

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elcome and thank you for joining us for the 2012 Old Dominion University E. V.

Williams Center for Real Estate and Economic Development (CREED) Hampton Roads Real Estate Market Review and Forecast. This is our 17th annual market report and review and we sincerely appreciate your continued support. Our report this year features a review of capital markets and real estate finance examining the role that commercial and government sponsored lending played in 2011 market performance. The 2012 report also features an expanded residential overview reviewing new and existing home sales in Hampton Roads. The Real Estate Information Network (REIN) has graciously provided us with the data and analysis by James Pritchard. This information, in conjunction with our ongoing evaluation of residential development, now provide you with a more informative and comprehensive overview of the residential market. Growth and development at CREED is driven significantly by support from our members. In 2011, the Industry Professional Advisors to the Center (IPAC) and the CREED Council numbered 115. Together, these membership bodies are dedicated to creating a nationally prominent center of excellence in economic development and real estate research and education here at Old Dominion University. The high degree of support and involvement demonstrated by our membership is positioning CREED to invest greater resources in research, additional educational programming, networking opportunities, and practical applications that benefit the Industry as a whole and sustain the real estate community here at Old Dominion University. CREED membership continues to be one of the most cost effective networking organizations you can ever support. There are many benefits to CREED membership, including complimentary registration to CREED events such as the Hampton Roads Real Estate Market Review and Forecast and the annual CREED Business Meeting and Luncheon. Moreover, there are several opportunities to meet promising students for possible internships or career symposiums. CREED Council and IPAC membership also provides further opportunity for those of you who want to see real estate establish itself as an academic major of choice for Old Dominion University students. With member support, CREED continues to expand student offerings and member services and programming. In 2011, CREED invited several industry leaders to campus and sponsored numerous events in the College of Business and Public Administration including a guest speaker series. In November, CREED presented the inaugural Hampton Roads Residential Market Review featuring Dr. Michael J. Seiler, the Robert M. Stanton Chair of Real Estate and Economic Development, who presented his cutting edge research in areas of behaviorial real estate. His research is featured in top level publications, enhancing the reputation of real estate related

2012 Hampton Roads Real Estate Market Review

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research in the College and University. Also presenting at this inaugural event, ODUâ&#x20AC;&#x2122;s leading economist, Dr. Vinod Agarwal, as well as Van Rose of Rose and Womble, and the Honorable Judge Frank Santoro spoke on the economic and legal aspects of current home buying and residential lending trends at both the regional and national levels. Looking ahead to 2012, CREED is expanding its partnership with the local chapter of the Urban Land Institute, in addition to many other regional industry partners, to bring the nationallyacclaimed ULI Reality Check land-planning exercise to Old Dominion University on May 17, 2012. This event will bring together 300 practitioners specializing in development, infrastructure, engineering and land-use policies for a one-day visioning exercise to determine sustainable and effective planning for our regionâ&#x20AC;&#x2122;s projected growth for the next 25 years. The post-implementation engagement of Reality Check will be housed at CREED and will set the platform for mobilization of the recommendations and land-use strategies that evolve from the Reality Check event. In addition, CREED, in partnership with the College of Business and Public Administration, will launch the Commercial Real Estate Institute (CREI) in the spring of 2012. This week-long instructional program will offer commercial real estate practitioners the opportunity to earn continuing education credits by completing courses in CCIM foundations, Excel and Real Estate Financial Analysis, and Ethics and Leadership. Fall 2012 will bring the 1st Annual CREED Tennis Pro-Am back to Old Dominion University. This exciting networking event sold out in 2011 and generated some friendly industry competition. CREED will also host the 2012 Hampton Roads Residential Market Review in November 2012, so watch for details to be announced later this year. There are many people to thank for their contributions to this report and the annual market review. Many writers and speakers make this program such a success. Of course, a special thank you to all the volunteers within the real estate and economic development community for providing their expertise and sharing their data. None of this is possible without your commitment. In closing, please note that we have changed the way we present some of our information. Every effort is made to provide the most accurate information in these reports. If you find an error, or have a suggestion on how to improve upon these reports, please contact me with comments. Your continued support is truly appreciated.

John R. Lombard, Ph.D.

John R. Lombard, Ph.D. Associate Professor and Chair | Department of Urban Studies and Public Administration Director, E. V. Williams Center for Real Estate and Economic Development Old Dominion University | College of Business and Public Administration | Norfolk, VA 23529-0218 Direct line: (757) 683-4809 Center line: (757) 683-5352

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MISSION OF CREED The E.V. Williams Center for Real Estate and Economic Development (CREED) at Old Dominion University (ODU) is a member-based organization that serves the

real

estate

and

economic

development communities. CREED is a non-profit,

non-political

organization,

established to serve as a liaison between ODU and the business community. CREED supports the real estate and economic development industry through the application of research, resources and continuing education to further land planning and development initiatives. CREED also provides an accessible, interactive, and innovative portal for ODU students to interact with leading industry partners in the public and private sectors.

For membership information, contact CREED Program Manager, Kyllie Brinkley, 757.683.5352, kbrinkle@odu.edu

2012 Hampton Roads Real Estate Market Review

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THE 2012 OFFICERS AND MEMBERS OF CREED ARE AS FOLLOWS: Executive Committee

Market Review Committee

Chair ............................................... Stephanie Sanker

Industrial............................... William C. Throne and

Director............................................ John Lombard

......................................... Stephanie Sanker

Sponsorship Chair .......................... Candi James

Office .................................... Casey J. O'Hearn

Publications Chair ........................... Brian Dundon

Retail .................................... David Machupa, Kyllie Brinkley

Membership Chair .......................... Craig Cope Curriculum Co-Chairs........................ Jon Crunkleton .................................................... Brad Sanford By-Laws Chair .................................. Andrew Keeney

......................................... and David Chapmin Multi-family............................ Charles Dalton/Real Data Residential............................ Ron Wildermuth, Blair Hardesty, James Pritchard and Van Rose

Past Chair........................................ Brad Sanford

Capital Markets & Real

At-Large ........................................... Billy King

Estate Finance ...................... Victor L. Pickett

.................................................... Tom Dillon CREED Program Manager.................Kyllie Brinkley

Research/Editorial Committee Kyllie Brinkley

Nancy Gossett Dove

John Lombard

David Chapman

Elizabeth Hancock

Maureen Rooks

Albert Duncan

Janice Hurley

Brad Sanford

Brian Dundon

Joy Learn

Lane Shea

Kristi Sutphin

To obtain additional copies of this report, please go to our website: www.odu.edu/creed Send to: Kyllie Brinkley Program Manager E. V. Williams Center for Real Estate and Economic Development Old Dominion University 2088 Constant Hall Norfolk, VA 23529 Telephone: (757) 683-5352 E-Mail: kbrinkle@odu.edu

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INDUSTRY PROFESSIONAL ADV Honorary Member Robert M. Stanton, CSM and CPM Stanton Partners, Inc. Jeff Ainslie Ainslie Group G. Robert Aston, Jr. TowneBank Ramon W. Breeden, Jr. The Breeden Company Sanford (Sandy) M. Cohen Divaris Real Estate, Inc. Craig Cope Liberty Property Trust

Cecil V. Cutchins Olympia Development Corporation

David M. Gianascoli Geeâ&#x20AC;&#x2122;s Group Real Estate Development

Robert L. Dewey Willcox & Savage, PC

John L. Gibson, III Ellis-Gibson Development Group

Thomas M. Dillon Fulton Bank N. Joseph Dreps BB&T Pamela J. Faber LeClair Ryan Joel T. Flax, CPA Dixon Hughes Goodman LLP

Warren Harris City of Virginia Beach Economic Development Miles B. Leon S. L. Nusbaum Realty Company Michael W. McCabe Harvey Lindsay Commercial Real Estate

THANK YOU 2012 SPONSORS

2012 Market Review Reception Sponsor

2012 Hampton Roads Real Estate Market Review

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I S O R S TO T H E C E N T E R ( I PA C ) Michael Newsome Clark Whitehill Enterprises, Inc.

Bradley R. Sanford, MAI Dominion Realty Advisors

Jon S. Wheeler Wheeler Interests

Harrison J. Perrine Perrine Investments

Burrell F. Saunders Lyall Design Architects

Robert T. Williams Tri City Developers, LLC

Don Perry Continental Development Victor L. Pickett Grandbridge Real Estate Capital, LLC

Reese Smith Reese Smith & Associates Tony Smith Robinson Development Group

Thomas E. Robinson Robinson Development Group

Deborah K. Stearns, CPM, SIOR Harvey Lindsay Commercial Real Estate

Jim V. Rose Rose & Womble Realty Co., LLC

Richard Thurmond William E. Wood & Associates

Steven Wright City of Chesapeake Economic Development

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CREED COUNCIL MEMBERS J. Scott Adams CB Richard Ellis|Hampton Roads

Laura B. de Graaf Bank of America Merrill Lynch

Dorcas T. Helfant-Browning DTH Properties, LLC

Tom Atherton Atherton Real Estate Development

Michael Divaris Divaris Real Estate, Inc.

Charles Hutchison Vanasse Hangen Brustlin, Inc.

Judy Boone Judy Boone Realty

Helen Dragas The Dragas Companies

Michael A. Inman Inman & Strickler, P.L.C.

Stewart Buckle, II The Morgan Real Estate Group

Brian Dundon Dundon & Associates

Candi James HBA Architecture & Interior Design, Inc.

M. Albert Carmichael Harvey Lindsay Commercial Real Estate

Tom Elder Hampton Roads Economic Development Alliance

Cherie James Cherie James, CPA

W. Page Cockrell Hurt & Proffitt

Sandra Ferebee GSH Residential Sales

Terry Johnson Abbitt Realty

David Collier First Atlantic Restoration

Bart Frye, Jr. Frye Properties, Inc.

Mallory Kahler City of Portsmouth Economic Development

Lawrence J. Colorito, Jr., MAI Axial Advisory Group, LLC

Brian E. Gordineer, A.A.S City of Hampton, Office of the Assessor

Hahns L. Copeland DARVA Group LLC Ann K. Crenshaw Kaufman & Canoles, P.C. Don Crigger, CCIM CB Richard Ellis of Virginia, Inc. Jon R. Crunkleton, Ph.D. Old Dominion University Kim Curtis Tidewater Home Funding William G. Darden Hearndon Construction Co.

Howard E. Gordon Williams Mullen Dennis W. Gruelle Appraisal Consultation Group Elizabeth O. Hancock Office of Real Estate Assessor, Norfolk Russell G. Hanson, Jr. Hanson Capital, LLC Carl Hardee Lawson Realty Corporation John Harry John C. Harry, Inc.

2012 Hampton Roads Real Estate Market Review

E. Andrew Keeney Kaufman & Canoles, P.C. R. I. King, II Cushman & Wakefield | THALHIMER William E. King, SIOR Harvey Lindsay Commercial Real Estate April Koleszar Koleszar Properties, Inc. Barry M. Kornblau Summit Realty Group, Inc. Tyler Leinbach Meredith Construction Company

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John R. (Jack) Lewis, II ECS Mid-Atlantic, LLC Harvey Lindsay, Jr. Harvey Lindsay Commercial Real Estate

Charles E. Rigney, Sr. City of Norfolk Department of Development Maureen G. Rooks Jones Lang LaSalle

Jeffrey R. Mack The CIM Group

J. Randy Royal Kimley-Horn and Associates

M. B. Mike Mausteller, Jr. Harvey Lindsay Commercial Real Estate

Robert J. Ruhl City of Virginia Beach Economic Development

G. Cliff Moore Virtexco Corporation

Stephanie Sanker, SIOR, CCIM S.L. Nusbaum Realty Co.

Michael Nice George Nice and Sons, Inc.

Robert M. Sherman III, CPM Harrison & Lear, Inc.

Thomas Oâ&#x20AC;&#x2122;Grady Clancy & Theys Construction

Kenneth Sisk, P.E. Bowman Consulting Group

James N. Owens, CCIM Harvey Lindsay Commercial Real Estate

Anthony W. Smith Robinson Development Group

Robert L. Philips, Jr. Cushman & Wakefield|THALHIMER Chris Read CB Richard Ellis|Hampton Roads F. Craig Read Read Commercial Properties Worth Remick CB Richard Ellis|Hampton Roads John C. Richards, Jr. CB Richard Ellis/Melody & Co. Rennie Richardson Richardson Real Estate Corporation 11

Robert M. Stanton Stanton Partners, Inc. Jeremy R. Starkey Monarch Bank Commercial Real Estate Finance/Monarch Capital, LLC Daniel R. Stegall Daniel Richard Stegall, A Professional Law Corporation Terrie L. Suit The Office of Commonwealth Preparedness Leo Sutton EXIT Realty Central Commercial

Michael Sykes Bank of Hampton Roads Robert M. Thornton, CRE, CCIM, SIOR Cushman & Wakefield|THALHIMER William C. Throne, SIOR, CCIM, ALC Cushman & Wakefield|THALHIMER Jamie Tollenaere McKenzie Construction Corporation Stewart Tyler, ASA Right of Way Acquisitions & Appraisals George D. Vick, III Harvey Lindsay Commercial Real Estate Edward W. Ware Norfolk Redevelopment and Housing H. Mac Weaver, II Wells Fargo Real Estate Group Edward M. Williams William E. Wood & Associates F. Blair Wimbush Norfolk Southern Corporation Peter E. Winters, Jr. Bank of Hampton Roads Chris Wood JD & W John P. Wright Waverton Associates Michael P. Zarpas Global Real Estate Investment Inc.

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2012 Hampton Roads Real Estate Market Review

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HAMPTON ROADS MARKET REVIEW

RETAIL Author

David Machupa Cushman & Wakefield | THALHIMER

Survey Collection

Kyllie Brinkley E.V. Williams Center for Real Estate and Economic Development Old Dominion University

David Chapman

Financial Support

The E. V. Williams Center for Real Estate and Economic Development (CREED) functions and reports are funded by donations from the CREED IPAC and Council Advisory Boards, organizations, and individuals.

Disclosure

The data used for this report are 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.

Old Dominion University

2 0 1 2 R E TA I L

Data Analysis/ Layout

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2012 R E T A I L

General Overview

his report analyzes the 2011 retail real estate conditions within the Virginia Beach-Norfolk-Newport News, Virginia Metropolitan Statistical Area (MSA) which is commonly referred to as Hampton Roads. The report examines supply, vacancy, construction, absorption, and rent data to provide a comparison of data for the specific submarkets and product types located within the Southside and Peninsula regions of the Hampton Roads MSA. Southside properties surveyed for the purpose of this report included those located in the cities of Chesapeake, Norfolk, Portsmouth, Smithfield, Suffolk and Virginia Beach. Peninsula properties surveyed are located in the cities of Gloucester, Hampton, Newport News, Poquoson, Williamsburg, and York County. This survey is recognized as the most comprehensive analysis of retail real estate trends in the Hampton Roads MSA. The report includes information on all retail property types including regional malls, freestanding buildings and strip centers of various classifications. The scope of the report also includes a summary of new retail construction activity, an analysis of absorption, and a review of selected retail investment sales that have occurred in the region in 2011.

METHODOLOGY This survey gathered information about strip shopping centers and regional malls located in the Hampton Roads MSA that were generally 30,000 square feet in size or larger. Additionally, information on retail-oriented freestanding buildings at least 23,000 square feet and freestanding buildings that contained furniture stores, discounters, grocery stores or category killer retailers that met the established size criteria were included in the survey. Automotive uses and buildings containing â&#x20AC;&#x153;downtown storefrontsâ&#x20AC;? were not included. Although available retail space in many submarkets (e.g. Ghent) is best described as a collection of small specialty shops, storefronts or freestanding buildings, practical limitations dictated that the focus of the survey be on larger product types. The survey data was collected between October 2011 and January 2012. Questionnaires were mailed to owners, leasing agents and property managers responsible for retail properties meeting the selection criteria. Direct contact was utilized as a follow-up to the mailing to encourage participation. Information on square footage for freestanding buildings was obtained from building owners, tax records, store managers and retail real estate representatives. Sales information was obtained from property owners, real estate agents, appraisers and real estate assessors.

2012 Hampton Roads Real Estate Market Review

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DEFINITIONS OF TERMS Asking Rates: The market rate per square foot of a retail property (excluding freestanding buildings and malls), exclusive of additional rents that may be paid under a triple net lease. Interpretation of average retail rates in different product types and submarkets should be viewed cautiously given the tremendous variability in rates for like products and for properties located within the same submarket. Factors such as visibility, co-tenancy and accessibility are some of the many sources of variation in market rates which should be considered. Big Boxes: Contiguous retail space that is at least 23,000 square feet and located in any one of the identified product types. Retailers occupying big boxes include, but are not limited to, the following: category killers, specialty stores, discounters, furniture stores, grocery stores and theaters. Bowling alleys, automotive uses, roller rinks and ice-skating rinks were not included. CAM: Common Area Maintenance Product Types: Properties were classified according to one of the following nine retail product types. The International Council of Shopping Centers defined the first six categories. Three additional categories were included to accurately categorize the remaining properties. 30,000 to 150,000 square feet; supermarket anchored

Community Center

100,000 to 350,000 square feet; discount department store, supermarket or drug store anchored

Fashion/Specialty Center

80,000 to 250,000 square feet; fashion anchored

Power Center

250,000 to 600,000 square feet; category killer, home improvement and discount department store anchored

Theme Festival Center

80,000 to 250,000 square feet; restaurants, entertainment anchored

Outlet Center

50,000 to 400,000 square feet; manufacturerâ&#x20AC;&#x2122;s outlet store anchored

Freestanding

Individual building not considered a shopping center

Mall

Shopping center with area designed for pedestrian use only

Other

Any center that does not fit into a typical category

Regional Mall Node: Submarket anchored by regional mall. Small Shop: In-line retail space usually less than 10,000 square feet located in a multi-tenanted shopping center. Submarkets: Hampton Roads is divided into 35 retail submarkets (25 Southside submarkets and 10 Peninsula submarkets) which reflected general concentrations, pockets or corridors of retail product type. Geographical boundaries of the retail submarkets were influenced by density of existing retail product, physical or geographical obstacles, existing transportation networks, municipal boundaries, population concentrations and retailersâ&#x20AC;&#x2122; perceptions of the MSA. Final determination of specific boundaries of each submarket was made by a subcommittee of retail real estate professionals who are actively involved in the MSA. Also highlighted were specific submarkets that are anchored by regional malls. A map which identifies the general location of each submarket is included in the centerfold of this report. Triple Net Lease: Type of lease under which a tenant pays its pro-rata share of real estate taxes, insurance and common area maintenance.

2 0 1 2 R E TA I L

Neighborhood Center

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2012 R E T A I L

YEAR IN REVIEW Gradual recovery, which has been the mantra on a local and national level, is exactly what the Hampton Roads retail market is experiencing. As 2010 came to a close, we were hopeful that the worst had come to pass. Market watchers were witnessing vacancy rates decreasing in conjunction with decreasing rental rates along with an increase in retail tenant activity. Lenders had not opened the purse strings to the extent of years past, but obtaining financing, while still difficult, was less difficult than the prior year. Overall, 2011 brought us less than what we hoped for, but exactly what we expected, a gradual recovery. What we saw in 2011 was increased activity from various mid-size and big box users. This new development speaks well as to the direction of the market. On the Southside, Harris Teeter is under construction in Portsmouth, Target is under construction behind Pembroke Mall in Virginia Beach, Dicks Sporting Goods opened in northern Suffolk, Cinemark opened a 40,000 sf theater in the Chesapeake Square, and Wal-Mart opened in the Edinburgh area of Chesapeake. The Peninsula saw The Fresh Market relocate and open a location in Williamsburg. We are hearing of and seeing additional grocery store activity in the entire Hampton Roads market. The Neighborhood Market, a Wal-Mart concept, has purchased multiple sites in Hampton Roads this past year. The fact that the grocery stores are touring and evaluating opportunities is another validation of the stability of Hampton Roads. The highlight of the past year was confirmation that Hampton Roads will welcome it first Whole Foods as they open in Virginia Beach in 2012. Concerning the small space users, we can say the bedding industry is alive and well in Hampton Roads as The Mattress Firm and Sleepyâ&#x20AC;&#x2122;s have aggressively expanded this past year. Blockbuster continues to close stores and many have been or are in the process of being repositioned. The fast casual users such as Panera Bread and Chipotle remain active. The mobile phone industry continues to drive retail locations with Verizon Wireless and Ntelos having opened new stores in 2011. The market has also seen the frozen yogurt retailers expanding. If you need coffee, you need not look far. Starbucks has two stores under construction, Dunkin Donuts has one location under construction in Virginia Beach, while Krispy Kreme opened two stores and is looking for additional sites. As in years past, we have seen a culling of the retail herd. Not indicative of the Hampton Roads market, A.J. Wright and Borders closed all locations nationwide. Total Wine and Beverage quickly expanded into the former Borders in the Hilltop submarket of Virginia Beach. Many of the A.J. Wright locations were converted to Marshalls or leased by other tenants. Market watchers are keeping a keen eye on Sears and Kmart as these companies are starting to close stores and have been unsuccessful in implementing merchandising plans that will attract customers. Sears has announced plans to close its Norfolk location in 2012. Sears owns many of their sites; therefore, these sites may generate prime redevelopment opportunities in the future. Retail investment sales continue to be few and far between. The logjam of lender owned property that is constantly discussed has not hit the market. What we have seen this past year is a new way for lenders to deal with troubled assets. Rather than work through the foreclosure process, we have seen lenders sell the loan/note to investors enabling them to remove the non-performing loans from the books. Overall, the Hampton Roads retail market remains stable and continues to gradually improve. The increased port activity, the stabilizing military presence, and increased consumer confidence has led to increased tenant activity in our market. Provided fuel pricing does not reach a level that seriously impacts consumersâ&#x20AC;&#x2122; disposable income, we should see 2012 outperform 2011 just as 2011 outperformed 2010.

2012 Hampton Roads Real Estate Market Review

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HAMPTON ROADS MARKET SURVEY The Hampton Roads retail market contained approximately 52,644,569 square feet of gross leasable area (â&#x20AC;&#x153;GLAâ&#x20AC;?) in 417 properties with an average asking rental rate of $15.79 triple net. The US Census Bureau indicates the population of the Hampton Roads MSA is approximately 1.7 In years past, we did not see a great deal of participation from million resulting in a 32.30 square feet of retail supply per person. landlords in tenant build-out; however, these days landlords Certain methodological differences are offering free rent, tenant improvement allowances, in this survey (e.g. the inclusion of graduated rental structures or a combination of the three to freestanding buildings and malls) assist tenants. These actions have reduced the vacancy rate make it difficult to compare per capita supply in the MSA to a from 8.94% in 2010 to 8.51% in 2011. national average statistic. Hampton Roads consists of two markets, the Southside and Peninsula. The Southside market has approximately 34,150,108 square feet, roughly 66% of the total square footage in the market, in 279 properties. The average asking rent for small shop space increased ever so slightly $.03 over 2010 numbers to $16.03 triple net. The increase in rental rates had little effect on the overall vacancy rate for Hampton Roads as the vacancy rate remained stable at 7.42%. In 2011, there was 103,380 square feet of projects built on the Southside this past year.

Fortunately 2011, like the previous year, saw an overall decrease in the vacancy rate for the Hampton Roads market. Landlords continue to be motivated and creative in finding ways to fill vacancies. In years past, we did not see a great deal of participation from landlords in tenant build-out; however, these days landlords are offering free rent, tenant improvement allowances, graduated rental structures or a combination of the three to assist tenants. These actions have reduced the vacancy rate from 8.94% in 2010 to 8.51% in 2011. While we will face many of the same challenges as 2011 retail sales are up, supply is slowly reducing and tenants continue to express interest in the Hampton Roads market. We move forward acknowledging 2012 is trending in the right direction. We have consistently stated that the recovery will be slow and gradual and 2011 numbers reflect that projection. As supply continues to be absorbed, we will see rental rates gradually increase. Additionally, we are seeing the initial stages of new development, further demonstrating the stability of the Hampton Roads retail market.

2 0 1 2 R E TA I L

The Peninsula also experienced some mixed change this past year. The 138 properties on the Peninsula that were surveyed combined for 18,494,461 square feet of product. The average asking price of small shop space decreased by $.37 to $15.28 per square foot triple net, this reduced rate help drive absorption and we saw a greater decrease in the vacancy rate on the Peninsula. The vacancy rate dropped 1.22% to 10.51% and interest remains very strong for select submarkets. Despite previous over development in the Williamsburg submarket, we did welcome Food Lion and a relocation of The Fresh Market to the area. A positive indicator is that the former Fresh Market location has been back filled.

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2012 R E T A I L

Market Overview Table Number of Properties

GLA in SF

Vacant SF

New Construction % Vacant in SF

Occupied Absorption in SF in SF

2012

Southside Peninsula Total

279 138 417

34,150,108 18,494,461 52,644,569

2,534,765 1,944,109 4,478,874

7.42% 10.51% 8.51%

103,380 999,389 1,102,769

31,615,343 16,550,352 48,165,695

794,577 782,099 1,576,676

2011

Southside Peninsula Total

274 138 412

34,019,555 18,548,407 52,567,962

2,523,754 2,175,793 4,699,547

7.42% 11.73% 8.94%

18,880 18,880

31,495,801 16,372,614 47,868,415

675,035 604,361 1,279,396

2010

Southside Peninsula Total

273 136 409

33,535,280 18,160,963 51,696,243

2,714,514 2,392,710 5,107,224

8.09% 13.18% 9.88%

302,352 981,463 1,283,815

30,820,766 15,768,253 46,589,019

(288,440) 362,777 74,337

2009

Southside Peninsula Total

265 133 398

33,265,028 17,112,012 50,377,040

2,155,822 1,706,536 3,862,358

6.48% 9.97% 7.67%

275,252 275,252

31,109,206 15,405,476 46,514,682

238,525 (109,898) 128,627

2008

Southside Peninsula Total

263 133 396

33,086,160 17,133,079 50,219,239

2,215,479 1,617,705 3,833,184

6.70% 9.44% 7.63%

1,038,291 1,009,000 2,047,291

30,870,681 15,515,374 46,386,055

339,596 100,485 440,081

Southside Peninsula Total

259 131 390

32,407,761 16,895,155 49,302,916

1,876,676 1,480,266 3,356,942

5.79% 8.76% 6.81%

1,552,392 1,042,451 2,594,843

30,531,085 15,414,889 45,945,974

1,741,962 576,788 2,318,750

Southside Peninsula Total

246 129 375

30,852,210 16,337,458 47,189,668

2,063,087 1,499,357 3,562,444

6.69% 9.18% 7.55%

593,520 618,179 1,211,699

28,789,123 14,838,101 43,627,224

1,280,869 687,097 1,967,966

2005

Southside Peninsula Total

243 125 368

30,184,395 15,799,778 45,984,173

2,676,141 1,648,774 4,324,915

8.87% 10.44% 9.41%

271,610 185,000 456,610

27,508,254 14,151,004 41,659,258

341,736 496,338 838,074

2004

Southside Peninsula Total

243 127 370

30,336,266 16,094,161 46,430,427

3,169,748 2,027,477 5,197,225

10.45% 12.60% 11.19%

419,458 330,000 749,458

27,166,518 14,066,684 41,233,202

419,138 412,018 831,156

2003

Southside Peninsula Total

245 126 371

30,180,691 15,546,085 45,726,776

3,433,311 1,891,419 5,324,730

11.38% 12.17% 11.64%

574,400 676,000 1,250,400

26,747,380 13,654,666 40,402,046

535,167 932,008 1,467,175

Southside Peninsula Total

239 123 362

29,760,443 14,906,530 44,666,973

3,548,230 2,183,872 5,732,102

11.92% 14.65% 12.83%

828,800 202,750 1,031,550

26,212,213 12,722,658 38,934,871

1,185,818 242,563 1,428,381

Southside Peninsula Total

230 121 351

29,436,515 14,477,970 43,914,485

3,760,087 1,997,875 5,757,962

12.77% 13.80% 13.11%

918,100 212,229 1,130,329

25,676,428 12,480,095 38,156,523

(158,181) 147,115 (11,066)

2000

Southside Peninsula Total

220 118 338

28,816,383 15,249,617 44,066,000

2,933,294 2,012,637 4,945,931

10.18% 13.20% 11.22%

2,064,727 758,370 2,823,097

25,883,089 13,236,980 39,120,069

1,344,209 292,785 1,636,994

1999

Southside Peninsula Total

208 112 320

27,089,939 14,548,482 41,638,421

2,551,059 1,604,287 4,155,346

9.42% 11.03% 9.98%

1,414,805 1,253,342 2,668,147

24,538,880 12,944,195 37,483,075

1,961,927 1,592,805 3,554,732

1998

Southside Peninsula Total

195 102 297

25,463,588 12,952,845 38,416,433

2,886,635 1,601,455 4,488,090

11.34% 12.36% 11.68%

No Data No Data No Data

22,576,953 11,351,390 33,928,343

No Data No Data No Data

2007

2006

2002

2001

2012 Hampton Roads Real Estate Market Review

ODU-MarketReview2012_REV1 3/1/12 11:50 AM Page 19

SOUTHSIDE SUBMARKETS There were 25 retail submarkets in the Southside survey this year. The average size of the submarkets was 1,366,004 square feet. The largest Southside markets were Greenbrier and Military Highway with combined square footage of 7,502,349 square feet. The Greenbrier /Battlefield submarket at 4,249,737 square feet has a low vacancy rate of 5.46%, although we did see a dip in the small shop asking rates to $19.65 per square foot triple net. The range of vacancy rates in the Southside submarkets are reviewed in the table below.

SOUTHSIDE BY SUBMARKET

Average Number of Properties

5 4 6 9 15 7 4 9 18 25 13 10 5 12 18 12 8 15 16 12 1 22 14 5 14 279

Vacant SF

% Vacant

Small Shop Rate PSF

290,718 191,655 332,904 2,218,786 1,196,260 1,510,437 1,329,283 398,161 1,375,042 4,249,737 1,554,944 841,300 666,183 1,216,659 1,867,591 1,459,428 1,822,451 1,768,265 3,252,612 638,344 39,691 2,793,180 1,724,498 281,150 1,130,829 34,150,108

19,702 48,899 82,600 97,486 42,780 60,119 33,275 39,368 138,492 231,930 133,357 51,524 85,015 163,265 265,109 11,677 178,847 176,615 120,624 86,779 6,314 277,485 91,718 4,050 87,735 2,534,765

6.78% 25.51% 24.81% 4.39% 3.58% 3.98% 2.50% 9.89% 10.07% 5.46% 8.58% 6.12% 12.76% 13.42% 14.20% 0.80% 9.81% 9.99% 3.71% 13.59% 15.91% 9.93% 5.32% 1.44% 7.76% 7.42%

$15.28 $11.95 $12.56 $18.00 $16.43 $18.33 $14.83 $17.56 $16.40 $19.65 $20.83 $13.11 $13.80 $15.50 $14.38 $16.44 $18.00 $12.68 $12.68 $12.82 $21.00 $16.23 $17.35 $17.00 $16.45 $16.03

2 0 1 2 R E TA I L

Bay Front Birdneck/Oceanfront Campostella Chesapeake Square Churchland-Portsmouth/Harborview Dam Neck Downtown Ghent Great Bridge Greenbrier/Battlefield Boulevard Hilltop/Great Neck Holland/Green Run Indian River/College Park (Including Chesapeake) Kempsville Little Creek Road /Wards Corner/Ocean View Little Neck Lynnhaven Road (Virginia Beach Boulevard To Holland Road) Middle Portsmouth Military Highway/Janaf Newtown ODU Pembroke Princess Anne Road (From Kempsville Road To Holland Road) Smithfield Suffolk Total

GLA in SF

ODU-MarketReview2012_REV1 3/1/12 11:50 AM Page 20

2012 R E T A I L

PENINSULA SUBMARKETS There were 10 retail submarkets in the Peninsula survey with an average size of 1,849,446 square feet. The two largest Peninsula submarkets are now Patrick Henry and Williamsburg. The Patrick Henry submarket is anchored by a regional mall, and has the lowest vacancy rate on the Peninsula. The Patrick Henry submarket continues to be one of the most highly desired submarkets in Hampton Roads having 4,374,256 square feet and a vacancy rate of just 3.27%. The Coliseum Market has shown improvement with a reduction of the vacancy rate; however, the relocation of Target created a 112,000 square foot vacancy that accounts for 3% of the submarket vacancy.

PENINSULA BY SUBMARKET

Coliseum Central Denbigh Foxhill/Buckroe/East Mercury Gloucester Hampton Misc Newmarket/Main (To Include Hampton) Patrick Henry/Oyster Point/Kiln Creek Poquoson Williamsburg York County Total

Average Number of Properties

GLA in SF

Vacant SF

% Vacant

Small Shop Rate PSF

15 15 7 8 2 13 31 2 33 12 138

3,665,442 1,785,121 681,614 894,676 118,972 1,389,156 4,374,256 108,521 4,636,980 839,723 18,494,461

440,629 376,657 49,231 63,164 19,470 229,607 143,239 14,675 531,635 75,802 1,944,109

12.02% 21.10% 7.22% 7.06% 16.37% 16.53% 3.27% 13.52% 11.47% 9.03% 10.51%

$17.88 $12.58 $12.60 $14.38 $10.75 $9.98 $17.08 $14.00 $18.69 $14.41 $15.28

RETAIL PRODUCT TYPE The Neighborhood Center remains the predominant product type with 160 properties with over 12 million square feet of GLA. The Community centers comprised over 10 million square feet with both product types showing a slight increase in both vacancy rate and rental rate in 2011.

2012 Hampton Roads Real Estate Market Review

ODU-MarketReview2012_REV1 3/1/12 11:50 AM Page 21

Total Retail Product By Type

Neighborhood Center Community Center Fashion/Specialty Center Power Center Theme Festival Center Outlet Center Other Freestanding Mall Total

GLA in SF

New Construction in SF

Vacant SF

12,106,022 9,911,552 1,539,384 10,590,613 100,000 349,927 2,398,636 7,929,794 7,718,641 52,644,569

20,380 83,000 999,389 1,102,769

1,412,717 1,032,222 140,043 841,387 281,138 338,632 432,735 4,478,874

Number of Properties

GLA in SF

New Construction in SF

120 37 8 20 1 44 42 7 279

8,739,907 6,151,669 1,056,384 6,425,330 100,000 1,564,152 4,463,021 5,649,645 34,150,108

20,380 83,000 103,380

Number of Properties

GLA in SF

New Construction in SF

48 21 2 10 1 20 33 3 138

3,366,115 3,759,883 483,000 4,165,283 349,927 834,484 3,466,773 2,068,996 18,494,461

999,389 999,389

Number of Properties 168 58 10 30 1 1 64 75 10 417

% Vacant

Average Small Shop Rate PSF

Average CAM PSF

11.67% 10.41% 9.10% 7.94% No data No data 11.72% 4.27% 5.61% 8.51%

$14.72 $15.52 $24.33 $20.48 No data No data $15.67 $13.83 $20.50 $15.79

$2.60 $2.41 $3.81 $3.43 No data No data $2.99 $3.60 $17.75 $2.77

Vacant SF

% Vacant

Average Small Shop Rate PSF

Average CAM PSF

1,080,174 558,472 85,076 318,327 161,352 18,300 313,064 2,534,765

12.36% 9.08% 8.05% 4.95% No data No data 10.32% 0.41% 5.54% 7.42%

$15.01 $15.33 $24.13 $20.26 No data No data $15.93 $15.90 $20.50 $16.03

$2.59 $2.41 $3.81 $3.43 No data No data $2.99 $3.60 $18.86 $2.85

Vacant SF

% Vacant

Average Small Shop Rate PSF

Average CAM PSF

332,543 473,750 54,967 523,060 119,786 320,332 119,671 1,944,109

9.88% 12.60% 11.38% 12.56% No data No data 14.35% 9.24% 5.78% 10.51%

$14.01 $15.83 $26.00 $20.85 No data No data $15.15 $11.25 No data $15.28

$2.23 $2.41 $5.40 $2.88 No data No data $2.46 $2.27 $17.75 $2.59

Southside By Type

Neighborhood Center Community Center Fashion/Specialty Center Power Center Theme Festival Center Outlet Center Other Freestanding Mall Total

2 0 1 2 R E TA I L

Peninsula By Type

ODU-MarketReview2012_REV1 3/1/12 11:50 AM Page 22

2012 I N D U S T R I A L

BIG BOX VACANCY Despite retailers such as A.J. Wright and Borders vacating the market, Big Box Vacancy in Hampton Roads decreased in 2011 to 1,650,463 square feet. This number represents 37% of the total retail vacancy in the market; a decrease of 67,130 square feet over last yearâ&#x20AC;&#x2122;s numbers. We did see some Big Box activity this past year. Wal-Mart opened at Edinburgh Commons in Chesapeake and tenants such as Goodwill and Marshalls occupied former A.J. Wright locations.

Big Box Vacancy 4,000,000 3,500,000

Southside Peninsula TOTAL

Vacant Square Feet

3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Big Box Vacancy 1999

2005

2006

2007

Southside 1,607,323 2,073,115 2,207,416 2,220,935 1,906,391 1,513,523 1,142,319

957,887

Peninsula 1,232,255 1,328,841 1,435,489 1,407,021 1,556,029 1,141,207

819,163

TOTAL

2000

2001

2002

2003

2004

982,263

2008

2009

2010

2011

948,288

907,688 1,102,093

880,568

855,979

827,360

880,805

837,025

794,484

989,305

2,839,578 3,401,956 3,642,905 3,627,956 3,462,420 2,654,730 2,124,582 1,777,050 1,775,648 1,788,493 2,091,398 1,717,593 1,650,463

2012 Hampton Roads Real Estate Market Review

ODU-MarketReview2012_REV1 3/1/12 1:24 PM Page 23

Retail Submarkets Southside 1 2 3 4 5 6 7 8 9 10

Bayfront Birdneck/Oceanfront Campostella Chesapeake Square Churchland/Harbourview Dam Neck Downtown Norfolk Ghent Great Bridge Greenbrier/Battlefield Boulevard

11 12 13 14 15 16 17 18 19 20

Hilltop/Great Neck Holland/Green Run Indian River/College Park Kempsville Little Creek Road/ Wards Corner Little Neck Lynnhaven Middle Portsmouth Military Highway/Janaf Newtown

21 22 23 24 25

ODU Pembroke Princess Anne Smithfield Suffolk

Peninsula 26 27 28 29 30 31 32 33 34 35

Coliseum Central Denbigh Foxhill/Buckroe Gloucester Hampton Miscellaneous Patrick Henry Poquoson Newmarket/Main Williamsburg York County

ODU-MarketReview2012_REV1 3/1/12 11:51 AM Page 24

The following is a list of the properties included in this yearâ&#x20AC;&#x2122;s survey listed by submarket with a code representing the type of property. The GLA of the property is also listed. A Neighborhood Center B Community Center C Fashion/Specialty Center D Power Center E Theme Festival

F Outlet Center G Other H Freestanding I Mall

SOUTHSIDE BAY FRONT Cape Henry Plaza Chic's Beach Shopping Center Kroger Lake Shores Plaza Shopping Center Marina Shores

A A H A G

58,424 79,397 47,000 58,230 47,667

BIRDNECK / OCEANFRONT Birdneck SC Farm Fresh Harris Teeter Linkhorn Shops

A H H A

65,460 29,296 48,000 48,899

CAMPOSTELLA Atlantic Commons Bainbridge Marketplace Campostella Corner George Washington Commons Holly Point SC Southgate Plaza

A A A A A A

63,393 46,444 43,375 44,942 65,321 69,429

CHESAPEAKE SQUARE BJ's H Chesapeake Center B Chesapeake Square Mall I Crossroads Center at Chesapeake Square D Food Lion @ Chesp. Sq. H Home Depot H Lowes H Taylor Road Plaza A Wal-Mart Supercenter/Sam's Club H

115,660 270,602 800,000 332,464 45,000 130,060 115,000 60,000 350,000

CHURCHLAND / PORTSMOUTH / HARBOURVIEW Academy Crossing G Churchland Place Shoppes G Churchland SC A Churchland Square A Grand H Harbor View Shoppes A Harbour View East D Harbourview Station East D Harbourview Station West D

45,483 21,000 149,741 72,189 30,000 17,000 172,000 217,308 83,007

Marketcenter at Harbourview Marketplace Square Planet Fitness Plaza Poplar Hill Plaza Sterling Creek Town Point Square

A A A B A A

86,130 12,461 52,966 102,326 75,660 58,989

DAM NECK Dam Neck Crossing Dam Neck Square General Booth Plaza Red Mill Commons Red Mill Walk Sandbridge SC Strawbridge Marketplace

B A A D B A A

138,571 67,917 73,320 750,000 240,000 66,800 173,829

DOWNTOWN Berkley Center Church Street Crossing MacArthur Center Mall Waterside Festival Marketplace

A A I I

47,945 51,000 1,100,000 130,338

GHENT 201 Twenty One 21st Street Pavilion Center Shops Colley Village Ghent Place Harris Teeter Palace Shops I, II Palace Station The Corner Shops

A G A A G H C G G

15,616 21,000 139,081 44,585 13,000 27,000 78,367 38,000 21,512

GREAT BRIDGE Cahoon Commons Cedar Lakes Center Centerville Crossing Country Club Shoppes Crossings at Deep Creek Dominion Marketplace Dominion Plaza SC Glenwood Square Great Bridge SC Hanbury Village Harbor Watch Shoppes Las Gaviotas Millwood Plaza Mt. Pleasant Shopping Center Mt. Pleasant Village Wilson Village Woodford Shoppes Woodford Square

D A A H A A A A A A G A G A A A B B

278,023 35,659 50,000 17,700 68,970 73,103 63,733 73,859 156,937 100,560 21,505 82,000 16,930 100,000 34,180 52,500 9,760 139,623

GREENBRIER / BATTLEFIELD BOULEVARD Battlefield Marketplace G 30,000 Chesapeake Crossing B 287,679 Country Club Square H 12,600

2012 Hampton Roads Real Estate Market Review

Crossways Center I & Eden Way Shops Crossways II Edinburgh Commons Edinburgh East Gainsborough Square Greenbrier Mall Greenbrier Market Center Greenbrier South SC Home Depot K-Mart/OfficeMax Knell's Ridge Square Lowes Orchard Square Parkview @ Greenbrier Plantation Woods Regal Cinemas The Shoppes at Greenbrier Towne Place at Greenbrier Village Square Volvo Parkway SC Wal-Mart Way Crossing Wal-Mart/Sam's Club/Kohl's

D D D D A I D A H H G H A A A H G C G G G D

438,725 152,686 184,232 133,000 88,862 899,665 487,580 97,500 130,060 165,000 40,000 114,000 88,910 83,711 16,800 60,763 40,000 127,109 15,000 41,874 80,160 433,821

HILLTOP / GREAT NECK Great Neck Square Great Neck Village Hilltop East Hilltop North Hilltop Plaza Hilltop Square Hilltop West La Promenade Marketplace at Hilltop Mill Dam Crossing Regency Hilltop Renaissance Place Target

A A C B B B G C C A B G H

93,887 73,836 144,100 202,511 152,025 220,413 60,000 63,280 113,000 25,776 236,549 47,667 122,000

HOLLAND / GREEN RUN Auburn Place Chimney Hill Green Run Square Holland Plaza SC Holland Windsor Crossing Lowes Lynnhaven Green Rosemont Center Shipps Corner Timberlake SC

A B A A B H A A A A

42,709 207,175 75,000 155,000 47,400 125,323 50,838 1,000 63,355 73,500

INDIAN RIVER / COLLEGE PARK College Park I & II College Park Square Indian River Plaza Indian River SC Tidewater Plaza

B H B A A

181,902 183,874 126,017 123,752 50,638

ODU-MarketReview2012_REV1 3/1/12 11:51 AM Page 25

KEMPSVILLE Arrowhead Plaza Fairfield SC Kemps Corner Shoppes Kemps River Center Kemps River Crossing Kempsville Crossing Kempsville Plaza Parkway Marketplace Providence Square SC University Shoppes Witchduck Exchange Woods Corner

A B G A B A A A A A A A

97,006 239,763 25,929 62,507 245,268 94,477 60,778 26,602 135,915 26,100 50,000 152,314

Ames/Kroger Dollar Tree Shopping Center East Beach Marketplace East Beach Shoppes Farm Fresh - Little Creek Glenwood Shoppes Little Creek and Tidewater Shops Little Creek Square Meadowbrook S C Mid-Town Mid-Way SC Ocean View SC Roosevelt Gardens SC Southern Shopping Center Suburban Park Super Wal-Mart Wards Corner Strip Wedgewood SC

B A B A H A B A G A G A A B B H A A

140,568 51,415 202,000 63,000 66,000 53,255 119,820 82,300 27,260 75,768 31,000 73,658 109,175 239,719 116,113 225,000 61,540 130,000

LITTLE NECK Birchwood SC Home Depot Kroger London Bridge Plaza Lowes Lynnhaven 2600 Lynnhaven Convenience Lynnhaven Shopping Center Princess Anne Plaza West Regatta Bay Shops Sam's Club Plaza

A H H B H A G B C G D

358,635 130,060 45,000 114,584 160,000 13,326 36,900 191,136 77,558 60,000 248,604

LYNNHAVEN ROAD Lynnhaven Crossing Lynnhaven East Lynnhaven Mall Lynnhaven North Lynnshores Shopping Center Lynnway Place Parkway Plaza Wal-Mart

G B I B G G G H

55,550 97,303 1,293,100 176,254 12,692 30,213 44,227 113,112

MIDDLE PORTSMOUTH Afton SC Airline Marketplace Airline Plaza Alexander's Corner Shopping Center Elmhurst Square Gilmerton Square Manor Commerce Center Manor Shops Old Towne Marketplace Rodman SC Super Wal-Mart Triangle SC Victory Crossing Victory West Shopping Center Williams Court

A A A A A G G G A A H A D A B

106,500 69,000 99,549 50,826 66,250 43,236 67,060 14,573 42,000 45,000 200,000 82,430 500,000 167,102 214,739

MILITARY HIGHWAY / JANAF 3455 Azalea Garden Road Best Square Broad Creek SC Bromley SC CostCo Dump/Mega Office Farm Fresh Food Lion #170 Grand Outlet Janaf Lowes Military Crossing Military Triangle Super K-Mart & Shoppes Super Wal-Mart The Gallery @ Military Circle

A B D A H G H H H D H D G B H I

1,024 140,030 205,417 67,790 110,000 115,854 60,000 41,000 35,000 878,381 115,000 192,000 10,061 200,000 224,513 856,542

NEWTOWN Cypress Plaza SC A Cypress Point A Diamond Springs North (Shopping Center) 23,880 Diamond Springs Shoppes H Newpointe SC A Newtown Baker Crossing A Newtown Center G Newtown Convenience Center G Northampton Business Center G Thomas Corner SC G Weblin Square G Wesleyan Commons Shopping Center A

59,012 117,958 A 18,840 92,978 91,687 19,876 19,800 85,000 23,557 31,552 54,204

ODU First Floor Retail Shops at University Village Apartments

39,691

PEMBROKE Aragona SC Best Buy

A H

69,700 45,000

Collins Square Columbus Village East Columbus Village Entertainment Center Dean Plaza (Former HQ) Former Bloom Brothers Giant Square Goodwill Haverty's Haygood SC Haynes Hunter's Mill Shoppes Loehmann's Plaza Northern Super Center Pembroke East Pembroke Mall Pembroke Meadows SC Pembroke Place Pembroke Plaza Roomstore The Town Center of Virginia Beach

A A E D H B H H B H G C G B I A B G H C

123,870 63,000 100,000 140,000 165,000 150,000 34,000 55,000 178,533 228,000 22,827 139,380 36,588 27,200 570,000 81,592 165,000 34,900 50,000 313,590

PRINCESS ANNE ROAD Brenneman Farm SC Courthouse Marketplace Home Depot Kempsville Marketplace Landstown Commons Lynnhaven Square S C Parkway SC Pleasant Valley Marketplace Princess Anne Marketplace Princess One SC Salem Crossing Salem Lakes Marketplace Salem Lakes SC Woodtide SC

A A H A D G A A B A D A A A

228,197 122,000 130,000 71,460 505,766 22,933 64,820 88,107 209,500 84,725 92,316 42,087 37,087 25,500

SMITHFIELD Cypress Run SC Eagle Harbor Shoppes at Eagle Harbor Smithfield Plaza Smithfield Square

G A A B A

25,000 77,400 24,386 89,120 65,244

SUFFOLK Bennetts Creek Crossing Bennetts Creek Food Lion Harbor View Shoppes Holland Plaza Kensington Square Lowes Mattress Discounters Plaza Oak Ridge Suffolk Plaza Suffolk Plaza West Suffolk Shopping Center Suffolk Specialty Shops

A A A A A H A A B A B G

109,812 64,544 18,835 69,345 6,000 150,000 59,892 38,700 176,733 60,000 155,733 15,200

ODU-MarketReview2012_REV1 3/1/12 11:51 AM Page 26

Suffolk Village SC Wal-Mart Super Center

G H

11,875 194,160

Shoppes at Gloucester Wal-Mart Super Center York River Crossing

B H B

82,025 220,000 175,000

PENINSULA COLISEUM CENTRAL Coliseum Corner Coliseum Crossing Coliseum Marketplace Coliseum Specialty Shops Coliseum Square Hampton Towne Centre Hampton Woods Home Depot Peninsula Towncenter Riverdale Plaza Sports Authority Target The Power Plant Todd Center & Todd Lane Shops Wal-Mart Super Center

A B A G G D A H I D H H D B H

DENBIGH Beaconsdale SC A Denbigh Speciality Shops G Denbigh Village Centre B Denbigh Village Shopping Center H Ferguson Center G Former Hills Denbigh H Jefferson Crossing (formerly Denbigh Crossing) 145,000 Kmart H Lee Hall Plaza A Newport Crossing B Richneck Shopping Center A Stoneybrook Shopping Center A Turnberry Crossing A Village Square A Warwick Denbigh SC B

49,267 221,004 86,681 15,026 45,041 376,100 89,092 130,060 994,235 280,133 40,000 122,000 621,150 242,000 193,316

28,000 24,504 334,299 327,322 118,000 86,589 A 115,854 36,000 200,088 63,425 74,340 53,775 40,000 137,925

FOXHILL / BUCKROE / EAST MERCURY Buckroe SC A 76,000 Farm Fresh Phoebus H 39,000 Kmart H 94,500 Langley Square A 120,646 Marketplace @ Nickerson A 70,450 Nickerson Plaza A 83,849 Willow Oaks Village Square S.C. B 197,169 GLOUCESTER Food Lion Hayes Plaza SC Hayes SC Home Depot Lowe's

H A A H H

40,000 52,651 100,000 100,000 125,000

HAMPTON MISCELLANEOUS Kecoughtan SC The Shops at Hampton Harbor NEWMARKET / MAIN 4113 W Mercury Blvd. 4205 W. Mercury Blvd. Brentwood SC Dresden SC Forest Park Square Francisco Village Hampton Plaza Hilton SC Midway Shopping Center Newmarket South Plaza @ Newmarket Warwick Center Warwick Village

A G

H H A G B A B A G D B A A

PATRICK HENRY / OYSTER POINT / KILN CREEK Bayberry Village A Best Buy Building H City Center C Commonweatlh Center G Fairway Plaza G Glendale SC G Grand Furniture H Harris Teeter H Haverty's H Haynes H Hidenwood SC A Jefferson Commons D Jefferson Greene G Jefferson Plaza D Kroger H Lowes H Market Place @ Oyster Point A Newport Marketplace D Newport Square B Office Depot H Oyster Point Plaza A Oyster Point Square A Patrick Henry Mall I Patrick Henry Place A Sam's Club H The Shoppes at Oyster Point G Victory Center @ Kiln Creek A Village Square @ Kiln Creek B Villages of Kiln Creek G Wal-Mart Super Center H

64,327 54,645

49,770 28,080 53,600 35,000 150,000 55,865 173,199 74,000 58,780 368,085 117,377 150,000 75,400

72,883 135,000 230,000 30,279 37,950 30,000 35,000 52,334 45,000 85,000 100,000 400,000 57,430 178,200 55,000 120,000 69,660 450,000 184,126 30,122 73,197 83,089 714,607 17,000 133,880 30,000 78,000 263,000 45,300 201,146

Yoder Plaza SC

337,053

POQUOSON Poquoson SC Wythe Creek Plaza SC

A A

57,458 51,063

WILLIAMSBURG Colony Square Ewell Station Festival Marketplace Gallery Shops Governor's Green SC Home Depot James York Plaza Kingsgate Green Lowes Marketplace Shoppes Marketplace Shopping Center Monticello Marketplace Monticello SC New Town Shops on Main Norge Crossing Olde Towne SC Prime Outlets Quarterpath Crossing Settlers Market at New Town Staples The Marquis (Phase I) The Shops at High Street Village Shops at Kingsmill Wal-Mart SuperCenter Williamsburg Crossing Williamsburg Farm Fresh Williamsburg Marketcenter Williamsburg Outlet Mall Williamsburg Pavillion Shops Williamsburg SC I & II Williamsburg Towne and Cnty WindsorMeade Marketplace Yankee Candle

A A G G A H B B H G A B A C H G F A B H D B G H A A B I G B A D H

66,806 68,048 16,216 18,187 100,000 130,000 137,708 138,348 163,000 32,026 36,000 299,792 82,000 253,000 52,000 30,000 349,927 85,600 37,051 37,400 1,000,000 114,449 82,200 210,000 149,933 79,188 120,920 180,000 50,000 251,000 49,802 174,379 42,000

YORK COUNTY Grafton SC Heritage Square Kiln Creek Center Lakeside 17 Marketplace @ Yorktown Patriots Square Pavilion at Kiln Creek Shady Banks SC Wal-Mart SuperCenter Washington Square Shopping Center York Square Yorkshire Downs

A A A H A A A A H B A G

32,000 73,665 45,700 8,400 73,050 47,231 26,820 56,634 220,000 183,403 48,720 23,900

ODU-MarketReview2012_REV1 3/1/12 11:51 AM Page 27

HAMPTON ROADS MARKET REVIEW

INDUSTRIAL Author

William C. Throne, SIOR, CCIM, ALC

Data Preparation

Stephanie Sanker, SIOR, CCIM

Survey Coordination

Stephanie Sanker, SIOR, CCIM

Reporters

Greenbrier........................................................ Christine Kaempfe Bainbridge/S. Elizabeth River Area .................... Chip Worley Cavalier Industrial Park..................................... Pat Mumey Norfolk Commerce Park/Central Norfolk Area ... Worth Remick Norfolk Industrial Park ...................................... Charles Dickinson West Side/MidTown Norfolk Area ...................... Billy King Lynnhaven........................................................ Brian Baker Airport Industrial Area ...................................... Bobby Beasley Portsmouth...................................................... Sam Walker Suffolk ............................................................. Bill Throne Isle of Wight..................................................... Billy King Copeland/Lower Peninsula ............................... Clay Culbreth Oyster Point/Middle Peninsula Area .................. Bobby Philips Oakland/Upper Peninsula Area ......................... Clay Culbreth Williamsburg Extended Area ............................. Bobby Phillips

Financial Support

Disclosure

2012 INDUSTRIAL

Greenwich/Cleveland Streets Area .................... Bobby Beasley

ODU-MarketReview2012_REV1 3/1/12 11:51 AM Page 28

2012 I N D U S T R I A L

General Overview

his report analyzes the 2011 industrial real estate conditions within the Virginia Beach-Norfolk-Newport News, VA-NC Metropolitan Statistical Area (the MSA) that is also known as Hampton Roads. It provides inventory, vacancy, rent, sale and other data for the MSA. The survey includes properties in the cities of Chesapeake, Hampton, Newport News, Norfolk, Poquoson, Portsmouth, Suffolk, Virginia Beach and Williamsburg, plus the counties of Gloucester, James City, York and Isle of Wight.

METHODOLOGY This survey includes the following types of properties: ■

Office-warehouse, industrial and shop facilities of 5,000 square feet or greater, although some facilities of less than 5,000 may be included.

■

Properties must have less than 80% office space to be included in the ODU survey.

■

Both owner-occupied and leased properties are included. Owner-occupied is defined as property that is 100% occupied by a business that is the same as or is related to the owner of the building.

■

All properties that are available and are listed for sale or lease regardless of whether they are occupied, unless they are strictly available for sale as an investment property, for example, a property that is available for sale and is currently occupied on a short term lease is included.

■

All properties that have commenced construction (foundations installed as a minimum).

The Survey excludes the following types of properties: ■

Land

■

Warehouse or shop facilities on shipyard properties.

■

Warehouse or industrial facilities on federal government property (e.g. military installations).

■

Industrial facilities on government property (e.g. Norfolk International Terminal or Newport News Marine Terminal).

Functional submarket delineations are determined with some regard to city boundaries but boundaries are not determinative. The entire market is divided into 16 submarkets defined by industrial building concentrations, the transportation network, and pertinent physical features. The area map included in this report provides a location for key reference. The E.V. Williams Center for Real Estate and Economic Development (CREED) at Old Dominion University has been tracking the inventory of the Hampton Roads industrial market since 1995. The results of this year’s survey (collected during the 4th quarter of 2011) indicate that the Hampton Roads industrial market currently encompasses 106,691,857 square

2012 Hampton Roads Real Estate Market Review

ODU-MarketReview2012_REV1 3/1/12 11:51 AM Page 29

feet or space located in 2,866 buildings throughout the region. This is a decrease of 2,030,258 square feet or 1.9% from last year’s survey. The decrease is primarily due to the demolition of approximately 1 million square feet on the former Ford plant and increased accuracy of surveyors over previous years. Totals may differ from other market surveys due to the self-imposed limitations established by the ODU CREED methodology described above.

INTRODUCTION The industrial market, while showing no improvement in the market below 50,000 square feet, fared better in 2011 than in 2010 for larger transactions. These major transactions obscured the overall weakness in the general industrial market. Prior to the current recession, the Hampton Roads region began a significant transition toward servicing global markets through the Port of Virginia. Developers purchased land and began construction of new cross-dock and deconsolidation centers. By 2008, over 20 million square feet of industrial buildings were planned. Ultimately, less than half that total was built.

The general industrial market has remained weak. Softness in the construction industry, defense spending, and light manufacturing continues to inhibit recovery. The service sector has also suffered in the current economy. Buildings that used to command a premium, such as small warehouse properties with yard space, have taken longer to lease, with diminished rental rates in comparison to past years.

VACANCIES AND ABSORPTION In 2011, the Hampton Roads region saw vacancy rates edge downward. It appears vacancy rates peaked in 2010 at 12.48% with a reduction in 2011 to 12.12%. The Southside saw vacancy declines in 7 of the 12 submarkets, finishing the 2011 year 1.1% lower than in 2010. Markets that saw improvements were ‘core’ markets, such as Norfolk Industrial Park (4.2% drop in vacancy) and Airport Industrial Park (6.12% drop). Outlying markets, further from the center of population in Hampton Roads, continue to work through vacant space. Southside submarkets that improved included two of Chesapeake’s three submarkets: Greenbrier Area and the Bainbridge/Elizabeth River area. Both saw absorption of over 200,000 square feet by multiple tenants and multiple transactions. Vacancy rates for both finished the year around 8%. These are indicators of a return to health in these submarkets.

2012 INDUSTRIAL

In 2011, the market saw absorption of much newly constructed Class A product. As a result, there is very little remaining high cube warehousing space. Over the past few years, building design has continued to evolve. Companies entering the market are demanding higher clear heights, larger truck courts, concrete construction, ESFR fire Developers holding entitled properties, with site suppression and sustainable facilities. As plan approvals and financing in place, should be in a result, older generation distribution the best position to capture significant new tenants. space will see greater vacancy and declining rental rates. Companies looking to relocate or expand in the market will have to look west for build-to-suit opportunities. Developers holding entitled properties, with site plan approvals and financing in place, should be in the best position to capture significant new tenants. Ironically, land may again become a desired commodity, with developers looking to position themselves as ‘build-ready’ for these companies. Waverton Commerce Park, CenterPoint Properties, McDonald Development, the Regional Companies, Liberty Properties, ProLogis, Devon USA and others all have significant entitled land holdings in Suffolk.

ODU-MarketReview2012_REV1 3/1/12 11:51 AM Page 30

2012 I N D U S T R I A L

Suffolk also recorded a reduction in vacancy of 4.19%. Distribution and supply chain related companies accounted for the bulk of the leasing, with positive absorption of over 475,000 square feet in existing space. Suffolk also saw renewed activity in development, with CenterPoint Properties constructing two new build-to-suites totaling almost 700,000 square feet. Markets that saw significant increases in vacancy rate include: Lynnhaven

+5.09%

Greenwich/Cleveland Street

+3.2%

Portsmouth

+4.14%

Isle of Wight

+7.05%

The Peninsula submarkets were consistent in 2011 with virtually no change in the total vacancy rate. There were a number of internal changes of note, including the demolition of the Hiden warehouses, a group of WWII vintage buildings owned by the Huntington-Ingalls shipyard. These buildings totaled approximately 900,000 square feet, and reduced the size of the Copeland/Lower Peninsula area Submarket substantially. Copeland has historically had to carry Camp Morrison as a vacancy. At approximately 600,000 square feet, this has contributed, perhaps unfairly, to the total vacancy of 17.73%. Also in Copeland, the former Speigel warehouse at 5201 City Line Road came on the market in 2011, adding 352,000 square feet to vacancy, bringing the total to almost 2 million square feet empty. On the other side of the ledger, Oyster Point/Middle Peninsula and the Williamsburg Extended Submarkets both held to vacancy rates of less than 7%. These would be good rates in a healthy economy.

Submarket Totals Submarket

City

Bldgs Surveyed

Reporter

Total Sq Ft Vacancy Sq Ft

Greenbrier Area

Chesapeake

283

Kaempfe

8,593,530

718,667

8.36%

Bainbridge/S. Elizabeth River Area

Chesapeake

143

Worley

5,829,489

447,921

7.68%

Vacancy %

Cavalier Industrial Park Area

Chesapeake

189

Mumey

6,138,520

884,537

14.41%

Norfolk Commerce Park/ Central Norfolk Area

Norfolk

143

Remick

5,492,451

622,279

11.33%

Norfolk Industrial Park Area

Norfolk

352

Dickinson

10,408,152

788,433

7.58%

West Side/Midtown Norfolk Area

Norfolk

277

King

6,780,759

546,271

8.06%

Lynnhaven Area

Virginia Beach

283

Baker

8,618,677

1,648,242

19.12%

Greenwich/Cleveland Streets Area

Virginia Beach

125

Beasley

3,057,300

300,717

9.84%

Airport Industrial Park Area

Virginia Beach

Beasley

3,641,362

445,215

12.23%

City of Portsmouth

Portsmouth

158

Walker

4,228,501

478,849

11.32%

City of Suffolk

Suffolk

126

Throne

11,637,163

1,638,902

14.08%

Isle of Wight

King

Southside Totals

2,185

3,807,023

980,650

25.76%

78,232,927

9,500,683

12.14%

11,218,810

1,989,149

17.73%

Copeland/Lower Peninsula Area

Peninsula

346

Culbreth

Oyster Point/Middle Peninsula Area

Peninsula

129

Phillips

4,395,259

284,829

6.48%

Oakland/Upper Peninsula Area

Peninsula

116

Culbreth

4,829,759

669,549

13.86%

Williamsburg Extended Area

Peninsula

Phillips

Peninsula Totals

653

Totals

2,838

2012 Hampton Roads Real Estate Market Review

Sanker

9,128,673

625,487

6.85%

29,572,501

3,569,014

12.07%

107,805,428

13,069,697

12.12%

ODU-MarketReview2012_REV1 3/1/12 11:51 AM Page 31

BUILDING SALES Sales activity grew fairly dramatically in 2011. 36 buildings sold, totaling 2,106,555 square feet, valued at almost $78 million. This is a significant jump over 2010 totals of 1,143,117 square feet sold valued at over $36 million.

$100,000,000

1,500,000 1,000,000

$50,000,000

500,000 $ 2008

2009

Size

2010

40,000 20,000 2009

$ 2008

2009

2010

2011

Price

Number of Industrial Properties Sold: Hampton Roads $100.00 $90.00 $80.00 $70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00

80 60 40 20 0 2007

Avg. Price

2008 # of Deals

2009

2010

2011

Avg. Price per Square Foot

Median Price per Square Foot

A few analytical notes: ■

Numbers: Generally trending upward across the board.

■

Average Size: Larger building sales continue to skew the average results. • The former Ford building at 2424 Springfield Avenue in Norfolk of 664,000 square feet sold to KTN. • MDV Nash Finch purchased their leased building of 601,640 square feet at 3616 Virginia Beach Boulevard in Norfolk. • Iron Mountain purchased 112,000 square feet at 4555 Progress Road at foreclosure, also in Norfolk. They were leasing the property. • 272 Benton Road in Suffolk sold to the City of Suffolk. 83,413 square feet on 17 acres.

■

A significant number of smaller building sales were completed in 2011. While nowhere near peak transaction volumes in 2008 and 2009, we are seeing a broad improvement market wide.

2012 INDUSTRIAL

Avg. Size

2010

$3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0

Average Price Sold

Square Feet

60,000

2008

$500,000

Size

80,000

2007

$1,000,000

Price

Average of Industrial Properties Sold: Hampton Roads

$1,500,000

2007

2011

# of Deals

2007

14,000 13,500 13,000 12,500 12,000 11,500 11,000 10,500

Median Price Sold

$150,000,000

2,000,000

Median Square Feet

Total Square Feet

2,500,000

Median Industrial Properties Sold: Hampton Roads Total Dollar Amount

Industrial Properties Sold: Hampton Roads

ODU-MarketReview2012_REV1 3/1/12 11:51 AM Page 32

2012 I N D U S T R I A L

OTHER REPRESENTATIVE BUILDING SALES 3527 Business Center Drive, Chesapeake February 2011 7,434 square feet Fenced yard area.

$815,000

$109.63 per square foot

$1,272,000

$42.40 per square foot

$747,000

$64.34 per square foot

$1,900,000

$22.78 per square foot

805 Live Oak Drive, Chesapeake July, 2011 22,645 square feet 46% office build-out

$1,650,000

$72.86 per square foot

121 Old Aberdeen Road, Hampton July, 2011 5,440 square feet Smaller building

$435,000

$79.96 per square foot

2861 Crusader Circle, Virginia Beach December, 2011 23,000 square feet Owner financing

$1,650,000

$71.74 per square foot

2010 Amedeo Court, Suffolk August, 2011 30,000 square feet New, tilt-concrete, no improvements, bank REO property. 1164 Kingwood Avenue, Norfolk April, 2011 11,611 square feet Older facility undergoing retrofit 230 Enterprise Drive, Newport News September, 2011 83,413 square feet

LEASING Lease rates saw modest increases in 2011. CBRE Hampton Roads reported in their 4th Quarter Hampton Roads Industrial Report that â&#x20AC;&#x153;Current average leasing rates rose from $4.41 per square foot triple net to $4.62 per square foot triple net.â&#x20AC;? It is expected that rates will continue to increase in 2012 as absorption continues to remove quality product from the market. The small space market and the large block market are expected to experience increasing rents. Both can expect to experience shortages of available space. Older generation distribution space will continue to have high vacancy rates, particularly those properties in the 50,000 to 100,000 square foot range. Functionally obsolete mid-size properties between 10,00040,000 square feet in older environs will also face challenges filling their space. New speculative space should be received well in the market.

2012 Hampton Roads Real Estate Market Review

ODU-MarketReview2012_REV1 3/1/12 11:51 AM Page 33

REPRESENTATIVE INDUSTRIAL LEASING 160 Wellman Street, Norfolk

4,153 square feet General industrial

$5.80 NNN psf/yr

4021 Seaboard Court, Portsmouth

6,500 square feet 1 acre fenced and stabilized yard

$9.79 NNN psf/yr

5621 Raby Road, Norfolk

8,000 square feet General industrial

$6.25 NNN psf/yr

1417 Miller Store Road, VB

8,509 square feet General industrial

$5.94 NNN psf/yr

1347 Diamond Springs Road, VB

23,033 square feet Warehouse

$5.30 NNN psf/yr

981 Scott Street, Norfolk

24,657 square feet Custom retrofit, crane service added

$7.95 NNN psf/yr

2125 Smith Avenue, Chesapeake

37,623 square feet Warehouse

$5.00 NNN psf/yr

713 Fenway Avenue, Chesapeake

38,000 square feet Warehouse

$3.60 NNN psf/yr

5601 City Line Road, NN

42,000 square feet Warehouse

$3.58 NNN psf/yr

550 Woodlake Drive, Chesapeake

67,615 square feet High quality manufacturing space

$5.75 NNN psf/yr

3700 Village Avenue, Norfolk

110,000 square feet Warehouse

$3.25 NNN psf/yr

RENTS FOR AVAILABLE SPACES BY SIZE RANGE 2011 $5.00-$7.00

5,000 to 20,000 square feet

$4.50-$6.00

20,000-40,000 square feet

$3.25-$5.25

40,000-60,000 square feet

$3.00-$4.50

>60,000 square feet

$1.00-$4.00

MAJOR MARKET ACTIVITY Aside from normal market transactions, there have been a number of significant industrial market developments worthy of note. ■

Former Ford Plant. This project traded first to Jacoby Development in total for $14.25 million, who in turn sold the main manufacturing building to KTN for $10.4 million. Jacoby retained 46 acres of land now on the market for sale.

■

Ace Hardware. CenterPoint landed this build-to-suit of 336,960 square feet at their project in Suffolk.

■

US Navy Exchange. CenterPoint also secured this build-to-suit requirement of 350,000 square feet in Suffolk.

■

CalCartage. McDonald Development landed this cross-dock requirement of 385,000 square feet at their Virginia Commerce Center off Kenyon Road in Suffolk, Virginia.

2012 INDUSTRIAL

<5,000 square feet

ODU-MarketReview2012_REV1 3/1/12 11:51 AM Page 34

2012 I N D U S T R I A L

■

DANA. Another build-to-suit project landed in Northern Suffolk at Liberty Properties Bridgeway Commerce Center: 126,000 square feet.

■

Regional Commerce Center, the Regional Company. This building of 400,000 square feet in Suffolk off Rt. 460 scored no less than four tenants for their new building: Art FX, 80,000 square feet; Caspari, 65,000 square feet; Massimo Zanetti, 67,500 square feet, and Best Brakes, 38,000 square feet.

■

Green Mountain Coffee. Johnson Development announced the pending sale of their 330,000 square foot warehouse building along with additional acreage for expansion.

■

IMS Gear. Miller Group in Virginia Beach will be providing a new facility for IMS Gear in the Lynnhaven area. Total square footage: 112,000 square feet.

■

Enviva LP purchased and opened their new 60 acre deep water terminal on the Elizabeth River to export over 3 million tons of wood chips and pellets per year to Europe.

A few thoughts on these major transactions: First, the leasing and sales may be a precursor to activity in the market related to the Panama Canal expansion, with expected completion in 2014. Second, we may be seeing the leading edge of an economic recovery, led by major corporations anticipating the upturn and need for space. Third, build-to-suits dominate the larger transactions. This is a common occurrence nationwide. The absence of speculative building, coupled with a lack of remaining large facilities, has forced large users to look to developers with entitled land to construct facilities to their specifications. Look for 2012 to continue this trend as long as large entitled sites are still available. Note the following comments from around the country: Raleigh, North Carolina “Vacancy rates continue to demonstrate disparate performance between Class A assets with clear heights above 24’ and ESFR sprinkler systems versus older facilities without these features. While the overall market vacancy continues to hover around 20%, vacancy rates within Class A product continue to be relatively tight at 7% market wide.” — Christopher Norvell, Managing Director Cassidy Turley Southeast Real Estate Business, January 2012

Tampa, Florida “We are beginning to see a shortage of Class A warehouse space for users 100,000 square feet or larger. With the combined Tampa, Pinellas and Lakeland markets ending 2011 at 6.7% vacancy, you would think developers would start new construction.” — Bruce K. Erhardt, Executive Director Cushman and Wakefield of Florida Tampa Bay Land Market Overview 4Q 2011

Nationwide “Industrial markets in the United States have also begun the recovery process. Integra Realty Resources research indicates that the underlying fundamentals in the industrial sector have improved only slightly over the course of the last three years, as a glut of speculative space built throughout the country prior to the crash is only now beginning to be absorbed. With this space beginning to be absorbed and little speculative building adding supply to the market in recent years, the sector could be poised for the strongest rebound in coming years as demand for space recovers.” — Integra Realty Resources

Real Estate Value Trends Viewpoint 2012

2012 Hampton Roads Real Estate Market Review

ODU-MarketReview2012_REV1 3/1/12 11:51 AM Page 35

REGIONAL INFLUENCES ON THE LOCAL MARKET Beyond real estate transactions, the following events occurred in 2011 and will influence the Hampton Roads industrial market for years to come. ■

The Port of Virginia: • With the installation of a new Board of Directors, the Port is expected to move into 2012 with a resolve to build on the modest improvements shown in 2011. • TEU volumes (import and export) at the Port of Virginia were up in 2011 by 1.2% to 1.9 million TEU’s. • The Federal Government has agreed to a FY12 budget that includes $26.9 million for the expansion at Craney Island. • Intermodal transport is expected to be a major innovation in moving containers off the APM terminal to Suffolk for both the CSX and NS rail lines. In 2011, rail container traffic increased by 26%. • The Virginia Port Authority signed a five year lease to operate the Port of Richmond, providing barge traffic.

■

Industrial Properties: • Development of the remaining large waterfront properties General manufacturing. Domestic and intershould occur in 2012 with growing demand for break bulk national companies consider Hampton Roads offloading and exporting. Recent examples include agriculand Commonwealth of Virginia a good place tural product exported to China, stone imported for road to do business. Labor, right-to-work state, cost and tunnel construction in Hampton Roads, and manufacof living and quality of life consistently rank turing and maintenance for offshore wind facilities. high when compared to other areas. • Exports of specialty products are also expected to increase demand for heavy industrial real estate. Wood pellet exports, coal export, steel and metal recycling. • General manufacturing. Domestic and international companies consider Hampton Roads and Commonwealth of Virginia a good place to do business. Labor, right-to-work state, cost of living and quality of life consistently rank high when compared to other areas.

Where is the market going in 2012? Will the Panama Canal really stimulate the local industrial warehousing market? Will we continue to see major announcements for Hampton Roads and the Commonwealth of Virginia? First, a look at the national industrial market for a little perspective: The national economy is beginning to show some life, as related by Mr. Ken McCarthy, Senior Economist, Research with Cushman and Wakefield in New York: “The US Labor Department reported that the economy added 243,000 payroll jobs in January 2012, the largest increase in employment since last April. The strongest job growth was in the professional business services sector…Large increases were also reported in the manufacturing sector (50,000+ jobs). For the real estate industry there is nothing more important than employment. More jobs represent demand for space. So a return to healthy job growth is the most positive sign in the last six months. Rising spending will also spur higher demand for manufacturing, warehouse and other industrial spaces. We are cautiously optimistic on 2012…” A few more thoughts on the national market from Tina Arambulo of Cushman and Wakefield, Director, Southern California & U.S. Industrial Research: ■

More than 306.3 million square feet of new leases were completed during the year, up 14% from 268.8 square feet signed in 2010, and the highest level of activity since 2007. Of the 33 U.S. industrial markets tracked by

2012 INDUSTRIAL

CONCLUSION: CUSHMAN AND WAKEFIELD, BAY ENVIRONMENTAL, AND AMAZON.COM

ODU-MarketReview2012_REV1 3/1/12 11:51 AM Page 36

2012 I N D U S T R I A L

Cushman & Wakefield, 22 reported an increase in new activity. Markets with the largest year-over-year gain in leasing included: Central & Northern New Jersey (+ 83.2%), Phoenix (+ 76.1%), Miami (+ 44.2%) and Dallas/Fort Worth (+ 32.4%). ■

For leases over 100,000 square feet, there were 538 deals signed during the year, an increase of 14.0% over 2010 and 28.1% over 2009. This year’s total is also more in-line with levels seen prior to the recession. With bigbox users dominating leasing activity in 2011, the large distribution hub markets have captured a significant share of the activity. The Inland Empire market in Southern California captured 37.8% of new leases signed over 500,000 square feet in the U.S.

■

With double-digit growth in on-line retail sales, E-commerce firms like Amazon.com have emerged as an important part of U.S. industrial demand. During the year, Amazon.com signed a 1.2-msf lease for a fulfillment U.S. Leasing Activity over 100,000 square feet center in Phoenix and two facilities totaling 1.8 600 million square feet in Indianapolis. Demand for big-box warehouse and distribution centers accel550 erated significantly in 2011 and we expect to see 500 continuing demand for Class A big-box space in key logistics hubs such as Inland Empire, New 450 Jersey, Chicago, and Dallas/Fort Worth. 400

It should be reasonable to expect the Hampton Roads market to benefit from a national upturn in the economy and the industrial market in general. The recent announcement concerning Amazon.com locating two new fulfillment centers in Virginia should help the confidence of Hampton Roads looking into next year. Amazon chose Virginia over other states, and most of the positive business features of Virginia as a business environment apply to our region.

350 300 2007

2008

2009

2010

2011

Source: C&W Research Services. NOTE: Only markets tracked by Cushman & Wakefield offices are included in this analysis which includes new leases, expansions and subleases not counting renewals.

On the other end of the spectrum, Bay Environmental is a local Chesapeake firm providing environmental surveys of commercial buildings and land in Hampton Roads. Phase I environmental inspections are commonly done prior to the purchase and/or financing of real estate. Bay Environmental reported the following summary of Phase I studies they have performed by year, giving us a ‘street level’ view of the market.

Year

Bay Environmental number of Phase I studies performed

2006 2007 2008 2009 2010 2011

120 120 60 30 40 60

Finally, the Port of Virginia with plenty of TEU capacity, positions the Hampton Roads region for a good 2012. Look for the decreasing vacancy trend to continue, rental rates in most sectors to firm up, and more build-to-suit construction.

2012 Hampton Roads Real Estate Market Review

ODU-MarketReview2012_REV1 3/1/12 11:51 AM Page 37

2012 INDUSTRIAL

Industrial Submarkets Southside Airport Industrial Park Bainbridge Cavalier Central Norfolk Cleveland Greenbrier

Peninsula Lynnhaven Norfolk Industrial Park Portsmouth Suffolk West Norfolk

Copeland Oakland Oyster Point Williamsburg Extended

ODU-MarketReview2012_REV1 3/1/12 11:51 AM Page 38

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ODU-MarketReview2012_REV1 3/1/12 11:31 AM Page 39

HAMPTON ROADS MARKET REVIEW

OFFICE Casey J. Oâ&#x20AC;&#x2122;Hearn Associate Vice President Jones Lang LaSalle

Data Analysis

Geoff Thomas Research & Financial Analyst Jones Lang LaSalle

Financial Support

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 IPAC and Council Advisory Boards.

Disclosure

2012 OFFICE

Author

ODU-MarketReview2012_REV1 3/1/12 11:31 AM Page 40

2012 O F F I C E

General Overview

he Hampton Roads office market ended 2011 with positive absorption year over year

but overall, the statistical performance reflected another sluggish year end with a luke warm outlook on potential growth through 2012. Still representing a tenant-oriented marketplace driven by economic incentives and stagnant leasing activity, the Hampton Roads office market is forecasted to have another year of sluggish growth with the 2012 elections on the horizon affecting the local core defense industry.

The 4th quarter 2011 overall vacancy rate for Hampton Roads decreased to 13.5% from the 4th quarter 2010 rate of 14.6%. This positive absorption can be credited to no new product being delivered to the Hampton Roads office market in 2011. Hampton Roads did outperform the national office market vacancy rate which finished 2011 down twenty basis points from the end of 2010 at 16.0% direct vacancy. However, the total vacancy for the national office market finished 2011 at 17.6% reflecting a significant amount of sublease space throughout the market.

METHODOLOGY The information in this report relies on market reports from the RCAnalytics, REIS, the CoStar Group Inc., and individual interviews of local office brokers. The methodology or parameters of building size included in the report for all of Hampton Roads were 20,000 SF and higher for the largest completed lease transactions in 2011; 5,000 SF and higher were included for the top completed office building sales transactions in 2011; approximately five acres and higher were included for the top completed office land sales transactions in 2011; and 20,000 SF and higher were included for top new construction deliveries in 2011.

2012 Hampton Roads Real Estate Market Review

ODU-MarketReview2012_REV1 3/1/12 11:31 AM Page 41

STILL KICKING THE CAN DOWN HAMPTON ROADS Economy The Hampton Roads economy has taken a discernible blow in the past two quarters. Major changes in defense spending and private industry out of state relocations have created economic tension for the area. This migration will most likely be reflected in the first quarters of 2012. Contrary to recent events, unemployment is still on a downward trend. Preliminary data suggests the November unemployment rate fell 30 basis points from October to 6.7 percent. Gross metro product has actually climbed by 90 basis points, signaling no slow down in Hampton Roads' output. Considerable achievements have been made to improve the areas ports and alleviate traffic congestion by expanding the Midtown tunnel. Gaps left by the decommissioned USJFCOM have been partially filled by the expansion of Navy Cyber Forces. However, reflecting on recovery progress of other Virginia cities, Hampton Roads has seen the smallest percentage increase in GDP, increases in credit delinquencies, and still heavy dependence on defense spending.

Market Conditions

Supply Pricing

Demand

Total vacancy rate 13.9% Although major steps have Under construction (% preleased) 262,289sf been taken to improve the local economy, Hampton Leasing activity 12 mo. % change 10.2% Roads relies on two indusYTD net absorption 44,306 sf tries: defense and ship12-month overall rent % change -4.1% ping. Past events have proven that one pen stroke Class A overall asking rent $21.27 psf can severely impair the Class B overall asking rent $16.48 psf areaâ&#x20AC;&#x2122;s economic vitality and Hampton Roads is not out of the woods yet. Current plans to relocate one of the areaâ&#x20AC;&#x2122;s three carrier divisions to Florida has the possibility of removing 6,000 jobs and $425 million in annual revenue. Green Mountain Coffee recently opened a facility in Isle of Wright, but rumors are circulating that they will be losing their patent for the K-Cup instant-brew packaging in 2013, which may severely affect their revenue if other coffee companies can now compete with Green Mountain lines.

2012 OFFICE

Endogenous shocks that occurred in the end of 2011 will likely be felt into 2012, decelerating forward progress. Tour activity has been extremely active with a major increase in defense contractors shopping for space. The expansion of Navy Cyber Forces has caught the eye of technology firms-one industry which Hampton Roads lacks. Although the activity looks promising, the area has just witnessed a major outflow of tenants. Current tenants in the mar12-month ket are taking advantage forecast Key Market Indicators of vacancies and consolidating offices, others are Supply 30,934,900 sf looking to relocate to more Direct vacancy rate 13.5 % desirable properties.

ODU-MarketReview2012_REV1 3/1/12 11:31 AM Page 42

2012 O F F I C E

Square Feet

Net New Supply, Net Absorption and Total Vacancy 1,200,000

20%

800,000

15%

400,000

10%

-400,00

0% 2007

2008

2009

Net New Supply

2010

Net Absorption

2011 Total Vacancy

Leasing Activity vs. Sublease Vacant Space 2,000,000

Outlook

Square Feet

1,500,000

1,000,000

500,000

0 2007

2008

2009

Leasing Activity

2010

2011

Conditions in Hampton Roads are not going to improve significantly in 2012. Most likely, commercial real estate markets need to restabilize after the last wave of negative absorption. Continued reliance on defense spending will most likely keep growth on standby as the market holds its breath for the 2012 elections.

Sublease Space

Sublease space includes vacant space

Tenant Perspective Tenants are still controlling the market in Hampton Roads with vacancy rates driving concession packages. Forward looking tenants should lock-in longer terms to take advantage of lower rental rates. Longer terms will ultimately provide stronger concessions packages which currently run $2 to $3 dollars per square foot per lease year for a new deal. Hampton Roads is currently one of the least expensive areas for businesses in the State of Virginia. The combination of state and local government support and tenant concessions provides favorable leasing conditions for new tenants. Speculative development is all but nonexistent and developers, due to financing constraints, are only able to build when a credit tenant has signed a long term lease. New construction should remain sluggish as the market absorbs existing high vacancies and does not warrant additional supply.

2012 Hampton Roads Real Estate Market Review

ODU-MarketReview2012_REV1 3/1/12 11:31 AM Page 43

Landlord Perspective The objective of landlords is to hold onto warm bodies. A shallower tenant pool should ultimately continue the trend of effective lower rental rates, slightly into 2012. Concession packages will not be as aggressive as 2011, but should still remain competitive. Industry diversification will be the most effective way to stabilize the office market. Property owners must encourage local officials to provide better incentives to attract new companies to the market.

Class A Overall Asking Rents

Class A Tenant Improvement Allowance

$25

$20

$ Square Feet

$20 $15 $10

$10

$5 $0

$0 2009

Peninsula

2010

2011

4 2

13 10 5

7 2009

2010 Southside

2011

25,000 50,000 sf

5 1

0 1

Peninsula

2011

Southside

> 200,000 sf

Number of Blocks

Peninsula

2010

2012 OFFICE

2008

2009

Class A Blocks of Vacant Contiguous Space

2007

2008 Peninsula

Class A Free Rent

Months

2007

Southside

100,000 200,000 sf

2008

50,000 100,000 sf

2007

ODU-MarketReview2012_REV1 3/1/12 11:31 AM Page 44

2012 O F F I C E

Submarket Leverage â&#x20AC;&#x201C; Market History and Forecast Submarket

2009

2010

2011

2012

2013

Property Clock â&#x20AC;&#x201C; Current Market Conditions

Newport News Hampton Williamsburg

Landlord Leverage

Norfolk Virginia Beach Portsmouth

Peaking Market

Falling Market

Rising Market

Bottoming Market

Tenant Leverage

Yorktown

Peninsula

Chesapeake

Southside

Suffolk Landlord-favorable conditions

Balanced conditions

Tenant-favorable conditions

Completed Lease Transactions Tenant Navy Cyber Forces US Coast Guard Hewlett-Packard Development Company, L.P. AMSEC SSAI Norfolk Department of Human Services General Dynamics Information Technology, Inc Sentara AECOM SAIC SDV Properties LLC Amerigroup Strayer University Crescent Recovery CDYNE Corporation Commonwealth of VA, Dept. of General Services H&A Architects & Engineers Bon Secours CACI Hunton Williams Harry Jernigan CPA, PC PAPCO, INC

Address 116 Lake View Parkway 300 Main Street 1434 Crossways Boulevard 550 Wood Lake Circle 208 Golden Court 741 Monticello Ave 700 Independence Parkway 1441 Crossways Boulevard 741 Monticello Avenue 2877 Guardian Lane 133 Waller Mill Rd 1301 Executive Boulevard 675 Old Oyster Point Road 510 Independence Boulevard 505 Independence Boulevard 2600 Washington Ave 222-236 Central Park Ave 1040 University Boulevard 999 Waterside Drive World Trade Center 5101 Cleveland St 5101 Cleveland St

Submarket Suffolk Norfolk Chesapeake Chesapeake Virginia Beach Norfolk Chesapeake Chesapeake Norfolk Virginia Beach Williamsburg Chesapeake Newport News Chesapeake Chesapeake Newport News Virginia Beach Portsmouth Norfolk Norfolk Virginia Beach Virginia Beach

SF 125,000 121,643 112,297 67,615 63,029 60,000 59,509 54,476 35,000 32,000 28,764 25,500 25,000 23,424 23,328 23,129 23,000 13,729 11,600 10,000 9,481 6,050

Type Expansion Renewal Renewal Renewal Renwal Renewal Renewal Renewal Expansion New New New New Renewal New Renewal New New Expansion New New New

Hampton Roads methodology: Inventory includes all Class A, B, & C office properties > 20,000 square feet, excluding all condo, medical and government owned buildings, and owner occupied buildings

2012 Hampton Roads Real Estate Market Review

ODU-MarketReview2012_REV1 3/1/12 11:31 AM Page 45

Top Completed Office Building Sales/Transactions Address

Submarket

Buyer / Seller

$ PSF

850-860 Greenbrier Circle

Chesapeake

First Potomac Realty / Parkway Properties

173,456

$115

5701 Cleveland St

Virginia Beach

Olympia Development Corp / The Custom Shop 55th Street Corp.

133,000

$95

780 Lynnhaven Pkwy

Virginia Beach

Continental Capital Management / Cox Communications

77,622

$109

2697 International Pkwy

Virginia Beach

CPC Realty / Rosemont Realty

64,186

$84

805 Live Oak Dr

Chesapeake

WT Holdings, LLC / Roland L Jr & Laura C Ore

22,600

$72

549 E Brambleton Ave

Norfolk

JMCG Norfolk LLC / Regions Bank

16,334

$38

3701 Pacific Ave

Virginia Beach

3701 Pacific Avenue Assocs, LLC / Brasco Bay Corp

9,827

$153

1104 Madison Plz

Chesapeake

Tidewater Emergency Medical / Towne Station LLC

7,486

$97

3527 Business Center Dr

Chesapeake

WB & E Holdings LLC / Heard Pumping LLC

7,080

$115

Source: RCAnalytics, REIS, CoStar Group, Inc.

Top Completed Office Land Sales/Transactions Address

Submarket

Buyer / Seller

Acres

Civic Center parking Lot (Water St)

Portsmouth

Oxford Properties LLC / City of Portsmouth

$ PSF $900,000/$20

Source: RCAnalytics, REIS, CoStar Group, Inc.

Top Select New Construction Deliveries (2011) Submarket

Buyer / Seller

5424 Discovery Park Blvd

Williamsburg

AH Williamsburg Medical, LLC

40,000

6005 Harbour View Blvd

Suffolk

Towne Bank

39,399

99 Old Oyster Point Rd

Newport News

Divaris Real Estate Inc

33,000

41 Old Oyster Point Rd

Newport News

Divaris Real Estate Inc

33,000

Source: RCAnalytics, REIS, CoStar Group, Inc.

Hampton Roads methodology: Inventory includes all Class A, B, & C office properties > 20,000 square feet, excluding all condo, medical and government owned buildings, and owner occupied buildings

2012 OFFICE

Address

ODU-MarketReview2012_REV1 3/1/12 11:31 AM Page 46

2012 O F F I C E

Class A Office Market Statistics Hampton Roads (Year-end 2011) Market

Existing Inventory # Blds

Peninsula Southside Totals

Vacancy

YTD net Absorption

Total r.b.a.

Direct SF

Total SF

Vac %

32 2,773,770 96 9,483,513 128 12,161,052

311,653 1,305,149 1,616,802

345,040 1,331,456 1,676,496

12.5% 15.0% 14.4%

9,016 77,765 86,781

YTD Under Deliveries Const SF 0 60,000 39,399 61,980 39,399 121,980

Quoted Rates $19.80 $21.71 $21.27

Class B Office Market Statistics Hampton Roads (Year-end 2011) Market

Existing Inventory # Blds

Peninsula Southside Totals

Vacancy

YTD net Absorption

Total r.b.a.

Direct SF

Total SF

Vac %

101 4,981,084 240 11,398,605 341 16,379,689

654,909 1,747,469 2,402,378

671,587 1,781,035 2,452,622

13.5% 16.2% 14.9%

86,888 (149,262) (62,734)

YTD Under Deliveries Const SF 106,000 27,476 133,476

0 92,300 92,300

Quoted Rates $15.79 $16.71 $16.48

Class C Office Market Statistics Hampton Roads (Year-end 2011) Market

Existing Inventory

Vacancy

YTD net Absorption

# Blds

Total r.b.a.

Direct SF

Total SF

Vac %

20 44 64

769,276 1,528,652 2,297,928

70,442 99,621 170,063

9.2% 6.9% 7.6%

Peninsula Southside Totals

YTD Under Deliveries Const SF

30,413 (10,514) 19,899

0 0 0

Quoted Rates $9.95 $13.01 $10.36

Total Office Market Statistics Hampton Roads (Year-end 2011) Market

Existing Inventory # Blds

Peninsula Southside Totals

Vacancy

YTD net Absorption

Total r.b.a.

Direct SF

Total SF

Vac %

153 8,524,130 380 22,410,770 533 30,934,900

1,037,004 4,189,243 5,618,212

1,087,069 3,212,112 4,299,181

12.8% 15.0% 14.4%

126,317 (82,011) 44,306

YTD Under Deliveries Const SF 106,000 108,000 66,875 154,280 239,750 262,289

Quoted Rates $16.70 $19.10 $18.51

Class A - Significant Office Market Statistics Hampton Roads (Year-end 2011) Market

Downtown Norfolk Harbour View Oyster Point VA Beach CBD Totals

Existing Inventory

Vacancy

# Blds

Total r.b.a.

Direct SF

Total SF

10 9 15 12 46

2,309,331 695,149 1,095,202 1,238,264 5,337,946

314,643 154,486 128,327 73,194 670,650

319,586 156,864 138,028 73,194 687,672

YTD net Absorption

YTD Under Deliveries Const SF

Quoted Rates

Vac % 15.3% 22.6% 12.6% 5.9% 13.5%

(16,049) 26,188 30,218 40,893 81,250

0 0 0 0 0

25.9% 0.3% 16.5% 15.8% 18.8%

Source: CoStar Group, Inc.

2012 Hampton Roads Real Estate Market Review

ODU-MarketReview2012_REV1 3/1/12 11:31 AM Page 47

Class B - Significant Office Market Statistics Hampton Roads (Year-end 2011) Market

Downtown Norfolk Harbour View Oyster Point VA Beach CBD Totals

Existing Inventory

Vacancy

# Blds

Total r.b.a.

Direct SF

Total SF

28 9 42 18 97

2,185,124 488,862 2,000,458 708,701 5,383,145

565,763 1,441 313,181 92,888 973,273

566,963 1,441 329,859 96,929 995,192

YTD net Absorption

YTD Under Deliveries Const SF

Quoted Rates

Vac % 25.9% 0.3% 16.5% 15.8% 18.8%

(51,135) 12,959 28,374 (63,554) (73,356)

0 66,000 0 0 66,000

0 0 0 0 0

$16.71 $26.00 $15.87 $17.22 $16.55

Source: CoStar Group, Inc.

Class C - Significant Office Market Statistics Hampton Roads (Year-end 2011) Market

Downtown Norfolk Harbour View Oyster Point VA Beach CBD Totals

Existing Inventory

Vacancy

# Blds

Total r.b.a.

Direct SF

Total SF

6 0 6 0 12

236,199 0 171,673 0 407,872

31,000 0 5,932 0 36,932

YTD net Absorption

YTD Under Deliveries Const SF

Quoted Rates

Vac % 13.1% 0.0% 3.5% 0.0% 9.1%

0 0 2,672 0 2,672

0 0 0 0 0

NA NA $14.75 N/A $14.75

Source: CoStar Group, Inc.

Significant Office Market Statistics Hampton Roads (Year-end 2011) Market

Existing Inventory # Blds

Total r.b.a.

44 4,730,654 18 1,184,011 63 3,267,333 30 1,946,965 155 11,128,963

Direct SF

Total SF

911,406 155,927 447,440 166,082 1,680,855

917,549 158,305 473,819 170,123 1,719,796

YTD net Absorption

YTD Under Deliveries Const SF

Vac % 20.1% 13.4% 14.5% 9.5% 15.9%

(67,184) 39,137 61,264 (22,661) 10,566

0 0 66,000 0 66,000

0 0 0 0 0

Source: CoStar Group, Inc.

REGIONAL OFFICE MARKET COMPARISON The relative vitality of the Hampton Roads office market can be more clearly illustrated by comparing the area’s 2011 performance to the nearby Virginia markets of Richmond, the District of Columbia, as well as the North Carolina markets of Raleigh-Durham and Charlotte. Clearly our regional competitive areas fared well in comparison to the United States’ national office vacancy rate.

Q4 2011 DATA — FROM COSTAR OFFICE MARKET REPORT The office vacancy rate in the Richmond, VA office market area ended the year at a direct vacancy of 10.9% and total vacancy of 11.8%. In Raleigh-Durham, NC the market closed the year at 16.0% direct and 16.8% total. The Charlotte, NC market finished at 16.8% direct and 18.1% total. And finally the office vacancy rate in the District of Columbia (Washington D.C.) office market finished 2011 at 13.0% direct vacancy and 14.2% total.

Quoted Rates $19.38 $24.11 $17.14 $19.84 $19.36

2012 OFFICE

Downtown Norfolk Harbour View Oyster Point VA Beach CBD Totals

Vacancy

ODU-MarketReview2012_REV1 3/1/12 11:31 AM Page 48

2011 Office Building Directory DOWNTOWN NORFOLK CLASS A 150 West Main Street . . . . . . . . . . . . . . . . . . . . .226,183 Bank of America . . . . . . . . . . . . . . . . . . . . . . . . . .340,000 Crown Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62,000 Dominion Tower . . . . . . . . . . . . . . . . . . . . . . . . . .403,276 Fort Norfolk Medical Office Tower . . . . . . . . . . .196,000 Main Street Tower . . . . . . . . . . . . . . . . . . . . . . . . .200,000 Norfolk Southern Tower . . . . . . . . . . . . . . . . . . . . .301,463 Town Point Center . . . . . . . . . . . . . . . . . . . . . . . . .130,266 World Trade Center . . . . . . . . . . . . . . . . . . . . . . . .366,941 Wells Fargo Center . . . . . . . . . . . . . . . . . . . . . . .255,000 CLASS B 101 Granby Street . . . . . . . . . . . . . . . . . . . . . . . . .22,000 141 W. Virginia Beach Blvd. (ABC Building) . . . . . .10,000 201 Granby Mall Building . . . . . . . . . . . . . . . . . . .76,071 250 W. Brambleton Avenue . . . . . . . . . . . . . . . . . .17,984 345 W. Freemason . . . . . . . . . . . . . . . . . . . . . . . . .11,000 500 Plume Street . . . . . . . . . . . . . . . . . . . . . . . . . .60,000 500 E. Main St. (BB&T) . . . . . . . . . . . . . . . . . . . .230,000 City Centre . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54,138 Hague Medical Center . . . . . . . . . . . . . . . . . . . . . .31,659 Madison Office Building . . . . . . . . . . . . . . . . . . . .82,000 Monticello Arcade . . . . . . . . . . . . . . . . . . . . . . . . . .44,500 The Monticello Building . . . . . . . . . . . . . . . . . . . . .70,000 Plume Center West . . . . . . . . . . . . . . . . . . . . . . . . .82,375 RBC Centura Tower . . . . . . . . . . . . . . . . . . . . . . . .111,600 St. Paul Building . . . . . . . . . . . . . . . . . . . . . . . . . . .47,308 Seaboard Center . . . . . . . . . . . . . . . . . . . . . . . . . .30,000 Tazewell Building . . . . . . . . . . . . . . . . . . . . . . . . . .38,000 The Helena Building . . . . . . . . . . . . . . . . . . . . . . . .20,100 Towne Bank Building . . . . . . . . . . . . . . . . . . . . . . .52,698 Wainwright Building . . . . . . . . . . . . . . . . . . . . . . . .83,151 York Street Center . . . . . . . . . . . . . . . . . . . . . . . . . .52,293 CLASS C 220 West Freemason Street . . . . . . . . . . . . . . . . . .10,775 255 Granby Street . . . . . . . . . . . . . . . . . . . . . . . . .30,000 400 Gresham Drive (The Medical Building) . . . . . .78,867 700 Monticello Avenue . . . . . . . . . . . . . . . . . . . . .22,760 700 Boush Street . . . . . . . . . . . . . . . . . . . . . . . . .16,825 Anders Williams Building . . . . . . . . . . . . . . . . . . . .14,000 Duke Grace Building . . . . . . . . . . . . . . . . . . . . . . .26,417 Ghent-Olney Building . . . . . . . . . . . . . . . . . . . . . . .24,000 Lonsdale Building . . . . . . . . . . . . . . . . . . . . . . . . . .18,000 Norfolk Community Services . . . . . . . . . . . . . . . . .16,192 Wainwright Building . . . . . . . . . . . . . . . . . . . . . . . .82,318 OWNER OCCUPIED AT&T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .200,000 Atlantic Building . . . . . . . . . . . . . . . . . . . . . . . . . . .14,000 Decker Building . . . . . . . . . . . . . . . . . . . . . . . . . . .10,000 Dominion Enterprises . . . . . . . . . . . . . . . . . . . . . .220,000 Landmark Communications . . . . . . . . . . . . . . . . . .66,500 Norfolk Telcom Center . . . . . . . . . . . . . . . . . . . . . . .60,000 Peta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25,000 Standard Forms . . . . . . . . . . . . . . . . . . . . . . . . . . .30,000 Two Commercial Place . . . . . . . . . . . . . . . . . . . . .234,450 Virginian Pilot Building . . . . . . . . . . . . . . . . . . . . .174,141

AIRPORT/NORTHAMPTON CLASS A Twin Oaks I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88,000 Twin Oaks II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88,000 The Concourse . . . . . . . . . . . . . . . . . . . . . . . . . .325,000 CLASS B Airport Executive Center . . . . . . . . . . . . . . . . . . . . .70,609 Circle South . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48,000 HRSA-ILA Bldg (Longshoremen’s) . . . . . . . . . . . . . .21,678 Northhampton Executive Center corrected buiding size . . . . . . . . . . . . . . . . . . . .69,904 CLASS C Electrical Workers Corporation Office . . . . . . . . . . .22,020

OWNER OCCUPIED CMA/CGM (USA) . . . . . . . . . . . . . . . . . . . . . . . . . .90,000 Commander Corporate Center . . . . . . . . . . . . . . . .65,000 Silver Oak . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78,200 Zim-American Israeli Shipping . . . . . . . . . . . . . . . .30,000

CENTRAL NORFOLK CLASS B 100 Kingsley Lane, DePaul Health Park” . . . . . . . .48,000 110 Kingsley Lane, DePaul Medical Building” . . . .39,054 160 Lingsley Lane, DePaul Medical Atrium” . . . . . .40,000 241 Corporate Blvd. (VA Eye Development) . . . . . .34,070 930 Majestic Avenue . . . . . . . . . . . . . . . . . . . . . . . .9,500 5360 Robin Hood Road . . . . . . . . . . . . . . . . . . . . .42,000 Almeda Business Center (flex) . . . . . . . . . . . . . . . .84,000 Central Center Office Building . . . . . . . . . . . . . . . . .53,815 Commerce Park Place(flex) . . . . . . . . . . . . . . . . . .58,783 Gateway II(flex) . . . . . . . . . . . . . . . . . . . . . . . . . . . .45,000 Lafayette Executive Center . . . . . . . . . . . . . . . . . . .18,641 Lawson Building . . . . . . . . . . . . . . . . . . . . . . . . . . .20,022 Norfolk Business Center (flex) . . . . . . . . . . . . . . . .89,000 Norfolk Business Center II (flex) . . . . . . . . . . . . . .126,926 Norfolk Commerce Center I(flex) . . . . . . . . . . . . . . .73,000 Norfolk Commerce Center III(flex) . . . . . . . . . . . . .168,000 Norfolk Commerce Center IV(flex) . . . . . . . . . . . . . .79,980 Norfolk Commerce Center V(flex) . . . . . . . . . . . . . .72,000 CLASS C 4100 Building . . . . . . . . . . . . . . . . . . . . . . . . . . . .20,614 Atlas Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30,476 Blair Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15,000 Southern Office Building . . . . . . . . . . . . . . . . . . . . .11,061 Time Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32,000 OWNER OCCUPIED American Funds Building . . . . . . . . . . . . . . . . . . .106,000

CHESAPEAKE/GREENBRIER CLASS A BECO Corp HQ (609 Independence) . . . . . . . . . . .22,400 Crossways Center . . . . . . . . . . . . . . . . . . . . . . . . . .52,702 CHKD Health Center (Volvo Park VI) . . . . . . . . . . . .25,000 Chubb Building . . . . . . . . . . . . . . . . . . . . . . . . . . .97,500 Dendrite One . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50,000 Dendrite Two . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50,000 EDS - 1434 Crossways Blvd . . . . . . . . . . . . . . . .111,000 Greenbrier Tower I . . . . . . . . . . . . . . . . . . . . . . . . . .87,900 Greenbrier Tower II . . . . . . . . . . . . . . . . . . . . . . . . .86,976 HR Realtors Association Bldg (638 Independence) .40,000 Independence Place . . . . . . . . . . . . . . . . . . . . . . .73,345 Lake Center I . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60,000 Lake Center II . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64,000 Liberty One . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50,000 Liberty Two . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50,000 Liberty Three . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75,000 1403 Greenbrier Parkway (Gateway Bank) . . . . . . .75,000 CLASS B Atlantic Business Center . . . . . . . . . . . . . . . . . . . . .60,000 Battlefield Corporate Center . . . . . . . . . . . . . . . . . .98,000 Battlefield Lakes Tech Center I . . . . . . . . . . . . . . . .38,500 Battlefield Lakes Tech Center II . . . . . . . . . . . . . . . .29,000 Battlefield Lakes Tech Center III . . . . . . . . . . . . . . .18,000 Battlefield Technology Center . . . . . . . . . . . . . . . . .51,578 Battlefield Technology Center I . . . . . . . . . . . . . . . .97,000 Battlefield Technology Center II (MCI) . . . . . . . . . . .81,478 Branch Executive Quarter-Hamilton . . . . . . . . . . . .11,600 Branch Executive Quarter-Jefferson . . . . . . . . . . . . .23,838 Branch Executive Quarter-Madison . . . . . . . . . . . . .16,788 Chelsea Commons WCMB . . . . . . . . . . . . . . . . . . .12,400 1580 Crossways Blvd . . . . . . . . . . . . . . . . . . . . . . .10,800 Crossways Commerce Center II . . . . . . . . . . . . . .145,300 Crossways Commerce Center I . . . . . . . . . . . . . . . .45,000 Crossways I . . . . . . . . . . . . . . . . . . . . . . . . . . . . .137,007 Crossways II (flex) . . . . . . . . . . . . . . . . . . . . . . . . . .84,751 Crossways III . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61,992 Dominion Business Center . . . . . . . . . . . . . . . . . . .20,000 Eden North Center . . . . . . . . . . . . . . . . . . . . . . . . .18,700 Greenbrier Business Centre (flex) . . . . . . . . . . . . . .91,561 Greenbrier Circle Corporate Center . . . . . . . . . . . .233,138 Greenbrier Executive Center II (I was torn down for a hotel) . . . . . . . . . . . . . . .26,787 Greenbrier Point II . . . . . . . . . . . . . . . . . . . . . . . . .16,000

2012 Hampton Roads Real Estate Market Review

Greenbrier Tech Center One (flex) . . . . . . . . . . . . . .95,414 Greenbrier Tech Center Two (flex) . . . . . . . . . . . . . .82,340 Hanbury Office Park . . . . . . . . . . . . . . . . . . . . . . . .24,000 Hanbury Road Business Center . . . . . . . . . . . . . . . .9,000 Independence Technology Center I . . . . . . . . . . . . .98,000 Rose and Womble Business Center . . . . . . . . . . . .13,432 SunTrust Bank Building . . . . . . . . . . . . . . . . . . . . .23,000 737 Volvo Parkway . . . . . . . . . . . . . . . . . . . . . . . . .36,000 Volvo Park (Progressive Drive) . . . . . . . . . . . . . . . . .52,000 Volvo VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13,000 Greenbrier Business Center . . . . . . . . . . . . . . . . . .50,000 Greenbrier Square . . . . . . . . . . . . . . . . . . . . . . . . .26,250 Heritage Bank Building . . . . . . . . . . . . . . . . . . . . . .12,654 Riverwalk Professional Bldg . . . . . . . . . . . . . . . . . .10,000 Woodbrier Terrace . . . . . . . . . . . . . . . . . . . . . . . . . .10,000 Wright Building . . . . . . . . . . . . . . . . . . . . . . . . . . .12,000 CLASS C 2125 Smith Avenue . . . . . . . . . . . . . . . . . . . . . . . .42,423 Knells Ridge Plaza . . . . . . . . . . . . . . . . . . . . . . . . .15,500 Old Greenbrier Village . . . . . . . . . . . . . . . . . . . . . . .34,015 OWNER OCCUPIED Cox Communications . . . . . . . . . . . . . . . . . . . . .150,000 Dollar Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .300,000 First Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42,557 Household Finance . . . . . . . . . . . . . . . . . . . . . . . .60,000 Panasonic Call Center . . . . . . . . . . . . . . . . . . . . . .55,000

HILLTOP/OCEANFRONT CLASS A Pavilion Center (Towne Bank) . . . . . . . . . . . . . . . . .85,177 Potter Professional Center . . . . . . . . . . . . . . . . . . .27,500 William E. Wood Building . . . . . . . . . . . . . . . . . . . .20,000 CLASS B 1206 Laskin Road Executive Center . . . . . . . . . . . .33,000 Beach Health Pavilion . . . . . . . . . . . . . . . . . . . . . .57,800 Beach Tower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23,000 Birdneck Office Park . . . . . . . . . . . . . . . . . . . . . . . .10,182 Birdneck Square . . . . . . . . . . . . . . . . . . . . . . . . . . .17,285 Camelot Professional Center . . . . . . . . . . . . . . . . .40,725 Colonial Mill Professional Center . . . . . . . . . . . . . .23,555 Damalas Centre . . . . . . . . . . . . . . . . . . . . . . . . . . .16,900 First Colonial Office Park . . . . . . . . . . . . . . . . . . . .18,000 General Booth Professional Center . . . . . . . . . . . . .11,000 Gibson Pavilion . . . . . . . . . . . . . . . . . . . . . . . . . . . .30,000 Great Neck Professional Bldg. . . . . . . . . . . . . . . . .20,000 Heritage Commons . . . . . . . . . . . . . . . . . . . . . . . . .11,000 Hilltop West Executive Center . . . . . . . . . . . . . . . . .23,000 Louisa Avenue Building One . . . . . . . . . . . . . . . . . .11,000 Louisa Avenue Building Two . . . . . . . . . . . . . . . . . .11,000 Louisa Avenue Building Three . . . . . . . . . . . . . . . . . .8,195 Mill Dam Crossing . . . . . . . . . . . . . . . . . . . . . . . . .22,037 Rudd Building . . . . . . . . . . . . . . . . . . . . . . . . . . . .13,000 Sandpiper Key Associates Bldg. . . . . . . . . . . . . . . .32,000 1092 Laskin Road . . . . . . . . . . . . . . . . . . . . . . . . .18,240 CLASS C Oceana East . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10,360”

CORPORATE LANDING CLASS B Executive Center at Corporate Landing . . . . . . . . .45,000” Princess Anne Executive Park . . . . . . . . . . . . . . . .59,756” Verizon Building . . . . . . . . . . . . . . . . . . . . . . . . . . .10,000 OWNER OCCUPIED Al-Anon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30,000 Liberty Tax Service . . . . . . . . . . . . . . . . . . . . . . . . .30,000 GEICO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .250,000

KEMPSVILLE CLASS A Chadwick Building . . . . . . . . . . . . . . . . . . . . . . . . .80,000 Grayson Building . . . . . . . . . . . . . . . . . . . . . . . . . .42,000 Metroplex 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35,000 CLASS B 1201 Lake James Office . . . . . . . . . . . . . . . . . . . .12,000 3386 Holland Road . . . . . . . . . . . . . . . . . . . . . . . .20,000 5301 Providence Road (Providence South) . . . . .12,000

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Arrowhead Office Court . . . . . . . . . . . . . . . . . . . . . .10,000 Atrium of College Park Square . . . . . . . . . . . . . . . .36,379 Central Park I (552 Central Dr) . . . . . . . . . . . . . . . .18,000 Central Park II (544 Central) . . . . . . . . . . . . . . . . .43,000 College Park Square III . . . . . . . . . . . . . . . . . . . . . .30,150 Courtyard at Providence . . . . . . . . . . . . . . . . . . . .17,879 Fairfield Square . . . . . . . . . . . . . . . . . . . . . . . . . . .12,933 Holland South . . . . . . . . . . . . . . . . . . . . . . . . . . . .14,843 Holland/Taft Professional Center . . . . . . . . . . . . . .11,850 Kempsville Office Park . . . . . . . . . . . . . . . . . . . . . .30,722 Oxford Square . . . . . . . . . . . . . . . . . . . . . . . . . . . .13,544 Woolpert Building . . . . . . . . . . . . . . . . . . . . . . . . . .36,700

Rosemont Interstate Center II . . . . . . . . . . . . . . . . .51,835 Rosemont Interstate Center III* . . . . . . . . . . . . . . .38,000 Sun Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11,600 Transouth Building (3615 VB Blvd) . . . . . . . . . . . .12,500

Copy Data (Ikon) . . . . . . . . . . . . . . . . . . . . . . . . . .20,000 Lendman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10,000 Newtown Square . . . . . . . . . . . . . . . . . . . . . . . . . .78,000

CLASS C Birchwood Office Park . . . . . . . . . . . . . . . . . . . . . .11,688 Byler Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16,592

PEMBROKE/ CENTRAL BUSINESS DISTRICT

LYNNHAVEN

MILITARY CIRCLE

CLASS A Chase Building . . . . . . . . . . . . . . . . . . . . . . . . . . . .31,910 Lynnhaven Commons Complex . . . . . . . . . . . . . . .25,000 Lynnhaven Commons (office bldg) . . . . . . . . . . . . .26,000 Lynnhaven II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36,000 Lynnwood Plaza . . . . . . . . . . . . . . . . . . . . . . . . . . .87,157 Marsh Landing . . . . . . . . . . . . . . . . . . . . . . . . . . . .62,117 Oceana Center One . . . . . . . . . . . . . . . . . . . . . . . .39,928 Oceana Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75,369 Park West AMSEC . . . . . . . . . . . . . . . . . . . . . . . . .66,180 Pinehurst Centre . . . . . . . . . . . . . . . . . . . . . . . . .103,000 Reflections I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62,924 Reflections II . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73,676 Reflections III . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67,000 Reflections IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80,000 Viking Building . . . . . . . . . . . . . . . . . . . . . . . . . . . .18,900 Windwood Center . . . . . . . . . . . . . . . . . . . . . . . . . .78,348

CLASS A Riverside Commerce Center (120 Corporate Blvd.) 70,000 Riverside Corporate Center . . . . . . . . . . . . . . . . . . .86,682

CLASS B 2700 International Parkway . . . . . . . . . . . . . . . . . .53,000 Advanced Technology Building . . . . . . . . . . . . . . . .32,000 Basgier Bldg. I . . . . . . . . . . . . . . . . . . . . . . . . . . . .18,200 Basgier Bldg. II . . . . . . . . . . . . . . . . . . . . . . . . . . . .20,000 Bennett Office Building (120 S. Lynnhaven) . . . . . .10,522 Commercial Place . . . . . . . . . . . . . . . . . . . . . . . . .36,400 Gateway Bank Building (641 Lynnhaven) . . . . . . . .18,000 Lynnhaven Corporate Center I . . . . . . . . . . . . . . . .36,046 Lynnhaven Corporate Center II . . . . . . . . . . . . . . . .40,300 Lynnhaven Executive Center . . . . . . . . . . . . . . . . . .18,000 Lynnhaven Five . . . . . . . . . . . . . . . . . . . . . . . . . . . .24,549 Lynnhaven North . . . . . . . . . . . . . . . . . . . . . . . . . .10,000 Lynnhaven Professional Center . . . . . . . . . . . . . . . .12,000 Lynnhaven Station . . . . . . . . . . . . . . . . . . . . . . . . .26,226 Parkway Center 3 and 4 . . . . . . . . . . . . . . . . . . . . .64,567 Parkway Center I & II . . . . . . . . . . . . . . . . . . . . . . .32,112 Parkway III (Unisys) . . . . . . . . . . . . . . . . . . . . . . . .50,428 Parkway West (flex) . . . . . . . . . . . . . . . . . . . . . . . . .41,563 RBM Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14,170 Sabre Street I . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68,000 Sabre Street II . . . . . . . . . . . . . . . . . . . . . . . . . . . .60,000 Sabre Street III . . . . . . . . . . . . . . . . . . . . . . . . . . . .40,000 Sabre Street IV . . . . . . . . . . . . . . . . . . . . . . . . . . . .40,000 South Lynnhaven Business Park . . . . . . . . . . . . . . .40,000 U.S. Commerce Center (Tidewater Tech) . . . . . . . . .26,819 Yorktown Commerce Center (228 N. Lynnhaven) . . . . . . . . . . . . . . . . . . . . . .30,529 OWNER OCCUPIED Cenit Bank Bldg . . . . . . . . . . . . . . . . . . . . . . . . . . .40,000 Global Technical Systems . . . . . . . . . . . . . . . . . . . .46,000 Hall Automotive . . . . . . . . . . . . . . . . . . . . . . . . . . .29,865 SAIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60,000

LITTLE NECK CLASS B 3300 Building (Virginia Beach Blvd.) . . . . . . . . . . .11,000 Kingâ&#x20AC;&#x2122;s Grant Office Building . . . . . . . . . . . . . . . . . .13,000 Little Neck Office Park (3300 Bldg) . . . . . . . . . . . .33,000 Little Neck Office Park (3300 South) . . . . . . . . . . .50,000 Little Neck Office Park (3400 Bldg) . . . . . . . . . . . .22,000 Little Neck Towers . . . . . . . . . . . . . . . . . . . . . . . . . .48,860 Lynnhaven Station 101 North Lynnhaven ( . . . . . . .28,000 NEXCOM Building . . . . . . . . . . . . . . . . . . . . . . . . . .75,000 NEXCOM Expansion . . . . . . . . . . . . . . . . . . . . . . . .18,000 Plaza Trail Office Building . . . . . . . . . . . . . . . . . . . .15,975 Rose Hall Commons . . . . . . . . . . . . . . . . . . . . . . . .12,266 Rose Hall Professional Center . . . . . . . . . . . . . . . .20,000 Rosemont Interstate Center I . . . . . . . . . . . . . . . . .41,400

OWNER OCCUPIED Plan-It Building . . . . . . . . . . . . . . . . . . . . . . . . . . . .24,000

CLASS B Centura Bank Building . . . . . . . . . . . . . . . . . . . . . .40,442 Circle East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41,047 College Park Executive Center . . . . . . . . . . . . . . . . .20,000 FBI Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50,000 I.T.T. Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49,379 CLASS C Executive Office - Janaf . . . . . . . . . . . . . . . . . . . . .28,800 Janaf Office Building . . . . . . . . . . . . . . . . . . . . . . . .37,329 OWNER OCCUPIED Portfolio Recovery Building . . . . . . . . . . . . . . . . . . .34,850 Sentara . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45,000 Union Mission (former VA Natural Gas) . . . . . . . . .75,403

NEWTOWN/WITCHDUCK CLASS A AAA Headquarters . . . . . . . . . . . . . . . . . . . . . . . . .47,045 Amelia Building . . . . . . . . . . . . . . . . . . . . . . . . . . .64,660 Amerigroup Building I . . . . . . . . . . . . . . . . . . . . . .106,000 Amerigroup Building II . . . . . . . . . . . . . . . . . . . . .106,000 BB&T Building . . . . . . . . . . . . . . . . . . . . . . . . . . . .30,000 Expressway Corporate Center . . . . . . . . . . . . . . . . .85,658 Gallery I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30,000 Gallery II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30,000 Greenwich Center . . . . . . . . . . . . . . . . . . . . . . . . . .56,000 Greenwich Commons . . . . . . . . . . . . . . . . . . . . . . .55,000 Greenwich Station . . . . . . . . . . . . . . . . . . . . . . . . .29,000 Halifax Building . . . . . . . . . . . . . . . . . . . . . . . . . . .71,100 Mass Mutual Building . . . . . . . . . . . . . . . . . . . . . . .45,500 Smithfield Building . . . . . . . . . . . . . . . . . . . . . . . .145,000 Verizon Center . . . . . . . . . . . . . . . . . . . . . . . . . . .135,000 Westmoreland Building . . . . . . . . . . . . . . . . . . . . .83,436 CLASS B 144 Business Park Drive . . . . . . . . . . . . . . . . . . . .17,000 168 Business Park Drive . . . . . . . . . . . . . . . . . . . .19,300 184 Business Park Drive . . . . . . . . . . . . . . . . . . . .27,784 209 Business Park Drive . . . . . . . . . . . . . . . . . . . .11,250 232 Business Park Drive . . . . . . . . . . . . . . . . . . . .14,000 396 Witchduck Road . . . . . . . . . . . . . . . . . . . . . . .12,000 6330 Newtown Road . . . . . . . . . . . . . . . . . . . . . . .55,181 American Teleservices Building . . . . . . . . . . . . . . . .12,232 Azalea Village . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20,000 BCF Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24,000 BPC Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29,074 Colonial Corporate Center . . . . . . . . . . . . . . . . . . .41,772 Commerce Centre (200-259 Expressway Ct) . . . . .35,500 Commonwealth Building . . . . . . . . . . . . . . . . . . . .10,000 Interstate Corporate Center . . . . . . . . . . . . . . . . .430,000 Parliament Drive Professional Bldg . . . . . . . . . . . . .10,000 TRC Center I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62,000 TRC Center II . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36,884 TRC Center III . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52,000 Witchduck Crossing . . . . . . . . . . . . . . . . . . . . . . . .15,326 CLASS C Witchduck Office Court . . . . . . . . . . . . . . . . . . . . . .18,000 OWNER OCCUPIED Cox Cable Building . . . . . . . . . . . . . . . . . . . . . . . . .45,000 Cox Expansion . . . . . . . . . . . . . . . . . . . . . . . . . . . .25,000

CLASS A 249 Central Park Avenue . . . . . . . . . . . . . . . . . . . .59,000 Convergence Center . . . . . . . . . . . . . . . . . . . . . . . .85,000 Convergence Center II . . . . . . . . . . . . . . . . . . . . . . .85,000 Convergence Center III . . . . . . . . . . . . . . . . . . . . . .99,000 Corporate Center VI . . . . . . . . . . . . . . . . . . . . . . . .59,000 Five Columbus Center . . . . . . . . . . . . . . . . . . . . . .20,000 Fulton Bank Plaza . . . . . . . . . . . . . . . . . . . . . . . . .90,315 One Columbus Center . . . . . . . . . . . . . . . . . . . . .134,000 OSS Building (former Ticketmaster) . . . . . . . . . . . .30,000 Six Columbus Center . . . . . . . . . . . . . . . . . . . . . . .36,000 Southport Center . . . . . . . . . . . . . . . . . . . . . . . . . .65,000 Town Center (222 Central Park) . . . . . . . . . . . . . .256,900 Town Center North Tower . . . . . . . . . . . . . . . . . . . . .53,000 Two Columbus Center . . . . . . . . . . . . . . . . . . . . . .109,000 CLASS B 4701 Columbus . . . . . . . . . . . . . . . . . . . . . . . . . . .32,000 4705 Columbus Street . . . . . . . . . . . . . . . . . . . . .33,000 4801 Columbus Street . . . . . . . . . . . . . . . . . . . . .40,000 Corporate Center I . . . . . . . . . . . . . . . . . . . . . . . . .51,000 Corporate Center II . . . . . . . . . . . . . . . . . . . . . . . . .52,475 Corporate Center III . . . . . . . . . . . . . . . . . . . . . . . .51,000 Corporate Center IV . . . . . . . . . . . . . . . . . . . . . . . .76,012 Holland Commerce Center . . . . . . . . . . . . . . . . . . .30,000 Holland Office Park . . . . . . . . . . . . . . . . . . . . . . . . .32,000 Independence Business Center . . . . . . . . . . . . . . .62,000 Independence Technology Center - Technocenter I .50,000 Independent Plaza . . . . . . . . . . . . . . . . . . . . . . . . .36,655 Pembroke Commercial Bldg. (4425 Corporation Lane) 70,760 Pembroke Office Park . . . . . . . . . . . . . . . . . . . . . .294,000 Prism Plaza . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32,000 Southgate Centre . . . . . . . . . . . . . . . . . . . . . . . . . .43,200 Southport Business Center(flex) (Baskin Bldg) . . . .20,683 Southport Trade Center(flex) . . . . . . . . . . . . . . . . . .30,883 Thalia One . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18,408 Thalia Professional Center . . . . . . . . . . . . . . . . . . .15,000 The Meadows . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32,433 VST Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25,000 CLASS C 4224 Holland Road . . . . . . . . . . . . . . . . . . . . . . . .10,104 Dragas Office Park . . . . . . . . . . . . . . . . . . . . . . . . .30,896 Haygood Buildings . . . . . . . . . . . . . . . . . . . . . . . . .22,392 Haygood Executive Park . . . . . . . . . . . . . . . . . . . . .36,472 Holland Plaza Office Building . . . . . . . . . . . . . . . . .14,513 Old Donation Executive Park . . . . . . . . . . . . . . . . . .20,347 Larkspur Village . . . . . . . . . . . . . . . . . . . . . . . . . . .16,184 Pocahontas Center . . . . . . . . . . . . . . . . . . . . . . . . .17,800 OWNER OCCUPIED Alantec Financial Fed Credit Union . . . . . . . . . . . . .12,000 AVIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .168,000 Coastal Training Technologies . . . . . . . . . . . . . . . . .60,000 Commonwealth College . . . . . . . . . . . . . . . . . . . . .30,000 Electronic Systems Building . . . . . . . . . . . . . . . . . .10,000 ISC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40,000 QED Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30,000 REIN Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24,500 Virginia Natural Gas Building . . . . . . . . . . . . . . . . .48,242

PORTSMOUTH CLASS A BB&T Building (500 Crawford) . . . . . . . . . . . . . . . .35,327 Harbourfront Corporate Center (801 Water St) . . . .53,000 CLASS B 307 County Street . . . . . . . . . . . . . . . . . . . . . . . . .13,475 355 Crawford Street Building . . . . . . . . . . . . . . . . .79,367 600 Crawford Street . . . . . . . . . . . . . . . . . . . . . . . .16,171 Boyette Professional Center . . . . . . . . . . . . . . . . . .13,000 Bristol Square . . . . . . . . . . . . . . . . . . . . . . . . . . . .10,800

ODU-MarketReview2012_REV1 3/1/12 11:31 AM Page 50

Towne Bank Building (200 High St) . . . . . . . . . . . .34,000 JJH Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17,563 New Kirn Building . . . . . . . . . . . . . . . . . . . . . . . . . .44,000 PortCentre I (flex) . . . . . . . . . . . . . . . . . . . . . . . . .100,000 Port Trade Center . . . . . . . . . . . . . . . . . . . . . . . . . .14,223 The Seaboard Building . . . . . . . . . . . . . . . . . . . . . .65,000 Wachovia Bank . . . . . . . . . . . . . . . . . . . . . . . . . . .48,000

NDS Building . . . . . . . . . . . . . . . . . . . . . . . . . . . .35,000 Raytheon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50,000 Research Office Building . . . . . . . . . . . . . . . . . . . .30,000

CLASS C Crawford Executive Center . . . . . . . . . . . . . . . . . . .20,340

COLISEUM CENTRAL

SUFFOLK CLASS A MAST One . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60,000 JTASC Building . . . . . . . . . . . . . . . . . . . . . . . . . . .408,365 CLASS B Bridgeway Technology Center I . . . . . . . . . . . . . . .125,000 Bridgeway Technology Center II . . . . . . . . . . . . . . . .67,500 Bridgeway Technology Center III . . . . . . . . . . . . . . .72,384 Brinkley Building . . . . . . . . . . . . . . . . . . . . . . . . . . .20,500 Brinkley Building II . . . . . . . . . . . . . . . . . . . . . . . . .21,000 Harbour Breeze Professional Center . . . . . . . . . . . .52,265 Harbour View Medical Arts Center . . . . . . . . . . . . .47,000 Harbor View Professional Center (1033 & 1035) .23,000” Konikoff Medical Office Building . . . . . . . . . . . . . .22,675” Lakeview Technology GSA Center . . . . . . . . . . . . .110,000 Lakeview Tech Center II . . . . . . . . . . . . . . . . . . . . .86,400” Main Street Center . . . . . . . . . . . . . . . . . . . . . . . . .13,800 Washington Street Center . . . . . . . . . . . . . . . . . . . .12,000 OWNER OCCUPIED Rubicon NGP - Lakeview Technical Center . . . . . .351,075 Lockheed Martin . . . . . . . . . . . . . . . . . . . . . . . . . .50,000 Overton Building . . . . . . . . . . . . . . . . . . . . . . . . . . .12,940 Rose & Womble Building . . . . . . . . . . . . . . . . . . . .25,000 Towne Bank Center . . . . . . . . . . . . . . . . . . . . . . . . .19,318

CLASS C NASA Langley Research Center . . . . . . . . . . . . . . .11,790 3217 Armistead Avenue . . . . . . . . . . . . . . . . . . . . .24,043

CLASS A Claiborne Building (Regional Mall Office) . . . . . . .150,000 Executive Tower . . . . . . . . . . . . . . . . . . . . . . . . . . .134,164 Pinewood Plaza . . . . . . . . . . . . . . . . . . . . . . . . . . .77,500 CLASS B 2115 Executive Drive . . . . . . . . . . . . . . . . . . . . . . .62,000 2310 Tower Place . . . . . . . . . . . . . . . . . . . . . . . . . .10,500 Bank of America Building . . . . . . . . . . . . . . . . . . . .14,434 Colony Square of Hampton . . . . . . . . . . . . . . . . . .30,050 Riverdale Complex . . . . . . . . . . . . . . . . . . . . . . . .168,000 Sheraton Office Bldg. . . . . . . . . . . . . . . . . . . . . . . .12,673 Todds Lane Professional Center . . . . . . . . . . . . . . .12,500 West Telemarketing . . . . . . . . . . . . . . . . . . . . . . . . .55,855 OWNER OCCUPIED Langley Federal Credit Union . . . . . . . . . . . . . . . . .72,800

NEWMARKET CLASS B Newmarket Building . . . . . . . . . . . . . . . . . . . . . . . .21,262 NetCenter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .546,171 UPS Call Center . . . . . . . . . . . . . . . . . . . . . . . . . .103,000 CLASS C Rouse Tower . . . . . . . . . . . . . . . . . . . . . . . . . . . . .150,000

DOWNTOWN HAMPTON

OWNER OCCUPIED NN Shipbuilding Employee Credit Union . . . . . . . . .15,000

CLASS A Harbour Centre . . . . . . . . . . . . . . . . . . . . . . . . . . .158,855

OYSTER POINT

CLASS B 10-16 W. Queens Way . . . . . . . . . . . . . . . . . . . . . .11,238 47 W. Queens Way . . . . . . . . . . . . . . . . . . . . . . . . .12,500 Mill Point Center . . . . . . . . . . . . . . . . . . . . . . . . . . .10,000 One Mallory Street . . . . . . . . . . . . . . . . . . . . . . . . .14,000 CLASS C 55 W. Queens Way . . . . . . . . . . . . . . . . . . . . . . . . .12,132

DOWNTOWN NEWPORT NEWS CLASS B 2600 Building . . . . . . . . . . . . . . . . . . . . . . . . . . .118,018 Wachovia Bank Building . . . . . . . . . . . . . . . . . . . . .17,846 OWNER OCCUPIED Newport News Shipbuilding, Bldg 520-521” . . . . .50,000

HAMPTON ROADS CENTER CLASS A 6 Manhattan Square . . . . . . . . . . . . . . . . . . . . . . .30,106 1001 N Campus Parkway . . . . . . . . . . . . . . . . . . .19,000 Allstate Building . . . . . . . . . . . . . . . . . . . . . . . . . . .17,000 HealthNet Building . . . . . . . . . . . . . . . . . . . . . . . . .60,482 Lakefront Plaza I . . . . . . . . . . . . . . . . . . . . . . . . . . .77,442 Morgan Marrow Building . . . . . . . . . . . . . . . . . . . .12,000 Olympia Place . . . . . . . . . . . . . . . . . . . . . . . . . . . .72,395 Oxford Plaza . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64,297 Parkway Executive Center . . . . . . . . . . . . . . . . . . . .45,000 Research Quad - Building One . . . . . . . . . . . . . . . .60,000 Research Quad - Building Three . . . . . . . . . . . . . .100,000 CLASS B 400 Butler Farm Road . . . . . . . . . . . . . . . . . . . . . .96,446 404 Butler Farm Road . . . . . . . . . . . . . . . . . . . . . .54,715 421 Butler Farm Road . . . . . . . . . . . . . . . . . . . . . .56,515 Hampton I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68,532 Hampton II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67,000 Hampton III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45,000 Hampton Technology Center I . . . . . . . . . . . . . . . . .56,575

CLASS A 601 Thimble Shoals Boulevard . . . . . . . . . . . . . . . .30,000 Atrium At Oyster Point . . . . . . . . . . . . . . . . . . . . . .62,971 Cedar One . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15,467 Cedar Two . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27,000 Contemporary Cybernetics . . . . . . . . . . . . . . . . . . .60,000 Ferguson Corporate Center II . . . . . . . . . . . . . . . .150,000 Fountain Plaza One . . . . . . . . . . . . . . . . . . . . . . .100,000 Fountain Plaza Two . . . . . . . . . . . . . . . . . . . . . . . . .80,000 Fountain Plaza Three . . . . . . . . . . . . . . . . . . . . . . .80,000 Langley Federal Centre . . . . . . . . . . . . . . . . . . . . . .51,982 Merchants Walk . . . . . . . . . . . . . . . . . . . . . . . . . . .28,000 One City Center . . . . . . . . . . . . . . . . . . . . . . . . . . .70,000 One Oyster Point . . . . . . . . . . . . . . . . . . . . . . . . . .36,226 Oyster Point Interstate Center . . . . . . . . . . . . . . . . .64,000 Patrick Henry Corporate Center . . . . . . . . . . . . . . .98,883 Riverside Health Center Building (Warwick) . . . . .104,500 Peninsula Professional Building . . . . . . . . . . . . . . .30,800 Rock Landing Corporate Center II . . . . . . . . . . . . . .33,476 SunTrust Building . . . . . . . . . . . . . . . . . . . . . . . . .100,955 Symantec Corp. Building . . . . . . . . . . . . . . . . . . .100,000 Tower Park (733 &735 Thimble Shoals) . . . . . . . . .31,667 Town Center One . . . . . . . . . . . . . . . . . . . . . . . . . .60,000 TowneBank Center . . . . . . . . . . . . . . . . . . . . . . . . .60,000 Two City Center . . . . . . . . . . . . . . . . . . . . . . . . . . . .63,600 Two Oyster Point . . . . . . . . . . . . . . . . . . . . . . . . . . .39,137 Turner Bldg (1060 Loftis) . . . . . . . . . . . . . . . . . . .21,000” Wachovia Building . . . . . . . . . . . . . . . . . . . . . . . . .42,921 William E Wood Building (1030 Loftis) . . . . . . . . . .26,000 CLASS B 11790 Jefferson Avenue . . . . . . . . . . . . . . . . . . . .20,662 745 Bluecrab (flex) . . . . . . . . . . . . . . . . . . . . . . . .16,000 BB&T Plaza (603 Pilot House) . . . . . . . . . . . . . . . .37,348 Cale Colony 17 . . . . . . . . . . . . . . . . . . . . . . . . . . .17,000 Canon Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26,000 Comb-Bay Park . . . . . . . . . . . . . . . . . . . . . . . . . . .32,000 Dunwoody Place . . . . . . . . . . . . . . . . . . . . . . . . . . .19,798 Executive Center . . . . . . . . . . . . . . . . . . . . . . . . . . .95,399 Fishing Point Complex(flex) . . . . . . . . . . . . . . . . . .50,000 International Distribution Center . . . . . . . . . . . . . . .36,000 McCale Professional Park . . . . . . . . . . . . . . . . . . . .40,000

2012 Hampton Roads Real Estate Market Review

Middle Ground Business Center . . . . . . . . . . . . . . .62,000 Oyster Point Center . . . . . . . . . . . . . . . . . . . . . . . . .44,000 Oyster Point Business Center . . . . . . . . . . . . . . . . .25,000 Oyster Point Place (flex) . . . . . . . . . . . . . . . . . . . . .38,000 Oyster Point West . . . . . . . . . . . . . . . . . . . . . . . . .176,560 Park Central Executive Center . . . . . . . . . . . . . . . . .54,425 Park Place (751 & 753 Thimble Shoals) . . . . . . . .25,000 Peninsula Business Center I (flex) . . . . . . . . . . . . .21,817 Peninsula Business Centre II (flex) . . . . . . . . . . . . .40,475 Peninsula Business Centre III (flex) . . . . . . . . . . . . .60,000 Rock Landing Corporate Center IV . . . . . . . . . . . . .18,125 Rock Landing Corporate Center V . . . . . . . . . . . . . .18,125 Technology Center (flex) . . . . . . . . . . . . . . . . . . . . .81,000 Thimble Shoals Business Center (flex) . . . . . . . . . .55,377 Thimble Shores Lakefront . . . . . . . . . . . . . . . . . . . .25,000 CLASS C 714-716-718 J.Clyde Morris Blvd. . . . . . . . . . . . . .15,000 Drucker & Falk Building . . . . . . . . . . . . . . . . . . . . .30,000 Pilgrim Landing . . . . . . . . . . . . . . . . . . . . . . . . . . . .10,650 Regent Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25,000 OWNER OCCUPIED Applied Research Center . . . . . . . . . . . . . . . . . . .121,000 Fountain Plaza Two . . . . . . . . . . . . . . . . . . . . . . . . .80,000 Muller Martini Building . . . . . . . . . . . . . . . . . . . . . .24,000 Peninsula Retail Credit . . . . . . . . . . . . . . . . . . . . . .30,000

SUBURBAN NEWPORT NEWS CLASS B Bay Savings Bank Building . . . . . . . . . . . . . . . . . . .18,000 Colony Square of Denbigh II . . . . . . . . . . . . . . . . . .26,100 Denbigh Professional Park . . . . . . . . . . . . . . . . . . .40,598 Ferguson Enterprises . . . . . . . . . . . . . . . . . . . . . . .75,800 MCI Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60,000 Tidewater Tech (616 Denbigh Blvd) . . . . . . . . . . . .15,778 CLASS C Mariner Building . . . . . . . . . . . . . . . . . . . . . . . . . . .26,000 Teagle Building . . . . . . . . . . . . . . . . . . . . . . . . . . . .22,000 OWNER OCCUPIED CNU Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40,000

WILLIAMSBURG/JAMES CITY/YORK COUNTY CLASS A 263 McLaws Circle . . . . . . . . . . . . . . . . . . . . . . . . .26,967 Atrium Building . . . . . . . . . . . . . . . . . . . . . . . . . . . .24,000 Casey New Town - SunTrust . . . . . . . . . . . . . . . . . .60,000 Courthouse Green . . . . . . . . . . . . . . . . . . . . . . . . .30,000 Design Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13,700 First Union Center . . . . . . . . . . . . . . . . . . . . . . . . .32,000 Langley Federal Credit Union . . . . . . . . . . . . . . . . .20,000 Williamsburg Commerce Center . . . . . . . . . . . . . . .32,000 Palladian Office Building . . . . . . . . . . . . . . . . . . . .21,000 Patriot Park Business Center . . . . . . . . . . . . . . . . .24,000 Sentara New Town Medical Building . . . . . . . . . . . .50,000 Sun Trust (Courthouse St.) . . . . . . . . . . . . . . . . . . .60,000 William E. Wood Building . . . . . . . . . . . . . . . . . . .20,000” CLASS B 104 Bypass Road . . . . . . . . . . . . . . . . . . . . . . . . .11,100 7601 George Washington Memorial Highway . . . . .10,000 Chartertowne Professional Center . . . . . . . . . . . . . .12,800 Greens Springs Office Park . . . . . . . . . . . . . . . . . . .37,000 Kristinsand Office Park . . . . . . . . . . . . . . . . . . . . . .15,221 Packets Executive Center . . . . . . . . . . . . . . . . . . . .23,000 Quarterland Commons Office Condos . . . . . . . . .120,000 Rivergate Center . . . . . . . . . . . . . . . . . . . . . . . . . . .36,000 Wachovia Bank . . . . . . . . . . . . . . . . . . . . . . . . . . .10,500 Williamsburg Office Park . . . . . . . . . . . . . . . . . . . . .79,600 Disclaimer: The information in this report is deemed reliable. The Old Dominion University E. V. Williams Center for Real Estate and Economic Development makes no representation or warranty as to its accuracy. .............................................. BOLD indicates change/addition from last year.

ODU-MarketReview2012_REV1 3/1/12 11:31 AM Page 51

2012 OFFICE

OFFICE SUBMARKETS Southside

Peninsula

Airport/Northampton

Chesapeake/Greenbrier

Downtown Norfolk

10 Military Circle

17 Coliseum Central

Central Norfolk

11 Newtown/Witchduck

18 Downtown Newport News

Hilltop/Oceanfront

12 Northern Suffolk

19 Newmarket

Corporate Landing

13 Pembroke

20 Oyster Point

Kempsville

14 Portsmouth

21 Suburban Newport News

5 6 7

Little Neck

15 Downtown Hampton

22 Williamsburg/

Lynnhaven

16 Hampton Roads Center

James City Co./ York County

ODU-MarketReview2012_REV1 3/1/12 11:31 AM Page 52

ODU-MarketReview2012_REV1 3/1/12 11:04 AM Page 53

HAMPTON ROADS MARKET REVIEW

RESIDENTIAL New Residential Market Authors Data Analysis/ Layouts

Ron Wildermuth and Blair Hardesty Residential DataBank

Existing Residential Market James Pritchard Manager, Data & Analytics Real Estate Information Network, Inc. Hampton Roads MLS

Financial Support

Disclosure

2012 RESIDENTIAL

Author Data Analysis/ Layouts

ODU-MarketReview2012_REV1 3/1/12 11:04 AM Page 54

2012 R E S I D E N T I A L

General Overview

he Hampton Roads Residential market statistics covered in this report analyze the new home building industry and the existing home sales activity for the year 2011. Included are the cities of Chesapeake, Hampton, Newport News, Norfolk, Poquoson, Portsmouth, Suffolk, Virginia Beach, and Williamsburg, and the counties of Gloucester, Isle of Wight, James City, and York. The new homes portion of the report also includes information for Franklin and Southampton, while the existing homes section of the report contains additional information on Surry, Matthews and Currituck. The new construction data contained in this report was gathered from the actual deeds recorded and from the building permits issued by each city or county. The sales data and existing home closings data was gathered from the Real Estate Information Network (REIN).

NEW CONSTRUCTION The housing tsunami that saw housing hyper- inflation followed by a housing depression has taken its toll on the industry nationally and locally. For now the public attitude toward housing as an investment has shifted to one of housing as a necessity. The “for sale” markets’ loss has been the “for rent” markets’ gain as many would be new home buyers chose to rent. The year 2011 was a pivotal year in the long market adjustment process, now in its 5th or 6th year, depending on what metric you use to measure the market. Inventories of detached and attached new homes all but disappeared in 2011 and high rise condos showed their strongest inventory reductions since the housing recession began. The significant increase in high rise condo sales was due to aggressive price reductions by several key players and, in the case of one high profile condo project, the use of alternative marketing methods. The year was characterized by builders continuing to adjust their market position, re-evaluate margin expectations, value engineer, fine tune their products and deal with forced lot cost write downs. Meanwhile, banks stepped up efforts to find workout solutions for troubled residential building sites. Foreclosures were a drag on the new construction market as many potential new home buyers succumbed to the temptation of rock bottom distressed sale prices. In 2012, foreclosures will be less of a factor as inventories continue to draw down, but short sales will be a big factor as more owners who are ready to sell find themselves trapped in homes with underwater mortgage balances.

2012 Hampton Roads Real Estate Market Review

ODU-MarketReview2012_REV1 3/1/12 11:04 AM Page 55

Amidst the doom and gloom there are indications of a bottoming in the key metrics of the residential new construction market as the downward trend lines in permits, closings, average sales price and revenue all show clear signs of leveling off. The unprecedented affordability of a new home and near record low interest rates, combined with diminished homebuyer fears of a further decline in home values, have started to attract buyers back into the market. What is needed now is a sustained economic recovery that generates robust employment growth which is the primary driver of a healthy residential new construction market.

2011 VERSUS 2010 RESIDENTIAL NEW CONSTRUCTION HIGHLIGHTS Permits down 9.3% with 289 fewer permits issued totaling 2,811 Closings down 2.8% with 67 fewer closings totaling 2,350 Average Sales Price down 3.4 %, a $10,802 decline to $309,238 Total Revenue down 6.1%, a decline of $46.8 mil to $726,710,422 (See Table # 1 for Details)

Table 1 02

Permits

6700

6978

7271

7854

7359

5035

3393

2911

3100

2811

Closings

5097

4841

5466

5128

4864

4153

3318

2775

2417

2350

Avg Sales Price 215,161 244,113 295,114 363,818 395,928 387,116 361,496 321,711 320,040 309,238 Total Revenue (millions)

1,097

1,182

1,613

1,866

Graph 1 Permits

1,926

1,608

1,199

893

774

727

Graph 2 Closings 6,000 5,000

6,000

4,000 3,000

3,000

2,000 1,000

0 02

500

2,500

400

2,000

300 200

1,500 1,000 500

100

0 02

Graph 4 Total Revenue (in Millions)

Millions

Thousands

Graph 3 Average Sales Price

2012 RESIDENTIAL

9,000

ODU-MarketReview2012_REV1 3/1/12 11:04 AM Page 56

2012 R E S I D E N T I A L

THE TEN YEAR TREND . . . . The run-up to the market peak that occurred from 2002 to 2004 and 2005 was followed by several years of decline in permits, closings, sales price and revenue. But in 2010 and 2011, there were clear signs that the downward trend was leveling off to create a market bottom from which a recovery can take place.

FROM PEAK TO TROUGH . . . . Permits down 64.2% with 5,043 fewer permits issued in 2011 versus 2005 Closings down 57% with 3,116 fewer closings in 2011 versus 2004 Average Sales Price down 21.9%, an $86,690 decline from 2006 to 2011 Total Revenue down 62.3%, a decline of $1.2 billion in 2011 compared to 2006 (See Table # 1 and Graph #’s 1 – 4 for details)

2011 VERSUS 2010 CONSTRUCTION ACTIVITY BY PRODUCT TYPE Detached Detached permits were down 3.4% to 2,044. Closings increased by 2.2% to 1,509 due to an increase in the availability of value priced detached homes in communities like Turtle Creek in Newport News, Hampshire Glen in Hampton and Rose Glen Manor in Virginia Beach. The average sales price declined 3.6% to $345,368 and detached revenue declined by 1.5% to $521.1 mil.

Attached — Multistory Multistory permits were down 14.6% to 105. Closings increased by 11.1% to 160 due to dramatic price concessions at several condominiums. The average sales price declined 6% to $261,194. Multistory condos were the only product type with increased revenues which was due to the significant increase in closings. Multistory revenues totaled nearly $41.8 mil.

Attached — Multiplex Multiplex permits were down 35% to 160. This portion of the residential market was hit hardest and is attributed to first time homebuyers that continue to stay away and those that chose to purchase distressed properties. Closings were down 15% to 198, the largest decline of the four product types. Average prices were down 5.7% to $216,140 as a result of increased competition in this market segment. This group experienced the largest revenue decline of 19.9% to just under $42.8 mil.

Attached — Townhouse/Duplex Townhouse/Duplex permits were down 18.4% to 502 as many buyers opted for detached foreclosure and short sale properties. Closings were down 14.2% to 483 and average sales prices were down 6.5% to $250,440. Revenues experienced the 2nd largest decline of the four product types down 19.8% to $120.9 mil. (See Table # 2 and Graphs # 5 - # 9 for details)

2012 Hampton Roads Real Estate Market Review

ODU-MarketReview2012_REV1 3/1/12 11:04 AM Page 57

Table 2 NEW CONSTRUCTION ACTIVITY 2010 vs 2011 Hampton Roads, Va - by Product Type Product Type *

Permits Closings 2010 2011 % Change 2010 2011 % Change

2010

Avg Sales Price 2011 % Change

2010

Revenue 2011

% Change

Detached Multistory MultiPlex Town/Dup

2116 123 246 615

2044 105 160 502

-3.4% -14.6% -35.0% -18.4%

1477 144 233 563

1509 160 198 483

2.2% 11.1% -15.0% -14.2%

358,378 277,805 229,325 267,807

345,368 261,194 216,140 250,440

-3.6% -6.0% -5.7% -6.5%

529,323,913 521,160,889 -1.5% 40,003,969 41,791,119 4.5% 53,432,711 42,795,705 -19.9% 150,775,239 120,962,709 -19.8%

Totals/Avgs:

3100 2811

-9.3%

2417 2350

-2.8%

320,040 309,238

-3.4%

773,535,832 726,710,422

Graph 5 Permits

-6.1%

Graph 6 Average Sales Price

Town/Dup

Town/Dup 2011 Permits

Multiplex Multistory

Multistory

Detached

Detached 0

500

1000

1500

200

2011 Ave. Sales Prices

Multiplex

2010 Permits

2010 Ave. Sales Prices

2500

100

200

300

400

500

Thousands

Graph 7 Closings

Graph 8 Total Revenue

Town/Dup

Multiplex

2010 Permits

2011 Revenue 2010 Revenue

Multistory Multistory Detached Detached 0

200

400

600

800

1000 1200 1400 1600 Millions

Graph 9 Product Mix 2011 Closings 7%

64%

Detached

Multistory

8% 21%

Multiplex

Town/Dup

100

150

2012 RESIDENTIAL

Town/Dup 2011 Permits

Multiplex

ODU-MarketReview2012_REV1 3/1/12 11:04 AM Page 58

2012 R E S I D E N T I A L

2011 VERSUS 2010 NEW CONSTRUCTION ACTIVITY BY CITY Permits Permits were up in four cities. The largest gainer was Newport News, up 23.5% to 226 permits issued. Permits were down in nine cities/counties. The largest percentage decline was in Isle of Wight County, down 31.4% to 83 permits issued. The largest reduction in the number of permits issued occurred in James City County, down 117 permits for the year.

Closings Closings were up in 2011 compared to 2010 in five cities including Chesapeake, Hampton, Newport News, Portsmouth and Williamsburg. Although Williamsburg had the largest percentage increase of 50%, Newport News had the largest number increase, up 45 closings for a 45.9% increase. Virginia Beach, Suffolk, Norfolk and the counties of Isle of Wight, James City, York and Southampton all saw declines in closings. The largest percentage loser was Southampton County, down 43.8% and the largest number loss was Suffolk with 54 fewer closings in 2011.

Average Sales Price The average sales price declined in all but two cities/counties. James City County and Newport News both saw increases. The James City County average increased 4.2% to $327,752. Newport News increased 6.2% to $221,525. Sales prices in the remaining cities declined as little as -.7% in Virginia Beach to -11.7% in Norfolk.

Closings were up in 2011 compared to 2010 in five cities including Chesapeake, Hampton, Newport News, Portsmouth and Williamsburg.

Revenue There were revenue increases in six cities. The largest percentage and dollar value increase occurred in Newport News with a 54.9% increase in revenue to $31.6 million, an $11.2 million increase compared to 2010. Seven cities/counties showed declines in revenue. York County had the largest percentage and dollar volume decline, down 47.5% with total revenue of $23.8 million, a $21.5 million drop. (See Table # 3 for details)

2012 Hampton Roads Real Estate Market Review

ODU-MarketReview2012_REV1 3/1/12 11:04 AM Page 59

NEW CONSTRUCTION ACTIVITY 2010 vs 2011 Hampton Roads, Va â&#x20AC;&#x201D; By City City/County

Permits

Closings

Avg Sales Price

2010 2011 % Change 2010 2011 % Change CHES

2010

2011

Revenue

% Change

2010

2011

% Change

722

653

-9.6%

545

576

5.7%

310,238

298,111

-3.9% 169,079,477

SOHAM

-30.4%

-43.8%

225,763

214,861

-4.8%

171,711,923

1.6%

1,933,750

-46.5%

GLOUC

109

105

-3.7%

0.0%

259,809

238,463

-8.2%

9,612,946

8,823,119

-8.2%

HAMP

144

168

16.7%

105

130

23.8%

265,293

260,309

-1.9%

27,855,806

33,840,178

21.5%

I of W

121

-31.4%

-33.7%

317,470

299,641

-5.6%

30,159,661

18,877,380

-37.4%

JCC

468

351

-25.0%

334

325

-2.7%

314,511

327,752

4.2% 105,046,608

106,519,476

1.4%

NNEWS

183

226

23.5%

143

45.9%

208,686

221,525

6.2%

20,451,254

31,678,067

54.9%

NORF

173

210

21.4%

165

150

-9.1%

330,013

291,322

-11.7%

54,452,162

43,698,277

-19.7%

3,612,200

PORT

-25.8%

15.6%

196,439

190,488

-3.0%

8,839,770

9,905,385

12.1%

SUFF

303

259

-14.5%

272

218

-19.9%

301,694

296,328

-1.8%

82,060,691

64,599,528

-21.3%

VBCH

587

538

-8.3%

557

540

-3.1%

378,364

375,554

-0.7% 210,748,648

202,799,417

-3.8%

2.9%

50.0%

281,942

256,770

-8.9%

6,202,729

8,473,424

36.6%

148

105

-29.1%

126

-41.3%

360,428

322,304

-10.6%

45,413,880

23,850,498

-47.5%

-9.3% 2417 2350

-2.8%

320,040

309,238

-3.4% 773,535,832

726,710,422

-6.1%

WMSBG YORK/POQ

Totals/Avgs: 3100 2811

HAMPTON ROADS 2011 TOP SUBDIVISIONS

The top subdivision for closings and revenue for 2011 was Colonial Heritage in James City County by The Lennar Corporation. Of the 63 closings recorded, 44 were detached and 19 were duplexes with average closing prices of $353,564 and $258,368. Hampshire Glen was No 2 for closings with 54 recorded and divided between HHHunt Homes (46), Sadler Building Corp (5) and Stylecraft Homes (3). Southmoor at Ridgely Manor in Virginia Beach was No 3 with 46 closings recorded and an average price of $163,809. Sherwood Lakes in Virginia Beach was the No 2 community for revenue in Hampton Roads with $17,916,153 in revenue divided between Home Associates of VA with $11,378,816 and HBD Building with $6,537,337. Heritage Park in Virginia Beach was the No 3 community for revenue with 29 closings totaling $17,690,898. There were eight builders with closings in Heritage Park and L R Hill Custom Builder was the top builder with 10 closings recorded and $5,751,675 in revenue during 2011. (See Table # 4 for details)

2012 RESIDENTIAL

For 2011, the top two subdivisions for permits were both attached residential products. The No 1 subdivision was Kings Pointe at Western Branch in Chesapeake with 70 permits for a mixture of non-elevator served multi-story condominiums and four-plex condominiums. The No 2 subdivision for permits was Windy Knolls by Beco Construction in Newport News which had 63 permits issued for three 21-unit buildings. The top single family detached subdivision for permits was Hampshire Glen in Hampton. Of the 60 permits issued, 57 were to HHHunt Homes.

ODU-MarketReview2012_REV1 3/1/12 11:04 AM Page 60

2012 R E S I D E N T I A L

Ryan Homes is actively building in 11 new communities on the Peninsula including eight detached and three townhome communities. Their top detached subdivision for permits was Turtle Creek in Newport News with 36 permits, and for closings was Fenwick Hills in James City County with 31 closings recorded and Greensprings West in James City County was their top community for revenue with $10,208,067.

HAMPTON ROADS 2011 TOP BUILDERS Ryan Homes was the top builder in Hampton Roads for permits, closings and revenue. Ryan Homes is actively building in 11 new communities on the Peninsula including eight detached and three townhome communities. Their top detached subdivision for permits was Turtle Creek in Newport News with 36 permits, and for closings was Fenwick Hills in James City County with 31 closings recorded. Greensprings West in James City County was their top community for revenue with $10,208,067. HHHunt Homes was the No 2 builder for permits with 151 issued during 2011. HHHunt was active in seven communities on the Peninsula during the year including five detached and two attached. Most of the permits were issued to Hampshire Glen in Hampton and Meridian Parkside in Newport News with 57 permits each. The Dragas Companies was the No 3 builder for permits with 134 issued across four communities in Chesapeake including Brighton Park, Kings Pointe, Oakbrooke Crossing and their latest community, The Grove at the Arboretum. Dragas was the No 2 builder for number of closings with 155 recorded during 2011. Southmoor in Virginia Beach had the most closings at 46. HHHunt Homes was the No 3 builder for number of closings recorded with 106. Hampshire Glen in Hampton had the most with 46. (See Table # 5 for details)

2012 Hampton Roads Real Estate Market Review

ODU-MarketReview2012_REV1 3/1/12 11:04 AM Page 61

Table 4 Permits Subdivision

Closings Permits Issued

Subdivision

Closings Recorded 63

Kings Pointe, C

Colonial Heritage, J

Windy Knolls, N

Hampshire Glen, H

Southmoor, V

Meridian Parkside, N

Sherwood Lakes, V

Brighton Park, C

Colonial Heritage, J

Culpepper Landing, C

Whitehall, J

Sajo Farm, V

Average Price

Subdivision

324,854 1

Total Revenue

Colonial Heritage, J

20,465,794

281,509 2

Sherwood Lakes, V

17,916,153

163,809 3

Heritage Park, V

17,690,898

407,185 4

Hampshire Glen, H

15,201,482

182,212 5

Sajo Farm, V

13,715,791

Oakbrooke Crossing, C

179,063 6

East Beach, R

13,162,884

Meridian Parkside, N

195,965 7

Woodbridge Point, V

12,131,975

Sajo Farm, V

391,880 8

Greensprings West, J

11,872,067

Woodbridge Point, V

367,636 9

Culpepper Landing, C

10,198,831

10 Turtle Creek, N

Fenwick Hills, J

283,521 10

Fenwick Hills, J

9,072,675

11 Woodbridge Point, V

Harbour Breeze Estates, S

267,005 11

Rose Glen Manor, V

8,775,450

12 Parkside, S

Heritage Park, V

610,031 12

Harbour Breeze Estates, S

8,277,167

13 Oakbrooke Crossing, C

Village at Quarterpath, W

244,446 13

Brighton Park, C

8,017,313

14 Riverwalk Townes, Y

Riverwalk Townes, Y

240,719 14

The Westin, V

7,973,000

15 East Beach, R

Culpepper Landing, C

364,244 15

Stonehouse, J

7,890,241

Builders

Closings Recorded

Average Price

178

309,177

Table 5 Permits

Builders 1

Ryan Homes

Total Revenue

1 Ryan Homes

205

Ryan Homes

55,033,436

2 HHHunt Homes

151

Dragas Companies

155

176,032

Chesapeake Homes

30,054,644

3 Dragas Companies

134

HHHunt Homes

106

244,019

Dragas Companies

27,284,891

4 Chesapeake Homes

Chesapeake Homes

104

288,987

HHHunt Homes

25,865,970

5 McQ Bldrs & Dev Inc

McQ Bldrs & Dev Inc

285,894

McQ Bldrs & Dev Inc

22,585,650

6 Beco Constr

Lennar Corp

324,854

Lennar Corp

20,465,794

7 Bishard Dev Corp

Terry Peterson Res

298,764

Terry Peterson Res

18,822,156

8 Lennar Corp

Napolitano Homes

361,576

Napolitano Homes

16,994,085

9 Terry Peterson Res

Ashdon Bldrs

329,452

Home Assoc of VA

16,592,640

10 Pace Constr & Dev

10 Hearndon Constr

288,787

Ashdon Bldrs

15,154,798

11 Ashdon Bldrs

11 Home Assoc of VA

404,699

Stephen Alexander Homes

13,830,947

12 Hearndon Constr

12 Moody Dev Corp

205,234

Hearndon Constr

13,284,214

13 Home Assoc of VA

13 Bishard Dev Corp

305,237

Pace Constr & Dev Inc

11,978,727

14 Virginia Ent

14 Pace Constr & Dev

342,249

Bishard Dev Corp

11,293,767

15 Platinum Homes

15 Franciscus Homes

236,978

Armada Hoffler

10,343,400

2012 RESIDENTIAL

Builders

Closings Permits Issued

ODU-MarketReview2012_REV1 3/1/12 11:04 AM Page 62

2012 R E S I D E N T I A L

EXISTING HOMES The Hampton Roads existing residential real estate market showed signs of stability throughout the year 2011. Existing home closings picked up from where the leading indicators left off at the end of 2010. Even without the influence of the federal first-time home-buyer’s tax credit, closings on existing homes rose, though many of those closings were of distressed homes. Not all quarters of 2011 were positive. Although the first, third and fourth quarters experienced growth in closings of existing homes each month, the second quarter was negative when compared to the second quarter of 2010. Overall, the region flourished as inventory levels dropped and closings rose for the vast majority of local cities and counties. The active inventory of existing homes for sale in the region for 2011 fell as measured at year end 12% when compared to 2010. There were 8,614 existing homes for sale at the end of 2011 whereas there were 9,809 existing homes for sale at the end of 2010. The sharp drop in existing homes for sale and the consistent growth of closings during the majority of 2011 caused the months’ supply of inventory in the Hampton Roads region to fall to 6.9 months. A measure between six to eight months inventory is within most experts’ ideal range of supply to signify a healthy market. However, this particular measure does not account for the added inventory new construction homes contribute to the entire real estate market supply.

$250,000 $215,000

21,890

$219,900 $208,000

$200,000

$205,000 $194,000

$194,500

15,017

14,265

14,517

$157,900

$130,000

$150,000

15,526

23,209

20,881

$224,900

18,572

18,430

16,612

15,000

19,604

20,000

24,207

25,000

$117,050

10,000

$100,000

$109,900 $99,999

$51,000

$55,200

$53,800

68,200

$68,200

Existing Active Homes for Sale

2003

2004

2005

Existing Home Closings

2012 Hampton Roads Real Estate Market Review

2006

2007

2008

Existing Home Median SP

2009

2010

8,614

9,809

$50,000

10,077

6,982

4,313

2002

2,093

3,831

2001

2,015

4,873

2000

2,801

5,538

$49,300

9,055

$64,100

5,000

$65,100

$60,300

$59,100

$56,600

2011

HUD Median Household Income

ODU-MarketReview2012_REV1 3/1/12 11:04 AM Page 63

Existing Real Estate Closings 45%

2,500 Distressed Existing Home Closings

Existing Home Closings

% Distressed of Closings 40%

2,000

35% 30%

1,500 25% 20% 1,000 15% 10%

500

5% 0%

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11

Average Days on Market for Existing Homes 120

101 100

84 80

2009

2010

61 60

46 36

2004

2005

20 0

2000

2001

2002

2003

2006

2007

2008

Average Days on Market for Existing Homes

Existing home closings rose 5% in 2011 to 15,017 from 14,313 closed in 2010. Virginia Beach had the largest percentage of the existing closings at 31%, down from the 33% measured in 2010. Chesapeake, Norfolk and Newport News each had 10% or more of the existing home closings. Norfolk showed significant growth of existing home closings for a total of 14% in 2011. The rest of the local cities and counties experienced less than a 1% gain or loss as a percentage of all existing home closings in 2011. Once the federal first-time home-buyer tax credit ended in 2010, sale prices of existing homes in the region began to fall. The trend continued throughout 2011 for existing home closings. Each month, measured on a year-over-

2011

2012 RESIDENTIAL

ODU-MarketReview2012_REV1 3/1/12 11:04 AM Page 64

2012 R E S I D E N T I A L

year basis, experienced median sale price declines. Overall, the regionâ&#x20AC;&#x2122;s median sale price of existing homes fell to $194,900 in 2011. This 5% decline follows the 1% fall in 2010 and a prior 5% drop in 2009. Since the peak median sales price in 2007 of $224,900, the regionâ&#x20AC;&#x2122;s median sales price for existing homes has fallen 13%. In addition to the median sale price for existing homes being lower in 2011, the average sale price of these same homes in 2011 was down 10% when compared to 2010. Not a single city or county in the Hampton Roads region experienced a median sale price increase for 2011. Suffolk and Williamsburg fared the best with each showing flat median sales prices of existing homes for the year. However, Williamsburg had a 9% increase in the average sale price of existing homes for the year in 2011 when compared to 2010 statistics. It was the only city or county to measure a positive increase in either median or average sales price of existing homes during 2011. James City County had the highest median existing home sale price at $285,000 in 2011, down 5% from the median sale price of $295,000 in 2010. York County was the second highest median in 2011 at $270,000, down from $278,000 in 2010. Norfolk, Portsmouth, Poquoson, and Currituck County experienced median sale price drops of 7% to 8%. At the other

$230,000 $230,000 $223,950

$229,000 $215,500 $215,250

WMBG

$173,500 $152,750

VBCH

$150,000

$135,000

$150,500 $135,000 $124,850

$230,000 $212,000 $210,000

$290,000 $279,000 $270,000

$293,700 $270,000 $250,000 $175,000 $164,900 $152,100

$265,000

$183,900 $172,250 $162,500

$169,250 $155,000 $146,900

$200,000

$201,000 $198,350 $190,625

$232,500 $213,750 $205,000

$250,000

$225,500 $230,000 $223,950

$300,000

$215,000 $179,800

$254,950 $256,000 $245,000

$350,000

$301,900 $295,000 $285,000

Existing Homes Median Sale Prices

$100,00

2009 Median SP Existing Homes

2012 Hampton Roads Real Estate Market Review

2010 Median SP Existing Homes

YORK

SURC

SUFF

PORT

POQ

NORF

NNEW

MATC

JCC

IWC

HAMP

GLOC

CURR

CHES

$50,000

2011 Median SP Existing Homes

ODU-MarketReview2012_REV1 3/1/12 11:04 AM Page 65

Closings By Type and City City/ County CHES CURR GLOC HAMP IWC JCC MATC NNEW NORF POQ PORT SUFF SURC VBCH WMBG YORK Totals

DET Sold 2010 1840 27 212 958 204 368 19 1112 1539 71 839 697 24 3028 32 345 11315

DET Sold 2011 1907 44 235 999 237 407 28 1173 1764 85 925 690 29 3003 37 355 11918

% Change 10-11 3.64% 62.96% 10.85% 4.28% 16.18% 10.60% 47.37% 5.49% 14.62% 19.72% 10.25% -1.00% 20.83% -0.83% 15.63% 2.90% 5.33%

ATT Sold 2010 339 0 7 122 32 77 0 234 212 10 105 83 0 1640 23 114 2998

ATT Sold 2011 371 0 6 112 24 70 1 273 289 7 91 87 0 1643 22 103 3099

% Change 10-11 9.44% 0.00% -14.29% -8.20% -25.00% -9.09% 0.00% 16.67% 36.32% -30.00% -13.33% 4.82% 0.00% 0.18% -4.35% -9.65% 3.37%

Total 2010 2179 27 219 1080 236 445 19 1346 1751 81 944 780 24 4668 55 459 14313

Total 2011 2278 44 241 1111 261 477 29 1446 2053 92 1016 777 29 4646 59 458 15017

% Change 10-11 4.54% 62.96% 10.05% 2.87% 10.59% 7.19% 52.63% 7.43% 17.25% 13.58% 7.63% -0.38% 20.83% -0.47% 7.27% -0.22% 4.92%

end of the spectrum, Portsmouth had the lowest median sale price for existing homes at $124,850. Hampton had the next lowest median sale price closed at $146,900 for existing homes in 2011, 5% lower than the average price of $155,000 in 2010.

Attached existing homes market did not experience strong gains across as many cities and counties within the Hampton Roads region in 2011. For the year, the region experienced a 3% increase in attached existing home closings to 3,099 in 2011 from 2,998 in 2010. A handful of cities saw an increase in the number of attached existing homes that closed in 2011. Norfolk had the largest year-over-year gain of 36%, followed by Newport News with a 17% increase. Poquoson and Isle of Wight County had the largest year-over-year drop-offs, 30% and 25% respectively. The median sale price of attached existing home closings in 2011 declined 6% to $155,000 in 2011 from $165,000 in 2010. Distressed homes, those that are bank owned or short sales, increased both their presence and effects on the existing residential real estate market in Hampton Roads during 2011. Throughout the year, distressed homes comprised between 22% and 26% of the active existing homes for sale in the region on a monthly basis, peaking in December. Virginia Beach, Chesapeake and Norfolk showed the most activity pertaining to distressed existing homes. This is largely due to the population densities within these cities. Distressed homes in the Hampton Roads region also comprised between 29% and 42% of closed existing home sales during 2011 on a monthly basis. The peak for these sales was in February. The percentage then tapered off sharply and became relatively flat for the remainder of the year. From May 2011 until

2012 RESIDENTIAL

Detached existing home closings comprised 11,918 or 79% of all existing home closings and increased 5% from 11,315 in 2010. Within the Hampton Roads region, only Suffolk and Virginia Beach did not experience growth in the number of detached existing home closings; down year-over-year by 1%. Most cities and counties showed year-over-year detached existing home sales gains of 10% or larger. For instance, Norfolk increased 15% from 1,539 detached existing home sales in 2010 to 1,764 in 2011. Another area with large year-over-year gains was Isle of Wight County; it saw a 16% increase in the number of detached existing home sales to 237 in 2011 compared to 204 in 2010.

ODU-MarketReview2012_REV1 3/1/12 11:04 AM Page 66

2012 R E S I D E N T I A L

December 2011, the percentage of closed existing home sales comprised by distressed homes ranged from 29% to 34%, as measured on a monthly basis. The high percentage of distressed existing home sales when compared to all existing home sales continued to have a negative impact on the overall median sale price of existing homes in the region. The lower median sale price of existing distressed homes of $130,000 for 2011 was $84,000 less than the median sale price for existing non-distressed homes. This contributed downward pressure on the marketâ&#x20AC;&#x2122;s overall median sale price for existing homes. At $214,000, the median sale price of non-distressed homes saw a $6,000 decline from 2010, negating the $5,000 increase seen the year prior. The average number of days an existing home spent on the market before closing in 2011 was 101 days, an increase of two weeks when compared to the 2010 average of 87 days. Despite the statisticâ&#x20AC;&#x2122;s susceptibility to manipulation, the average is the highest historically since tracking began and has more than tripled since the lowest average of 26 days on the market in 2004. The average days on market has climbed an average of 10 days per year since 2004. As 2011 ended and 2012 progresses, there are early signs of growth in the existing homes real estate market of Hampton Roads. The rising trends in closings during the fourth quarter of 2011 and the sharp rise of homes under contract in December 2011 show promise in the beginning stages of 2012. The key leading indicator of under contract sales showed a significant jump of 21% in December 2011 when compared to December 2010. In comparison, there was a similar rise, though not as pronounced, at the end of 2010 leading into a strong first quarter in 2011 and, ultimately, a strong year. Although it is likely that not all of the contracts written in December 2011 will become closed existing sales, those that do close, should turn into a solid base for growth in the existing residential real estate market of Hampton Roads in 2012.

Closings Concentration 2011

15%

2% 7% 2%

31%

3% 0% 10%

VBCH WMBG YORK CHES CURR GLOC HAMP IWC

JCC MATC NNEW NORF POQ PORT SUFF SURC

0% 14%

5% 7%

2012 Hampton Roads Real Estate Market Review

ODU-MarketReview2012_REV1 3/1/12 11:04 AM Page 67

ABOUT THE DATA: The underlying data the resale home closing statistics are based upon is the collection of those closings belonging to Real Estate Information Network, Inc. (REIN) members only. The data for each sales transaction was input by hand and therefore may contain some errors at the individual home sale level. But, as a collection, this data represents the timeliest and most accurate dataset of resale homes for the entire Hampton Roads region. The strength of the dataset lies within its proximity to origin and depth. The MLS (Multiple Listing Service) data is considered the deepest of any resale home database due to the sheer number of rich data fields within the database and the information contained within. The information is also being keyed by either the actual listing agent or administrative staff of the same real estate firm. The combination of these two key elements allows the MLS data to be more precise than many other information repositories and vastly timelier. But, MLS data does have weaknesses. Most notably is the portion of the dataset at the edges of the MLSâ&#x20AC;&#x2122;s boundaries. Usually, MLS membership wanes around the bor-

real estate broker may choose to join only one of the two or more MLSes that cover the particular area. For the local MSA and the region covered by REIN, this translates into less than ideal accountability for sales in North Carolina, Northern Neck areas of Virginia, and the Williamsburg area. As for REIN, it is an independent MLS owned by broker stockholder members. Currently, there are approximately 500 real estate firms with over 5,800 real estate agents serving the entire Hampton Roads region.

2012 RESIDENTIAL

ders of the coverage area, due to overlapping MLSes. In such overlap areas, any given

ODU-MarketReview2012_REV1 3/1/12 11:04 AM Page 68

To Franklin and Southampton

RESIDENTIAL SUBMARKETS

(NEW CONSTRUCTION)

(EXISTING HOMES)

Southside

Peninsula

Southside

Peninsula

Chesapeake Franklin/Southampton Isle of Wight Co Norfolk Portsmouth Suffolk Virginia Beach

Gloucester Hampton James City County Newport News York County

Chesapeake Currituck Isle of Wight Co Norfolk Portsmouth Suffolk Surry Virginia Beach

Gloucester Hampton James City County Matthews Newport News York County

ODU-MarketReview2012_REV1 3/1/12 10:55 AM Page 69

HAMPTON ROADS MARKET REVIEW

MULTIFAMILY Charles Dalton

Data Analysis

Real Data

Financial Support

The E. V. Williams Center for Real Estate and Economic Development (CREED) functions and reports are funded by donations from CREED IPAC and Council Advisory Boards, organizations and individuals.

Disclosure

2 0 1 2 M U LT I - FA M I LY

Author

ODU-MarketReview2012_REV1 3/1/12 10:57 AM Page 70

2012 M U L T I - F A M I LY

General Overview

he Norfolk-Virginia Beach-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 95,000 units within conventional apartment communities of 50 or more units each. The Norfolk-Virginia Beach-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; also known as South Hampton Roads. The cities with the highest concentration of units are Virginia Beach and Newport News, which accounts for nearly one half of the regionâ&#x20AC;&#x2122;s apartment units.

Submarket Percentages Suffolk 1%

Williamsburg 4%

York County 2%

Virginia Beach 25%

Chesapeake 11%

Hampton 12%

Portsmouth 8%

Newport News 22% Norfolk 15%

The Hampton Roads apartment market has remained stable over the past 18-24 months. Occupancy rates for the overall market are 94% which is higher than most major metros in the southeast. Looking ahead, apartments should see improving fundamentals due to strengthening demand for rentals in lieu of home ownership. Development activity increased over the second half of 2010 as investors and developers looked to take advantage of a rebounding rental market. As of October 2010, there were nearly 2,000 units under construction; however, this equates to only a 2% growth rate in supply over the next 12-24 months which will help keep occupancies at or above current levels.

The average quoted rental rate is $926, with one-bedroom rents averaging $825 per month, two-bedroom units averaging $932 per month, and three-bedroom units reporting an average rental rate of $1,103 per month. Average rental rates from existing inventory increased by $14.60 in the last twelve months. Although rents have risen in each of the last three years, rent growth over the past 18 months has lagged the larger increases recorded in many other cities.

2012 Hampton Roads Real Estate Market Review

ODU-MarketReview2012_REV1 3/1/12 10:57 AM Page 71

HISTORICAL APARTMENT DEVELOPMENT Norfolk-Virginia Beach-Newport News Development of apartment units in this market peaked during two time periods, the early 1970s and the late 1980s. Although current development activity is being slowed by tighter lending restrictions, there are nearly 2,000 units expected to come on line within the next 18 months with less than 4,000 housing units of any type permitted in 2011.

TABLE I Historical Apartment Development 25,000

15,000

10,000

5,000

0 Pre-‘64

‘65-‘69

‘70-‘74

‘75-‘79

‘80-‘84

‘85-‘89 Year Built

‘90-‘94

‘95-‘99

‘00-‘04

‘05- ‘09

‘10-‘12

2 0 1 2 M U LT I - FA M I LY

Number of Units

20,000

ODU-MarketReview2012_REV1 3/1/12 10:58 AM Page 72

2012 M U L T I - F A M I LY

MULTI-FAMILY PERMIT ACTIVITY Historical Multi-Family Building Permits Norfolk-Virginia Beach-Newport News Overall housing development in the region was at its peak from 2002-2006 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 5,223 in 2009 which is less than half of the activity at the peak of the market in 2005. Based on single and multifamily permits issued, the slow down in new housing starts is expected to continue with less than 4000 units permitted in 2011. Multi-family permit activity, which includes rental and for-sale units, was strongest in 2005. However, much of the permit activity up until 2009 had 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 forsale arena. Multifamily development and apartments in particular, saw a surge in activity in 2011 with more than 2400 multi-family, including rental and for-sale, units permitted compared to only 761 units in 2010.

TABLE II Annual Multi-Family Permit Activity

3,200

3,085

3,000 2,800 2,600

2,339

2002

2003

2004

2,336

2,292

2,000

1,200

1,159

1,400

1,315

1,600

1,811

1,800

1,519

Permits Issued

2,200

2,355

2,400

1,000

761

800 600 400 200 0 2001

2012 Hampton Roads Real Estate Market Review

2005

2006

2007

2008

2009

2010 (thru Nov.)

ODU-MarketReview2012_REV1 3/1/12 10:58 AM Page 73

TABLE III Multi-Family Permits Issued â&#x20AC;&#x201D; Past Year

419

400

200

208

178

223

200 100

234

300

191

Number of Permits

500

Sep. 2011

Oct. 2011

0 Nov. 2010

Dec. 2010

Jan. 2011

Feb. 2011

Mar. 2011

Apr. 2011

May 2011

Jun. 2011

Jul. 2011

Aug. 2011

Nov. 2011

APARTMENT DEVELOPMENT ACTIVITY As of the 4th quarter of 2011, there were 1,940 apartment units under construction within twelve communities in the Norfolk-Virginia Beach-Newport News market. There are an additional 2,563 apartment units proposed to start construction within the next year. Chesapeake, Newport News, Norfolk and Virginia Beach are the most active areas for new apartment development with twenty-three communities either underway or in planning.

TABLE IV Apartment Development Activity (October 2011)

2 0 1 2 M U LT I - FA M I LY

1,100 1,000

Number of Units

900 800 700 600 500 400 300 200 100 0 Chesapeake

Hampton

Newport News

Norfolk

Under Construction

Portsmouth

Suffolk

Virginia Beach Williamsburg

Proposed

York County

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2012 M U L T I - F A M I LY

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 Norfolk-Virginia Beach-Newport News area is expected to absorb between 600 and 900 units annually. The collapse of the housing markets nationwide and the weakening economy caused a significant drop in demand for all types of housing in 2008. The area experienced a surge in demand for rental units in 2009 and 2010. This was due in part to the depressed for-sale housing market and householder preferences switching from ownership to renting. The area saw a decrease in demand in 2011 with only 628 units absorbed. This was less than half the rate of absorption occurring in 2009 and 2010. The slowdown in demand may be due in part to the same force (depressed for-sale housing market) that bolstered demand in the prior two years. Only this time, home prices and mortgage rates have dropped to such low levels that ownership is looking more financially appealing than renting in some cases. In addition, some distressed single family and condominium properties are moving into the rental pool and adding a new source of supply to compete with apartments for renters. Although the outlook for rental demand is expected to remain strong for the next several years, job growth is the ultimate driver for housing demand and a rebounding job market will be needed to sustain demand long term.

TABLE V Absorption 2200 2000 1800 1600

Units Absorbed (Demand)

1400 1200 1000 800 600 400 200 0 -200 -400 -600 -800 2002

2003

2004

2012 Hampton Roads Real Estate Market Review

2005

2006

2007

2008

2009

2010

2011

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Table VI Submarket Absorption 2011 700

Absorption (Annual)

600 500 400 300 200 100 0 -100 -200 Chesapeake

Hampton

Newport News

Norfolk

Portsmouth

Suffolk

Virginia Beach Williamsburg

York County

VACANCY The overall vacancy rate for the Norfolk-Virginia Beach-Newport News market as of October 2011 was 6.4%, up from 5.7% in 2010. Vacancy rates are expected to remain in the 6% range through 2013.

TABLE VII Overall Vacancy

2 0 1 2 M U LT I - FA M I LY

7.5 7.0 6.5 6.0

Vacancy Rate (Annual)

5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 .5 0 2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

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MULTI-FAMILY SUBMARKETS Southside

Peninsula

Chesapeake

Hampton

Norfolk

Newport News

Portsmouth

York County

Suffolk

Williamsburg

Virginia Beach

2 0 1 2 M U LT I - FA M I LY

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2012 M U L T I - F A M I LY

Most submarkets experienced a slight rise in vacancies over the past year other than Williamsburg which saw its vacancy rate improve slightly. Although vacancy rates rose modestly in the past year, the areaâ&#x20AC;&#x2122;s vacancy rate remains much lower than most other cities in the southeast. Hampton Roads historically has maintained a relatively healthy vacancy rate even in weak economic cycles due to the strong and consistent demand from the military bases for rental housing in the area.

Table VIII Submarket Vacancy Rates 9% 8%

Number of Units

7% 6% 5% 4% 3% 2% 1% 0% Chesapeake

Hampton

Newport News

Norfolk

Portsmouth

Suffolk

October 2010

Virginia Beach

Williamsburg York County

Overall

October 2011

RENTAL RATES As of October 2011, the average rental rate in Norfolk-Virginia Beach-Newport News was $926.

Table IX Average Rental Rates (New & Existing Communities) $1000 $900 $800

Average Rental Rate

$700 $600 $500 $400 $300 $200 $100 $0 2002

2003

2012 Hampton Roads Real Estate Market Review

2004

2005

2006

2007

2008

2009

2010

2011

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AVERAGE RENTS Average overall rents ranged from a low of $821 in Newport News to a high of $1,020 in Chesapeake. Newport News, Portsmouth, Suffolk and Hampton all reported rents lower than the average rent of $926 per month, while Norfolk, Williamsburg, York County, Virginia Beach and Chesapeake all reported rents higher than the average overall rent.

TABLE X Average Rent by Submarket â&#x20AC;&#x201C; October 2011 $1100

Average Rent (Lowest to Highest)

$1000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 Newport News

Portsmouth

Suffolk

Hampton

Overall

Norfolk

Williamsburg

York County

Virginia Beach

Chesapeake

2 0 1 2 M U LT I - FA M I LY

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2012 M U L T I - F A M I LY

MANAGEMENT There were over 470 conventional apartment communities with more than 50 units surveyed in the Hampton Roads region. Of the 92,000+ apartment units surveyed, the top five firms manage one-third of these units. The majority of the management firms oversee one or two apartment communities and have 500 or less units under management.

Table XI Top 10 Management Companies S.L. Nusbaum Realty Co. Harbor Group Management Co. Drucker & Falk Real Estate Lawson Companies Inc. Breeden Management Company Weinstein Properties Real Estate Kotarides Companies Property Management Ripley-Heatwole Company, Inc. Perrel Management Company, Inc. Bonaventure Group Inc. 0%

10%

REGIONAL TRENDS Richmond Richmond has over 60,000 conventional apartment units within communities of at least 50 units. The areaâ&#x20AC;&#x2122;s apartments hit bottom in the fourth quarter of 2009 and first quarter of 2010 when occupancies fell to 90% and rents declined by (-3.5%) for the year. Since that time Richmond has seen a strong resurgence in rental demand and occupancies reached nearly 93% in 2011. Rents also showed modest growth over the past two years with rents now averaging $855 per month.

Roanoke Roanoke has fewer than 10,000 conventional apartment units among communities of at least 30 units. Roanokeâ&#x20AC;&#x2122;s apartment market coped better than most markets during the past recession. This was due in large part to the fact that there has been minimal new apartment development in Roanoke over the past several years which has kept the rental supply at a manageable level. Occupancy rates in 2011 were 93.9% with rent averaging $693 per month.

2012 Hampton Roads Real Estate Market Review

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HAMPTON ROADS MARKET REVIEW

CAPITAL MARKETS & REAL ESTATE FINANCE Victor L. Pickett Senior Vice President, Regional Manager Grandbridge Real Estate Capital LLC

Financial Support

The E. V. Williams Center for Real Estate and Economic Development (CREED) functions and reports are funded by donations from the CREED IPAC and Council Advisory Boards, individuals and organizations.

Disclosure

2 0 1 2 CAPITAL MARKETS & REAL ESTATE FINANCE

Author

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2012 CAPITAL MARKETS & REAL ESTATE FINANCE

General Overview

ontrary to popular belief, there is pent up demand by commercial real estate lenders to make commercial real estate loans.

For the first time in the history of the Mortgage Bankers Association (MBA), the Association is forecasting commercial/multifamily origination volume. In 2012, the MBA is forecasting CRE loan origination to be $230 billion. This production volume forecasted by the MBA, when compared to maturing mortgages on multifamily/commercial real estate in 2012 alone, falls very short of the $400 billion that will be maturing this year. While interest rates remain at historically low levels, lenders are reluctant to take on additional risk or relax their current underwriting standards to meet this refinance volume. The pent up demand for quality loans (capital) by the commercial real estate lenders will far exceed the availability of stabilized quality assets. The question then remains, will lenders be forced to take on more risk for more yield, thus filling the capital needs of borrowers to refinance the large number of maturing loans in 2012 and beyond? Hampton Roads has been a stable market throughout recent history for institutional lenders and banks that make investments in commercial real estate. As the market continues to stabilize and basic fundamentals for all asset classes of commercial real estate trend positive, this capital will seek real estate investments in our region.

COMMERCIAL REAL ESTATE FINANCE The fundamentals of commercial real estate (CRE) turned more positive in 2011. First mortgage debt placements were higher for life insurance companies than any other time. Agency lenders continue to have success in originating multifamily loans. Commercial real estate trends have rebounded significantly since reaching bottom in 2009. Most all property types showed economic stability and growth in 2011. Both 2012 and 2013 should be positive transitional years as occupancies increase and rent growth continues to improve. Supply and demand will stay in check, with no new major developments in process, and fundamentals will continue to improve, albeit slowly. Commercial real estate finance, as it relates to permanent first mortgage debt, had its best year since the bubble of 2006 and 2007. Production or origination volume was up with lender participation having included life insurance companies, commercial mortgage-backed securities (CMBS) participants, banking institutions, HUD and the government sponsored entities (GSE) of Fannie Mae and Freddie Mac. With fundamentals improving across all sectors, CRE finance lenders will continue to be very active in 2012 with equal or increased allocations.

2012 Hampton Roads Real Estate Market Review

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2011 Commercial/Multifamily Originations (In Billions) Life

2007

2009

2011*

$42

$17

$50

$230

$30

$13

Fannie

$26

$21

$24

Freddie

$22

$16

$20

$324

$65

$137

CMBS HUD

Total Volume

Sources: MBA, ACLI, Fannie Mae & Freddie Mac, HUD *Actual through 3rd quarter with 4th quarter estimated

The upturn of new capital moving back into the commercial real estate market in 2011 and 2012 is very positive for owners and investors. This momentum comes at a critical time as a large number of loans in the portfolio of banking institutions, life insurance companies, CMBS lenders and GSEs are maturing. A significant number of loans and $400 billion in dollar volume will mature in 2012. Loan maturities alone will increase every year through 2017, the single largest year for maturities estimated at $1.5 trillion. This debt maturity, coupled with global deleveraging, slow economic growth, increased regulation, and paranoid markets will create continued refinance and financing challenges to both lenders and borrowers in 2012 and beyond.

CRE Mortgage Debt Outstanding 2011 Q3 ($millions)

% of total

Bank and Thrift

793,004

33.4%

CMBS, CDO and other ABS issues

606,501

25.6%

Agency and GSE portfolios and MBS

337,500

14.2%

Life Insurance Companies

309,553

13.1%

Other

324,650

13.7%

Total

2,371,208

100%

Source: Mortgage Bankers Association

2 0 1 2 CAPITAL MARKETS & REAL ESTATE FINANCE

Debt originations for commercial and multifamily real estate lenders increased to $137 billion in 2011. As you can see from the origination chart, lenders are more confident and capital will continue to flow back into CRE, assuming fundamentals continue to improve.

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2012 CAPITAL MARKETS & REAL ESTATE FINANCE

Between 2012 and 2017, there will be approximately $2 trillion of CMBS loans maturing according to TREPP. It becomes very apparent that the historical annual production volume of life insurance companies and CMBS lenders will not fill the void of capital necessary to refinance these maturities as noted above. Based on the most recent TREPP Rollover Summary, borrowers are experiencing difficulties in finding lenders to take out the CMBS loans that are maturing today. In 2011, only 49% of maturing loans in all CMBS maturities were refinanced. This means 51% of the maturing loans in 2011 were amended, extended or restructured by pay down, rate adjustment, fees etc., or foreclosure.

Percentage of Loan Payoff in 2011 by Month % by Balance at Maturity Date

% by Count at Maturity Date

Jan 2011

38.7%

49.4%

Feb 2011

38.4%

47.2%

Mar 2011

55.5%

52.2%

Apr 2011

47.5%

53.8%

May 2011

34.9%

48.1%

Jun 2011

42.4%

56.1%

Jul 2011

39.6%

49.4%

Aug 2011

39.5%

43.1%

Sept 2011

64.4%

55.6%

Oct 2011

41.8%

44.2%

Nov 2011

47.1%

50.0%

Source: TREPP

As loans mature, the need for loan extensions between the existing lender and the borrower becomes necessary for various reasons. In most cases, these assets are over leveraged but are cash flowing, thus the existing loan is current, but the available loan terms in todayâ&#x20AC;&#x2122;s financing market cannot meet the loan request required. The financing gap can range from loan amounts in excess of the value to loans that may be only 5% to 10% higher in leverage than what is financeable. (Not all cases are leverage, but for the purposes of this discussion, leverage will be the focus.) Borrowers or service providers are to be proactive on loan maturities. It is very important to start early in discussions with both the existing lender as well as alternative sources for new debt. Seeking professional advice 12 to 24 months in advance is highly recommended. The financing market is always changing and it is critical to stay abreast of current financing terms and conditions as well as trends relative to financing needs. Competition will be fierce for new loans and lenders will be very selective in 2012.

2012 Hampton Roads Real Estate Market Review

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Outlined below are the basic terms and conditions available in the multifamily and commercial real estate debt market today. It should be noted and understood that every real estate asset is different and each loan situation will vary as to the final terms.

PROPERTY TYPES IN ORDER OF PREFERENCE TO THE LENDER: Apartments

Industrial

Grocery Anchored Shopping Centers

CBD Office

Credit, Single-Tenant Properties on long-term leases

Suburban Office

Shadow Anchored Retail

Self-Storage

Medical Office

Well flagged limited- or full-service hotels

LOAN-TO-VALUE

INTEREST RATES The initiative by the Federal Reserve to keep base interest rates low has helped drive mortgage rates for commercial real estate to historical lows. Mortgage rates are derived by taking an index, in most cases the 10-year U.S. Treasury rate, and adding a spread or credit adjustment to the base rate for an overall interest rate. During 2009 and most of 2010, lenders charged a high spread due to the perceived risk, and consequently, spreads were at an all time high. During the second half of 2010 and all of 2011, spreads generally contracted and the yield on the 10-year Treasury rate dropped from the mid 3% level to around 2% today. In 2011, we saw overall interest rates for 10-year term money fall below 4% on “best in class” assets for the first time. First mortgage interest rates are at historically low rates and demand by lenders is very high. At the time of this narrative, the 10-year Treasury rate was 2%. The generally quoted interest rate today for a 65% leveraged asset meeting the underwriting standards for the reported asset classes would be as follows: Apartments

3.50% – 4.50%

Commercial Real Estate

4.00% – 5.00%

Hotels

4.75% – 6.00%

Self-Storage

4.50% – 5.00%

2 0 1 2 CAPITAL MARKETS & REAL ESTATE FINANCE

A major improvement over the past 24 months between all lenders is their willingness to extend higher loan proceeds relative to value. In 2009, the maximum loan-to-value (LTV) for CRE by the life insurance company lenders was on average around 50% to 60%. CMBS lenders were not in the market during this time. In 2011, CMBS lenders came back in and pushed loan-to-value back to 75% on most property types. Life insurance companies followed in 2011 and the average leverage was 65% loan-to-value and insurance lenders stretched to 70% to 75% LTV for “best in class assets”. In 2012 and going forward, increased competition will exist in the market amongst all capital sources for top quality multifamily, retail and industrial properties. Borrowers will see loan-to-value increase to 75% for these assets. For less than top tier assets, most insurance companies will continue to limit loans to 65% loan-to-value. In 2012, look for insurance companies to stay the course at 65% to 70% loan-to-value and CMBS lenders to drop down to 70% LTV. The GSE multifamily lenders can lend up to 80% loan-to-value with caveats.

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As you can see from the chart, published spreads for the mid-point of a fixed rate 10-year commercial mortgage varies depending on the property type. Apartments tend to always have the lowest spread vs. hotels being the highest among all assets.

Mid-Point of Fixed Rate Commercial Mortgage Spreads for 10-Year Commercial Real Estate Mortgages Property Type

1/8/12

Multifamily â&#x20AC;&#x201C; Non-Agency Multifamily â&#x20AC;&#x201C; Agency Regional Mall Grocery Anchor Strip and Power Centers Multi-Tenant Industrial CBD Office Suburban Office Full-Service Hotel Limited-Service Hotel 10-Year Treasury

+240 +235 +250 +245 +260 +245 +250 +265 +300 +305 2.00%

Source: Cushman & Wakefield Sonnenblick Goldman

Look for interest rate spreads in 2012 to trend slightly lower for quality, low leverage deals. As for most lenders, there is a need for yield and 2012 will be a transitional year for lenders to take on additional risk for additional spread.

In conclusion, 2011 was a transitional year for the real estate finance industry. Property fundamentals showed stabilization with growth, albeit slow, in rental rates and occupancy trends moving positive. Demand by all lenders will be strong in 2012 and competition will be fierce for low leverage quality assets. Look for greater allocations to CRE by most all life insurance company lenders and continued large volume of multifamily loans by the GSEs. The CMBS lenders will be trying to find their market with core lenders staying the course and making this market. Estimates for production volume by CMBS lenders in 2012 will be at 2011 levels or slightly higher.

2012 Hampton Roads Real Estate Market Review

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