Inside Business Beth Hancock Joy Learn for their sponsorship - PDF document

Executive Committee Executive Committee Old Dominion University Old Dominion University • Melody Bobko • Warren Harris Hampton Roads Real Estate Hampton Roads Real Estate • Ron Bray • Joyce Hartman Market Review and Forecast Market Review and Forecast • Craig Cope • Andrew Keeney • John Crunkleton • Billy King • Tom Dillon • John Lombard • Brian Dundon • Betsy Mason • Joan Gifford • Don Perry Presented by: • Thor Gormley • Van Rose The Center for Real Estate • Jonathan Guion • Dick Thurmond and Economic Development Programs Committee Programs Committee Sponsorship Sponsorship Committee Committee Joyce Hartman, Chair Don Perry, Chair Jonathan Guion Ron Bray Jonathan Guion John Lombard Cliff Moore Research & Editorial Committee Research & Editorial Committee Special thank you to Brian Dundon, Chair Inside Business Beth Hancock Joy Learn for their sponsorship Sandi Prestridge Maureen Rooks over the past two years. Lane Shea 1

Thank Jonathan Guion You For leadership of the CREED Advisory Board throughout the past two years ODU’s College of Business and Public Administration ODU’s College of Business and Public Administration 2003 OFFICE MARKET The Robert M. Stanton Chair REVIEW of Real Estate and Economic Development • $1.5 million lead gift is largest planned gift by an ODU Presented by alumnus • $4.5 million total endowment Donald R. Crigger, CCIM • Endowment will allow: – Chaired professorship Senior Director – Expanded curriculum in real estate and economic development Advantis/GVA – Enhanced CREED activities NATIONAL CLIMATE NATIONAL CLIMATE POSITIVE INFLUENCES NEGATIVE INFLUENCES • HIGH VACANCY DUE TO LIMITED DEMAND • IMPROVING ECONOMY • SIGNIFICANT SUBLEASE INVENTORY • CORPORATE PROFITS FUELED BY PRODUCTIVITY GAINS • INCREASING OCCUPANCY DENSITY (INCREASED NEARLY 10% IN LAST 10 YEARS) • JOB GROWTH SHOULD FOLLOW GRADUALLY • TECHNOLOGY CONTINUES TO REPLACE (LATE 2004 & 2005) WORKERS • OFFSHORING OF OFFICE JOBS (INDIA & CHINA) 2

NATIONAL CLIMATE FORECAST 5 YEAR • VERY GRADUAL IMPROVEMENT NATIONAL VACANCY & • SUBLEASE AND PHANTOM SPACE WILL DAMPEN ABSORPTION STATISTICAL RECOVERY TRENDS (BOTH IN TERMS OF RENTAL RATES AND VACANCY) • FLIGHT TO QUALITY (INCREASING DENSITY AT SAME PRICE) REQUIRING EMPLOYEES TO LIVE IN LESS SPACE, MUST INCREASE QUALITY & AMENITIES POSITIVE INFLUENCES FOR 2004 HAMPTON ROADS CLIMATE POSITIVE INFLUENCES • LIMITED DEVELOPMENT SINCE 2000 (SUPPLY CONTROLLED) • “TOWN CENTER” PROJECTS BUOYED ABSORPTION (MET PENT UP DEMAND) • VACANCY DECREASING WITH LIMITED SUBLEASE INVENTORY (LOW TEENS) • DEFENSE & PORT REMAIN IN GROWTH MODE HAMPTON ROADS CLIMATE HAMPTON ROADS CLIMATE FORECAST NEGATIVE INFLUENCES • LIMITED CLASS “A” SUBURBAN INVENTORY • MODERATE ABSORPTION IN 2004 - IMPROVING IN 2005 • CONTINUED LACK OF NEW PROSPECT ACTIVITY FROM OUTSIDE REGION • CONTINUED BUILD-TO-SUIT ACTIVITY WITH SPECULATIVE DEVELOPMENT RETURNING BY 2005 • NORTHEAST NO LONGER AS FERTILE FOR PROSPECTING • SUBURBAN RE-DEVELOPMENT AS DEMAND WARRANTS • SHRINKING RENTAL RATE DIFFERENTIAL WITH • RETENTION STRATEGIES WILL BE AS IMPORTANT AS COMPETING MARKETS RECRUITMENT INITIATIVES 3

HAMPTON ROADS HISTORICAL HAMPTON ROADS HISTORICAL VACANCY ABSORPTION TRENDS RATE TRENDS 20.00% 1,000,000 14.30% 800,000 13.10% 15.00% 11.80% Square Feet 600,000 9.70% 657,000 10.00% 7.80% Vacancy Rate 400,000 343,000 823,000 108,000 551,000 200,000 5.00% 0 1999 2000 2001 2002 2003 0.00% Net Absorption 1999 2000 2001 2002 2003 NEW DEVELOPMENTS 2004 LOCKHEED MARTIN GLOBAL VISION INTEGRATION CENTER AMERIGROUP CORPORATION BRIDGEWAY TECHNOLOGY CENTER II 4

LARGE LEASE TRANSACTIONS AMSEC LLC AT BATTLEFIELD TECH CENTER I 57,429 SF SUNTRUST AT 150 WEST MAIN SENTARA HEALTHCARE AT 53,120 SF CROSSWAYS I AOR/US ONCOLOGY 40,211 SF Multi-Family Market Overview SIGNIFICANT INVESTMENT SALES SELLER: THE HAYMAN COMPANY BUYER: BERMAN KAPPLER Wendy Drucker SALES PRICE: $11,500,000 Drucker & Falk, LLC TOTAL SF: 155,500 Newport News, VA PRICE PSF: $73.95 • The Established The Established Market Market Vacancy 2.8% • New Development • Projected Revenue Growth 3.7%+ • 1258 units absorbed • Curve Balls • Cap rates 7.27-8.31 5

Land Prices 1400 Apartments Under Construction 1800 In Pipeline 1 Bedroom Rental Rates $1000+ • Increased 10%-15% per year New Development • $11,000-$12,000 per unit Clubhouses New Development More Bells and Wh Whistles! istles! Swimming Pool Waterscapes 6

Café, Billiards Coffee Bars Movie Theatre Child Friendly Facilities Walking Trails Mixed us Mixed use “vill e “village” ” co comm mmunitie unities, mid- s, mid-rise, rise, high-ri high-rise 7

Elegant Building Lobbies 8

Curve Balls Military Deployment Rain! 9

Hurricane Isabel Asbestos MOLD! Insurance Costs Lead 10

Residential Market Review What’s in store for Presented by 2004? J.V. Rose, Jr. President Rose & Womble Realty 9 Year History of Resale and Hampton Roads Housing Stats - 2003 New Construction Closings 7,049 Building Permits • 25000 • 4,759 Closed New Home Sales 20000 • New Home Closings Total Volume = 15000 $1,158,560,096 up 7.0 % • 20,612 Closed Existing Home Sales 10000 • 5000 Existing Home Closings Total Volume = $3,293,498,753 up 19.9 % 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 R esale N ew Construction Hampton Roads Housing Stats - 2003 Market Share 1993 vs. 2003 • Average Price of SF New Home 19% NC $254,895 44% • An Increase of $25,779 or 11.2 % NC in one year • Average Price of SF Existing Home 81% Resale 56% Resale $172,873 • An Increase of $20,359 or 13.3 % in one Year 1993 2003 11

Virginia Beach Virginia Beach Chesapeake 2003 Average Price Increase 2003 Average Price Increase 2003 Average Price Increase for a Single Family Home for a Single Family Home for a Single Family Home NC 2002 $231,967 NC 2002 $274,902 2003 $258,383 11. 4 % 2003 $291,308 6.0 % Resale 2002 $164,174 Resale 2002 $192,683 2003 $190,597 16.1 % 2003 $219,648 14.0 % Suffolk Southside Resale VS. New Construction Average Closing Prices for 2003 2003 Average Price Increase Single-Family Detached Homes for a Single Family Home $300,000 $291,308 $245,946 $258,383 $219,648 $250,000 NC 2002 $197,634 $190,597 $200,000 $174,261 2003 $245,946 24.4 % $150,000 $71,660 $100,000 $71,685 Resale 2002 $153,654 $67,786 $50,000 2003 $174,261 13.4 % $0 VB Ches Suff Resale NC Diff Southside Peninsula Resale VS. New Construction Average Closing Prices for 2003 Resale VS. New Construction Average Closing Prices for 2003 Single-Family Detached Homes Single-Family Detached Homes $300,000 $300,000 $260,395 $254,304 $270,191 $252,544 $238,477 $241,495 $250,000 $250,000 $211,687 $209,187 $200,943 $200,000 $173,047 $200,000 $132,823 $118,791 $150,000 $113,604 $150,000 $131,628 $106,849 $92,896 $69,248 $100,000 $100,000 $76,364 $59,443 $7,851 $50,000 $50,000 $12,809 $0 $0 H NN JCC YC Ports Norf I/W Resale NC Diff. Resale NC Diff 12

Average Consumer Lot Costs Average Consumer Lot Costs Chesapeake Suffolk • Governors Pointe - $139,352 • Greystone - $109,000 • Nansemond Pointe - $80,375 • Ravanna - $120,000 • Nansemond River Estates - $90,360 • Edinburgh - $180,626 • The Riverfront - $139,900 • Cahoon Plantation - $118,888 Average Consumer Lot Costs Average Consumer Lot Costs Virginia Beach Peninsula • J Landfall - $160,000 • Morgans Walk - $127,800 • J Stonehouse - $113,000 • Lago Mar - $154,658 • Indian River Plantation - $189,968 • J Fords Colony - $118,502 • Victoria Park - $140,000 - $175,000 • Y Port Myers - $82,910 RESIDENTIAL HOUSING RESIDENTIAL HOUSING FORECAST FORECAST 1. Extremely Positive!!! REASONS: 1 . Hampton Roads Economics 13

RESIDENTIAL HOUSING Hampton Roads Economic Stats - 2003 FORECAST • Employment has Grown Faster in Hampton Roads Than In The U.S. and Virginia Since Late in 2000 • Hampton Roads Has Been Buffered from Recession by Increases in Military Pay and Housing Allowances REASONS: • Median Family Income 2 . Hampton Roads Housing Demand National Average $ 42,900 Chesapeake $ 53,800 Virginia Beach $ 53,242 • Average MSA Military Pay $ 50,613 • Estimated 53,000 Retired Military in HR RESIDENTIAL HOUSING Percent of Households That Purchased A Home in 2003 FORECAST Compared To The Total Number of Households In The MSA Charlotte NC MSA Raleigh/Durham MSA Total Closings Total Closings = 26,370 = 36,862 11 % of HH 7.4 % of HH REASONS: Total Total Households = Households = 239,368 492,966 3 . Hampton Roads Housing Supply Hampton Roads MSA Total Closings = 25,371 Total 4.3 % of HH Households = 579,107 RESIDENTIAL HOUSING Number of Homes Listed in December FORECAST 1998-2003 and February 2004 10000 8000 REASONS: 8582 6000 6902 4. Effects of Interest Rates 6449 4000 5200 (Mortgage Instruments) 4082 2000 2925 2764 0 1998 1999 2000 2001 2002 2004 2004 14