2011 Hampton Roads Real Estate Market Review - College of ...

2011 O F F I C E
New and existing Hampton Roads tenants are preparing to backfill vacancies created by USJFCOM’s exodus in the
Harbour View area of Suffolk. In addition, Hampton Roads looks forward to the benefits of the completion of the Norfolk
Southern “Heartland Corridor” which will be a direct rail connection from the Virginia ports to Chicago.
Market Conditions
In many ways, 2010 represented a settling period in the market. Other than medical sector growth, some government contractors,
and private colleges and universities entering and expanding in the Hampton Roads area, there has been little economic
growth by way of office tenants. There were fewer lease transactions completed in the last quarter of 2010 than any other since
the beginning of 2009, resulting in a fairly stagnant market. The overall vacancy rate remained a steady 14.6 percent, which is
still below the National Office Market vacancy of 16.2%. Rental rates remained flat throughout the year, and large rent abatements
remain prevalent. Despite the lack of leasing
activity, brokers in the market reported a surge
in tour activity. The increase in tour activity due to
new tenants entering the market will hopefully
translate into positive absorption and continued increases
in activity in 2011.
Outlook
Market performance during the first two quarters
of 2011 will be especially important in measuring
overall market recovery and potential growth
in Hampton Roads. Leasing activity is expected to
increase as tenants gain more confidence in the
market. Rent rates will likely remain relatively flat
over the next 12 months, and tenants will continue
to expect highly attractive rent concessions. The
market has become less dependent on “blend and
extend” renewals and it is possible that fundamentals
will begin to shift as early as the fourth quarter
of 2011 or the beginning of 2012.
Pricing Demand Supply
Key Market Indicators
Supply
26,816,106 sf
Direct vacancy rate 13.7%
Total vacancy rate 14.6%
Under construction
80,742 sf
Leasing activity 12 mo. % change -14.7%
YTD net absorption
281,916 sf
12-month overall rent % change -4.1%
Class A overall asking rent
Class B overall asking rent
$21.37 psf
$16.09 psf
12-month
forecast
*Please note the above statistics were derived and referenced from the Brookings Institution. They offered the overall office vacancy rate of Hampton Roads at 14.6%. CoStar’s
statistics, which are also referenced in this report, differed by 2% offering an overall office vacancy rate of 12.6%. The percentage difference is the utilization of A,B,C & F office
properties with Brookings and only A,B & C office properties with CoStar.
Net New Supply, Net Absorption and Total Vacancy
1,500,000
20%
Leasing Activity vs. Sublease Vacant Space
1,000,000
15%
2,000,000
Leasing Activity
Sublease Space
Square Feet
500,000
0
-500,000
2006 2007 2008 2009 2010
Net New Supply Total Vacancy
Net Absorption
10%
5%
0%
Square Feet
1,500,000
1,000,000
500,000
0
2006 2007 2008 2009 2010
2011 OFFICE
Sublease space includes vacant space.
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