The Hampton Roads region of Virginia continues to experience moderate growth in most sectors of the real estate industry. The Hampton Roads region is made up of fifteen local jurisdictions and stretches from Williamsburg to Virginia Beach, encompassing almost 2,400 square miles. The jurisdictions included in the region are the cities of Chesapeake, Norfolk, Portsmouth, Suffolk and Virginia Beach on the southside of the port of Hampton Roads and Hampton, Newport News, Poquoson and Williamsburg on the Peninsula side, as well as the counties of Gloucester, Isle of Wight, James City and York. The Hampton Roads MSA is the country's 34th largest and there are approximately 1.5 million people residing in the area.

With a high quality of life, desirable climate and a cost of living below the national average, it's no wonder so many people are choosing to live in Hampton Roads. Not only is it a great place to live, Hampton Roads is also an attractive place to visit. Each year, the area is flooded with nearly 4 million visitors who come for the area's history, beaches, theme parks and cultural activities.

Office

The office sector has continued to grow moderately through the late 1990s and into the new millennium. The region has absorbed the first wave of new development projects without much difficulty due to a combination of factors including pent-up demand during the mid-1990s and moderate growth in the demand for office space by existing tenants. In addition, a healthy influx of new tenants such as Geico, Nextel and USAA have made their first entrances into the marketplace, each leasing large blocks of space.

Home to the world's largest Navy base, Hampton Roads' relationship with the United States armed forces has proved to be an area of strong economic growth and support. The North American Treaty Organization and the U.S. Atlantic Command have their headquarters in Hampton Roads.

The next wave of new development is underway, bringing a significant amount of new construction to the market. One significant project included in this group is the Town Center of Virginia Beach project being developed by Armada/Hoffler Development Company and leased and managed by Divaris Real Estate in the Pembroke area of Virginia Beach. Town Center of Virginia Beach will comprise 1.8 million square feet of Class A office, upscale retail, hotels and apartments. Another development of note is NAI Harvey Lindsay's Oyster Point Town Center project being developed in the Oyster Point submarket of Newport News. Each of these projects will add a significant amount of Class A office space to the market and, along with the other new development underway, could create an oversupply of office space for some time.

Retail

The retail sector continues to see new entries to the market each year such as Kroger and Best Buy, as well as the departure of others such as Hannaford Bros. and Winn-Dixie. This trend of new entrants and departures of others seems to be here to stay and absorption of the space created by the departures seems to take care of itself fairly easily.

There are no new regional malls currently planned. The McArthur Center Mall in downtown Norfolk has been well received by the marketplace and is doing well despite the fact that Rainforest Caf closed its location there.

The drugstore wars are winding down, but the gas station battles are flaming up as WaWa, Racetrak and others compete for new sites throughout the region.

Industrial

The industrial market in Hampton Roads has also shown steady growth. The region's efforts to diversify its industrial base and not be so reliant upon the military and defense sectors are paying nice dividends.

Hampton Roads is one of the world's busiest ports, allowing the area to be active in international commerce. The port of Hampton Roads has grown steadily over the past decade, increasing its share of the international East Coast shipping market. The port has attracted numerous warehousing and distribution facilities to locate in the Hampton Roads region. Among the more notable recent warehouse and distribution facilities to choose the Hampton Roads area are Wal-Mart's 1 million square feet in James City County and Sysco Systems' 300,000 square feet in Suffolk.

In addition to the warehouse and distribution sector of the industrial market, the manufacturing sector has also seen significant growth with new companies such as Evercel, a deep cell rechargeable battery manufacturer that opened a 100,000-square-foot manufacturing facility in Oakland Industrial Park in Newport News.

The Hampton Roads region appears to be well positioned to continue its moderate growth trend well into the future. The strong labor force, developing port and emerging high-tech industry could prove to be the new economic engine that propels the region forward in the 2't Century.

Mike Mausteller is a senior vice president with Morton G. Thalhimer, Inc. in the company's Newport News office.


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