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CITY HIGHLIGHTS, NOVEMBER 2004
HAMPTON ROADS SEES NEW DEVELOPMENT
The outlook for commercial real estate in Hampton Roads, Virginia,
is positive. New developments in all sectors are drawing businesses
and retailers to the area, with The Town Center of Virginia
Beach in particular drawing a significant amount of interest.
Retail
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The Goodman Company has broken
ground on Jefferson Commons,
a power/specialty center in the Jefferson Avenue
corridor.
Wakefield Beasley & Associates is serving
as architect for the project.
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Retail development continues at a fast pace. The national
trend for lifestyle and town centers has hit, with new projects
in Williamsburg, Newport News, Virginia Beach, Chesapeake
and Suffolk. Also, power centers spring up as Kohl’s,
The Home Depot, Wal-Mart and Target look for growth opportunities.
New grocery-anchored centers are led by the expansions of
Harris Teeter, Farm Fresh and Food Lion, with Kroger to follow.
In general, the development is wide spread. The “hottest”
submarkets are Pembroke/central business district in Virginia
Beach, Newport News’ Jefferson Avenue corridor, the Greenbrier
area in Chesapeake and Suffolk’s Harbour View. Recent
venues are attracting new-to-the-market retailers, including
ULTA, The Cheesecake Factory, Red Star Tavern, Bass Pro Shops
and Galyan’s Trading Company.
The most significant development is The Town Center of Virginia
Beach, a 1.8 million-square-foot mixed-use project in Pembroke.
Several blocks are complete with The Cheesecake Factory, Galyan’s,
P.F. Chang’s China Bistro, California Pizza Kitchen,
Cold Stone Creamery, Men’s Wearhouse, Class A high-rise
office space and hotels. Under construction are Ann Taylor
Loft, Bravo! Cucina Italiana, Funny Bone Comedy Club, luxury
apartments and cultural facilities, including a new $50 million,
1,200-seat performing arts center.
In Newport News, the City Center at Oyster Point is in the
works. Largely office-orientated, some “street”
retail will be included. In the Jefferson Avenue corridor,
Jefferson Commons, a Kohl’s-anchored power/specialty
center, has broken ground for Ross, T.J. Maxx, ULTA and others.
Also, PREIT announced its renovation of Patrick Henry Mall
to attract lifestyle tenants. In Hampton, the Bass Pro Shops-
and Lowe’s-anchored Power Plant is underway, with several
national restaurants including Lone Star, Starbucks Coffee,
McFadden’s, Sonic and Cold Stone Creamery.
Chesapeake announced its new town center in the Greenbrier
area to be developed by Kahn Development of Columbia, South
Carolina. Similarly, Landonomics of Chicago is expanding its
Wal-Mart-anchored power center and planning a new specialty
center to join the existing entertainment component in Harbour
View.
Several plans are on the drawing board for Virginia Beach’s
oceanfront. With the approaching completion of the Hilton
Conference Center and the city’s new $240 million convention
center, two- and three-story retail will be added, including
a full city block between 14th and 15th streets at Atlantic
Avenue, tentatively called Atlantic Square.
The most active developer in the area is Armada/Hoffler Development
Company, responsible for The Town Center of Virginia Beach,
Courthouse Marketplace and Harris Teeter’s Hanbury Road
project. The City of Newport News selected L.M. Sandler &
Sons, an East Coast residential developer, to create Endview,
a “legacy village” with retail, hotel, residential,
office and cultural elements. L.M. Sandler also is completing
projects in Hampton, Virginia Beach and Chesapeake. Others
active in Hampton Roads include The Goodman Company and Kahn
Development Company.
Rental rates edge up as demand rises. Rent for small shop
space ranges from $25 to $35 per square foot, and big boxes
run between $13 and $18 per square foot. Vacancies are under
10 percent — mostly in secondary markets and consisting
of big boxes left vacant by HQ, Ames, Winn-Dixie and Kmart.
— Gerald Divaris, Chairman/CEO, Divaris Real Estate,
Inc.
Industrial
A snapshot of the Hampton Roads industrial market in early
2003 would portrait one well-balanced with trends and market
influences beckoning the development of modern high-bay distribution
space. Indeed, Hampton Roads is now experiencing such development
as we close in on 2005.
The historical, stalwart foundations and inherent strengths
of this unique industrial market endure and indeed will feed
the new product. The drivers, the region’s principal
advantages, include The Port of Virginia, one of the largest
ports on the Atlantic coast, served by the deepest, ice-free
channels on the East Coast seeing substantial investment in
dock and off-dock infrastructure and port operations improvements
to handle the forecasted increase in container traffic. Secondly,
the region’s defense-related industry (Northrop Grumman
Newport News, Norfolk Naval Shipyard, NASA Langley Research,
etc.) and other major manufacturing (Ford Motor Company, Smithfield
Packing, International Paper, Siemens, etc.) along with their
supporting cast continue to steady the industrial real estate
market.
Hampton Roads has an industrial market in excess of 92 million
square feet, of which just over 70 percent is owner-occupied,
leaving less than 30 percent to the investment community.
Approximately 8 million square feet of that 30 percent is
deemed to be of investment quality.
The region/MSA of more than 1.6 million people is dissected
by the hand that feeds our market, that distinct geographic
influence in the form of the world’s largest natural
harbor, Hampton Roads. While the coast location creates an
industrial market sitting at the end of the proverbial cul-de-sac
from a transportation perspective, this characteristic of
the market is changing positively each and every year as the
population and infrastructure link with the Central Virginia
Interstate 95 market. In Hampton Roads, the harbor dissection
translates to an allocation of space on the Peninsula of 27
percent (Newport News, Hampton, Williamsburg) and 73 percent
on the Southside (Norfolk, Suffolk, Chesapeake, Virginia Beach).
— Robert Phillips Jr., vice president, Thalhimer/Cushman
& Wakefield
Office
Hampton Roads’ office market consists of 25 million square
feet of Class A and B space, 88 percent of which is multi-tenanted
and 12 percent is owner-occupied. The vacancy rate of the
combined Class A and B multi-tenant space is approximately
12 ercent. In the past year, vacancies dropped while rental
rates increased on average by 5 percent. Even with several
new developments, it is anticipated that the market will remain
stable due to defense contractors absorbing available office
space.
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Armada Hoffler anchors the 458,000
square feet of completed
Class A office space at The Town Center of Virginia
Beach.
Photo credit: CMSS Architects
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The market’s most significant construction projects
are two mixed-use developments in Virginia Beach and Newport
News. The Town Center of Virginia Beach is a public-private
partnership that will comprise 1.8 million square feet of
prime retail, hotel, office, apartment and cultural components.
The 458,000 square feet of completed Class A office space
is 91 percent leased, anchored by Armada Hoffler. An additional
52,000 square feet of office space is under construction.
The City Center at Oyster Point in Newport News is planned
for 700,000 square feet of mixed-use office, retail and residential
space. The first phase of 300,000 square feet of office space
is fully leased and anchored by Riverside Healthcare. Construction
of the second phase has begun with 700,000 square feet over
seven office buildings with an additional 250,000 square feet
of open-air specialty shopping, a hotel and conference center.
Smaller mixed-use projects on the drawing board for the cities
of Chesapeake and Suffolk are attracting significant interest
as well.
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The mixed-use City Center at
Oyster Point is being developed in Newport News.
Photo credit: CMSS Architects
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The Norfolk office market is experiencing resurgence with
the completion of the 150 W. Main St. tower with 239,000 square
feet above a nine-story city parking garage. Currently 86
percent is leased and anchored by SunTrust Bank’s regional
headquarters. The recently announced 225,000-square-foot,
11-story office tower above a seven-story parking garage will
house 1,400 associates of Trader Publishing Company. Both
of these developments, together with the rebirth of the residential
housing market, have added to the economic revival of downtown
Norfolk.
The most active office developers in Hampton Roads over the
past 2 years have been Norfolk-based Robinson Development
Company and Virginia Beach’s Armada Hoffler Development
Company and Olympia Development Group.
— Michael Divaris, Divaris Real Estate, Inc.
| City of Suffolk
With more than a dozen major commerce parks or sites available
for sale, as well as several new speculative industrial
buildings, businesses ranging from basic manufacturing
to high-tech research and development find Suffolk is
a good place to be for affordability, with easy access
to a rich labor market. In 2003, more than $120 million
in major investments were made in the city by new and
expanding business, creating almost 1,000 new jobs.
The big news in 2003 came when Lockheed Martin announced
plans for a new 50,000-square-foot, hexagon-shaped office
and research & development (R&D) center, investing
more than $35 million into the project. In addition to
this major announcement, Northern Suffolk saw significant
expansion of office space as it continues to develop as
one of the major high-technology hubs of the Hampton Roads
Region.
The Virginia Modeling, Analysis and Simulation Center
(VMASC) completed a 20,000-square-foot expansion to include
a “battle lab” to help the military test their
new computer modeling and simulation technologies. VMASC
is a joint effort of Old Dominion University (ODU), the
Commonwealth of Virginia, the city of Suffolk and over
125 private companies to help develop private sector applications
for this newly developing technology. ODU became the first
university in the nation to develop a PhD. program for
computer modeling and simulation.
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Bridgeway Technology Center
II is a 68,250-square-foot office, technology
and R&D building located within Bridgeway
Commerce Park.
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Within Bridgeway Commerce Park, Bridgeway Technology
Center I is continuing to attract the U.S. military
and various defense contractors focused on developing
computer modeling and simulation applications. This
125,000-square-foot office building recently leased
17,000 and 10,000 square feet of space to two subsets
of the U.S. Joint Forces Command Joint Warfighting Center.
The building currently has 60,000 square feet available.
Bridgeway Technology Center II is an additional 68,250
square feet of Class A office, technology and R&D
space. Science Applications International Corporation
(SAIC) recently leased 22,000 square feet, leaving approximately
25,650 square feet available. Given the prospective
activity in Bridgeway Commerce Park, plans are underway
to begin development of Bridgeway Technology Center
III. This facility is slated for delivery during 2005.
It would be the third of six planned office buildings,
which will amount to more than 500,000 square feet.
Across Interstate 664, Lakeview Technology Park is home
to the 320,000-square-foot U.S. Joint Forces Command building,
which has recently completed a major expansion adding
85,000 square feet of office space to the existing building.
In addition, the 60,000-square-foot Lakeview Technology
Center recently completed a 40,000-square-foot expansion.
These tenants assess defense systems via computer modeling,
and model battle strategies and new weapons systems for
the military.
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Obici Memorial Hospital
at Godwin Commerce Park.
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Other commerce parks under development include Godwin
Commerce Park, a mixed-use office, retail and office/warehouse
development adjacent to Obici Hospital; Suffolk Industrial
Park, near the new Rt. 58/13 bypass; and Northgate Commerce
Park, near Interstate 664.
As you can see there is significant new commercial and
industrial growth throughout Suffolk. By managing our
residential and commercial development through “smart
growth” best practices we continue to offer families
and businesses plenty of room to live, work and play in
Suffolk. It’s a good time to be in Suffolk.
— Deanna B. Holt
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©2004 France Publications, Inc. Duplication
or reproduction of this article not permitted without authorization
from France Publications, Inc. For information on reprints
of this article contact Barbara
Sherer at (630) 554-6054.
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