CITY HIGHLIGHT, NOVEMBER 2005
HAMPTON ROADS CITY HIGHLIGHTS
Robert Philips Jr. and Donald Crigger
Hampton Roads Industrial Market
Below-average vacancies and above-average rents are fueled by demand for distribution space in the Hampton Roads industrial market as it is gearing up for the forecasted increase in warehousing requirements. Absorption continues to be driven by distribution centers for retail distribution, investment purchases for 1031 exchanges, and local users purchasing older buildings to capitalize on lingering low cost of debt. Average industrial lease rates are running $5 with vacancy rates in the upper 8 percent range. APM Terminals' (Maersk) $450 million privately owned terminal under construction in Portsmouth is on schedule to ship containers by mid 2007. This coupled with the overall increase in Asian goods flowing through the well positioned Ports of Virginia are the leading demand drivers. As a result, Wal-Mart is adding another million square feet to its current 2 million-square-foot James City County Distribution Center in the Greenmount Industrial Park. Also in that same park, Haynes Furniture is completing its own 300,000-square-foot distribution center. Target will soon start a 300,000-square-foot addition to its 1.5 million-square-foot Import Distribution Facility in Suffolk. And Cost Plus World Market doubled its 500,000-square-foot distribution center in Isle of Wight County, now 1 million square feet.
Public warehousers continue to play active roles not only by conducting their primary business operations, but providing space for lease to others. Commonwealth Storage Corporation in Suffolk, DD Jones Transfer and Warehouse in Chesapeake and Virginia Beach, as well as Liberty Warehousing in York County and Givens in Virginia Beach, are all notable contributors on both the landlord and tenant side of warehousing and distribution transactions, albeit mostly short term in nature. Givens and its builder-partner, Greg Ireland, recently pre-leased a 168,000-square-foot multi-tenant high-bay warehouse facility off Interstate 64 in Chesapeake and promptly sold at around an 8 percent cap; Ireland is now planning a second building in same Cavalier submarket. Investment purchasers Cambridge Hanover and First Potomac remain active in the market.
Nippon Express USA sold a 170,000-square-foot, two-building warehousing complex in Newport News to a Virginia Beach investment group and then leased back the 90,000-square-foot building.
American Port Services (APS), a Savannah-based logistics supplier to manufacturers, is increasingly active in the market with plans in place to partner with Richmond, Virginia-based Devon USA on Phase I of a 645,693-square-foot, two-building modern distribution development in Hampton (Phase I is 417,534 square feet; Phase 2 is 228,159 square feet). Occupancy for this Hampton Enterchange project may occur by the end of next year. APS is also planning to develop its own two-building, 300,000-square-foot development (two 150,000-square-foot buildings) in Suffolk's Northgate Commerce Park. Devon also purchased 72 acres in South Suffolk to develop 762,118 square feet of 32-foot clear distribution space.
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The 247,000-square-foot Indian River Distribution Center is located across from Ford Motor Company's Norfolk Assembly Plant.
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Publicly traded Liberty Property Trust recently completed the first of three planned buildings in Bridgeway Commerce Center. The 130,000-square-foot building, located at Interstate 664 in Suffolk, is leased to the Dana Corporation (80,000 square feet) and a lighting company (30,000 square feet). Also, Ashley Capital, a privately held New York City-based industrial owner/developer, is breaking ground on its initial Hampton Roads development known as Indian River Distribution Center, a 247,000-square-foot modern distribution center strategically nestled across the street from Ford Motor Company's Norfolk Assembly Plant and boasting an internal rail loading dock (Norfolk Southern). Spartanburg, South Carolina-based Johnson Development Associates is moving quickly to come out of the ground with its 316,130-square-foot, 32-foot-plus warehouse/distribution facility (expandable to 800,000 square feet) in the Shirley T. Holland Commerce Park located off U.S. 460 in Isle of Wight County.
Other notable developers in various stages of due diligence or pre-leasing (with plans and permits in hand) include Atlanta-based owner/developer, McDonald Development Company (planned 185,000-square-foot, multi-tenant product in Hampton next to the Gateway Warehouses/West Park buildings subleased to NYK Logistics) and Denver-based Triumph Real Estate (135,000-square-foot, multi-tenant warehouse in Suffolk Industrial Park). Locally, Empire Development is constructing flex product in Suffolk, and a team led by Mid-Eastern Builders will develop similar flex product in Hampton. Williamsburg will be the next announcement for such product.
— Robert Phillips Jr. is vice president with Thalhimer/Cushman & Wakefield.
Hampton Roads Office Market
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The 88,000-square-foot Resource Bank Building at the Convergence Center in Virginia Beach, Virginia, is the only significant new building completed this year in the Hampton Roads office market.
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The Hampton Roads office market continued to gradually tighten during the first half of this year with vacancies dropping below 9 percent. Although demand remains modest, developers are taking a measured approach to adding new supply. The only significant new building completed this year is the 88,000-square-foot Resource Bank Building at the Convergence Center in Virginia Beach.
The speculative projects under construction are moderately sized and include the 50,000-square-foot Liberty II building at Greenbrier in Chesapeake and the 60,000-square-foot The Gallery at Newtown Road in Virginia Beach. Both of these developments will deliver in the first quarter of 2006 and are 100 percent speculative. In Newport News, NAI Harvey Lindsay Commercial Real Estate is developing the next phase of City Center at Oyster Point, with an 80,000-square-foot Class A building.
Absorption has been widely spread throughout the region with the Pembroke/central business district (Virginia Beach), Greenbrier/Battlefield (Chesapeake) and Downtown Norfolk submarkets leading the way. In total, more than 300,000 square feet has been absorbed year-to-date, which is average for this market.
Build-to-suit developments remain prevalent with two larger projects currently under construction. In downtown Norfolk, the 300,000-square-foot Trader Publishing headquarters is a 22-story tower due for completion next fall. The 106,000-square-foot AMERIGROUP Corporation Support Center Building Two also is under construction and will be completed in next fall.
— Donald Crigger, CCIM, is senior director with Richmond-based GVA Advantis.
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