Attendees at the 23th annual Hampton Roads Real Estate Market Review and Forecast, hosted by Old Dominion University’s E.V. Williams Center for Real Estate, heard an optimistic report about 2017 and the year ahead.
Seven experts offered presentations on the current state and future of real estate while addressing topics such as economic trends and the office, industrial, retail, multifamily, investment and residential sectors on March 13, 2018 at the Ted Constant Convocation Center.
Vinod Agarwal, deputy director of ODU’s Dragas Center for Economic Analysis and Policy, said Hampton Roads is still behind the curve as far as job creation since the recession. But he said the region’s economy is expected to grow at a 2.2 percent rate in 2018, higher than the 0.8 percent rate in 2017.
“We lost 2,400 jobs in 2017, but revised employment numbers show a gain of 7,300 jobs,” he said. “The good news is, these numbers also show that on an annual basis, jobs in 2017 were higher than they have ever been in the history of Hampton Roads.”
Agarwal said stagnant defense spending and lack of private-sector development were the reasons for slow economic growth in the region.
“From 2000 to 2012, DoD spending increased by an average of 6 percent a year,” he said. “Since 2012, the spending has been stagnant. When the DoD stays stagnant, so does the economy in Hampton Roads.”
Agarwal said the region’s dependence on the Defense Department can’t continue at the same level.
He also noted that although the unemployment rate is going down both nationally and in Hampton Roads, the region still hasn’t recovered all of the jobs that were lost during the recent recession.
“We need to have more innovation, entrepreneurship and regional collaboration,” he said.
“The total office inventory in Hampton Roads at the end of 2017 was just shy of 51 million square feet,” Costa said.
The office vacancy rate ended the year at 9.2 percent, and rents in the region slightly increased. “The net absorption, which is the square footage leased after deducting the space vacated, was 820,076 square feet,” she said. “That figure is greater than the net absorption for the past three years combined.”
Michael Zarpas, vice president of retail brokerage and development for S.L. Nusbaum Realty, said 2017 was a productive year for sales in the retail sector.
“There are more signs going up in Hampton Roads than coming down. We had over 700,000 square feet in new retail development projects,” he said.
The Hampton Roads retail environment will continue evolving in 2018, particularly as the region see’s its first major casualty of the grocery wars. “The grocery wars are in full swing in Hampton Roads. Farm Fresh will be the first casualty in 2018,” Zarpas said.
Last year, Farm Fresh closed a store near Williamsburg and a store in Newport News near Kiln Creek. On Wednesday, Farm Fresh’s parent company, Supervalu Inc., announced that it plans to sell 21 of its 38 Farm Fresh stores to Kroger, Food Lion and Harris Teeter.
One of the top retail developments in 2017 was German discount grocer Lidl opening nine stores in the region, Zarpas said. That happened as discount rival Aldi expanded and Publix announced adding a store in the Williamsburg area, which also is attracting organic grocer Earth Fare.
Food Lion is renovating its Hampton Roads stores over the next few years, Amazon is getting into the local grocery business and Kroger and others are trying to compete on the e-commerce side as “click and collect” — ordering online for pickup — is a new driving force for retail sales, Zarpas said. Walmart also is a competitor with online grocery ordering and Wegmans is bringing a grocery store to Virginia Beach.
Other recent retail closures included HHGregg, Radio Shack and Toys R Us.
“Retail closures are nothing new,” Zarpas said. “They create opportunity.”
Still, new stores outweighed closings in Hampton Roads in 2017 last year as the retail real estate market peaked with an overall regional retail vacancy rate at 4.8 percent by the end of the year. Shopping centers had a 7.4 percent vacancy rate while malls had a vacancy rate of 2.8 percent.
Zarpas said strong tenants have been expanding their presence in the Hampton Roads market in the last year.
“Ikea, Floor and Décor, Publix, Lidl, Wegmans and Bluemercury all signed deals in 2017,” he said.
Zarpas said consumer demands will be challenging as the retail landscape continues to evolve over time. Some of those changes are augmented and virtual reality, computer enhanced logistics and artificial intelligence.
“The only constant in retail is change,” he said.
The event wrapped up with Van Rose, president of Rose & Womble Realty Co., delivering the residential portion.
Residential real estate also should continue its “smooth sailing” in 2018 and 2019, Van Rose told attendees. Overall closings were up 3.87 percent in 2017 after gains the previous two years.
“The area climbed back to 26,000 units built and sold in 2017,” he said. “That number was 23,000 in 2015; in 2005, 30,000 units were bought and sold.
In 2017, the median time a home was on the market was 41 days, but Rose said a large percentage are selling in less than 30 days.
“It’s getting back to that time where we’re getting multiple offers and houses are moving very rapidly,” Rose said. About 73 percent of the resale houses moving on the Peninsula cost under $300,000, Rose said in the report. Competition should heat up as both first-time buyer millennials and downsizing baby boomers are going after the same homes, he added
Rose said one of the future challenges is low inventory. Some sectors are struggling.
“There’s going to be a bit of a crisis coming in the months ahead,” he said. “But if I was to predict today what I think will happen in 2018, I say we are probably going to walk away with a silver medal.”