2009 market slides - odu · 2020-03-13 · deborah stearns, gva advantis richard thurmond, william...

3/12/2009

1

Old Dominion University Hampton Roads Real Estate

Market Review and Forecast2009

Presented by: E.V. Williams

Center for Real Estate and Economic Development

Director’s Message

John R. Lombard, PhDAssociate Professor, Department of

Urban Studies and Public Administration, College of Business and Public Administration

Director, E. V. Williams Center for Real Estate and Economic Development

A Message from the Dean

Nancy Bagranoff, DBAD C ll f B iDean, College of Business

& Public Administration, Old Dominion University

Industry Professional Advisors to the Center (IPAC)

Jeff Ainslie, Ainslie-WidenerG. Robert Aston, Jr. , TowneBankRamon W. Breeden, Jr., The Breeden CompaniesSandy M. Cohen, Divaris Real Estate, Inc.Craig Cope, Liberty Property TrustCecil V Cutchins Olympia AssociatesCecil V. Cutchins, Olympia AssociatesRobert L. Dewey, Willcox & Savage, PCThomas M. Dillon, Fulton BankN. Joseph Dreps, BB&TPamela J. Faber, LeClair RyanJoel Flax, Goodman & CompanyDavid M. Gianascoli, Gee’s Group Real EstateJohn Gibson, Ellis-GibsonWarren Harris, City of Virginia Beach Economic DevelopmentAubrey L. Layne, Jr., Great Atlantic Management, LLCMiles B. Leon, S.L. Nusbaum Realty Co.Michael W. McCabe, Harvey Lindsay Commercial Real Estate

Industry Professional Advisors to the Center (IPAC)

Michael Newsome, Clark Whitehill Corp.Harrison Perrine, Perrine InvestmentsDon Perry, Continental DevelopmentVictor L. Pickett, Grandbridge Real Estate Capital, LLCThomas E. Robinson, Robinson Development GroupJim V Rose Rose and Womble Realty Co LLCJim V. Rose, Rose and Womble Realty Co., LLCBrad Sanford, Dominion Realty AdvisorsBurrell F. Saunders, CMSS Architects, PCReese Smith, Reese Smith & AssociatesTony Smith, Robinson Development GroupDeborah Stearns, GVA AdvantisRichard Thurmond, William E. WoodJon S. Wheeler, Wheeler InvestmentsRobert T. Williams, Tri-City Developers, LLCRod Woolard, City of Norfolk Economic DevelopmentSteven Wright, City of Chesapeake Economic Development

Save The Date

CREED Annual Business Meeting and Luncheon

Tuesday, June 2, 11:30 AM – 1:00 PM

Featured SpeakerFrank Nothaft

Chief Economist, Freddie Mac

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Executive CommitteeExecutive CommitteeChair: Tom DillonExecutive Director: John LombardVice Chair: Brad Sanford Programs Chair: Stephanie SankerPublications Chair: Brian DundonPublications Chair: Brian DundonMembership Chair: Craig CopeCurriculum Co-Chairs: John Crunkleton, Brad SanfordSponsorship Chair: Fred FackaBy-Laws Chair: Andrew KeeneyPast Chair: Joyce Hartman At Large: Jonathan Guion

Billy King Aubrey Layne

Research Committee

Albert DuncanBrian Dundon, Brian J. Dundon & Assoc.

Beth Hancock, City of NorfolkJ L F l B kJoy Learn, Fulton Bank

Sandi Prestridge, City of NorfolkMaureen Rooks, Thalhimer/Cushman & Wakefield

Bradley Sanford, Dominion Realty AdvisorsLane Shea, Harbor Group

Kristi Sutphin, Isle of Wight County

Special thank you to

Inside Businessfor their sponsorship

over the past six years.

REAL ESTATE INVESTMENT MARKET UPDATE

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Presented by:Jordan E. Slone, Chairman & CEO

HOUSING VS COMMERCIAL REAL ESTATE

3 Key Reasons this is a Housing Recession and not a Commercial Real Estate Recession

1. Residential construction doubled over 5 year1. Residential construction doubled over 5 year period from 2001 to 2006

2. Over-reliance of residential boom on speculative investors

3. Residential lending practices allowed “no money down”

11

Current Real Estate Cycle

12Source: Real Capital Analytics, October 2008

• Market is headed to the bottom of the current real estate cycle with exuberance ending and fundamentals dominating.

• Capital market moved out of line with property level fundamentals and was further exaggerated by the leverage markets.

3/12/2009

3

PERCEPTION

IS

13

IS

REALITY14

Appreciation/Depreciation in Property Values

15

•As of December 2008, Commercial Property Values have declined 14.9% over the last year.

•Apartments have dropped by –13.6%, followed by Office at –13.5%, Industrial at -13.9% and Retail at –8.5%

• Assets purchased in 2007 will require an increase in NOI to overcome the increase in capitalization rate in order to retain value.

• Assets purchased in the early 2000’s have still appreciated.Source: Moody’s Investor Services, data through December 2008

Where have all the Lenders gone?

US CMBS Issuance

100

150

200

250

Tota

l ($

Mill

ions

)

16

-

50

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: Commercial Mortgage Alert

• After posting huge increases over the last three years, 2008 US CMBS issuance dropped to volumes not seen in over a decade.

The first step in a correction:Sales volume slows as bid/offer widens

Sales volume changes between 4Q 2008/2007

Number Total $ Avg. PSF/PPU

Properties Volume

Sold

Office CBD -74% -88% -2%

Suburban -81% -70% -3%

Total -80% -80% -12%

Retail Mall and Other 73% 80% 45%

17

Retail Mall and Other -73% -80% -45%

Strip -71% -81% -22%

Total -72% -81% -22%

Apt Mid/High Rise -55% -77% -11%

Garden -40% -59% -20%

Total -42% -62% -22%

Hotel Full-Service -60% -86% -25%

Limited Svc. -76% -79% -16%

Total -68% -85% -25%

Source: Real Capital Analytics

Key Themes for 2009: The Bad News• Deteriorating economy is exacerbating the decline of

CRE fundamentals:– Cap rate compression assumptions unwinding– Pro-forma underwriting assumptions no longer hold– Rating agency assumptions that resulted in lower

subordination levels are being revisited, which has led to wide-sweeping ratings changes

• Commercial real estate values expected to decrease roughly 30-35% peak-to-trough given tighter underwriting standards, less available liquidity and higher cost of capital

• Rating agency downgrades have and will continue to affect bonds issued in 2005-2007

18

3/12/2009

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Key Themes for 2009: The Good News• Significant governmental intervention:

• Agency MBS• $500bn “buy” program from the Fed• $20bn/month from Treasury

• TARP, TALF, TAF, etc.• $787bn stimulus package

• TALF 1 0 to be directed at the consumer (e g autos student loans

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TALF 1.0 to be directed at the consumer (e.g. autos, student loans, cards, small business). Subsequent rounds (TALF 2.0) to address CMBS and private-label (prime) RMBS

• Limited CMBS refinance risk in 2009• $17 billion of fixed-rate and $1.5 billion of floating-rate

securitized loans need to refinance in 2009• Insurance company and commercial bank whole loans due to be

refinanced in 2009 were originated years ago, which allowed them to build equity

• Loan extensions

General

• TARP bail out funds have not had any immediate effect on banks lending abilities. Banks need to use the funds to cover losses and operations, little will trickle into real liquidity for new lending

• Loan extensions

Harbor Group’s Outlook and Expectations

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• 2009 – Big money to be made buying debt

• Gap between buyer and seller expectations is expected to narrow and transaction volume expected to increase

• Second six months of 2009 and 2010 – Great opportunities to buy real estate

Office

• Transaction volume down for large assets due to lack of financing sources. Hard to sell unless assumable debt is included.

Owners who do not need to sell hold assets so as to not


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• Owners who do not need to sell, hold assets so as to not take a hit on pricing due to bottom feeding in the market.

• Smaller assets continue to trade as banks have some money to lend; however, banks want to be able to diversify that pool of funds across assets.

• Asset management key to retaining value.

Multi-Family

• Owners who do not need to sell, hold assets so as to not take a hit on pricing due to bottom feeding in the market.


22

• Freddie Mac and Fannie Mae continue to be more conservative with their debt and are unable to finance acquisitions of distressed assets. Agency financing available to refinance stabilized assets.

• Vultures with cash feasting on bank REOs.

MARCH 11TH, 2009

ODU/CREED 2008 Industrial Market Overview

INDUSTRIAL OVERVIEWBill Throne

MARCH 11TH, 2009


INDUSTRIAL OVERVIEWThanks owed to the Reporters:

Ron Biesecker Thalhimer/Cushman and WakefieldChristine Kaempfe Thalhimer/Cushman and WakefieldPat Mumey Thalhimer/Cushman and WakefieldScott Wermers Thalhimer/Cushman and WakefieldScott Wermers Thalhimer/Cushman and WakefieldAbe Ellis Thalhimer/ Cushman and WakefieldBobby Phillips Thalhimer/Cushman and WakefieldWorth Remick CB Richard EllisCharles Dickenson Harvey LindsayBilly King Harvey LindsayBobby Beasley Harvey LindsayChip Worley Harvey LindsayClay Culbreth GVA AdvantisBrian Baker GVA AdvantisStephanie Sanker GVA Advantis

3/12/2009

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MARCH 11TH, 2009


INTRODUCTION 2008

“HIGH CUBE” CHALLENGED

INDUSTRIAL CORE STILL HEALTH

2009 FORECAST

CONCLUSION

MARCH 11TH, 2009


JOB GROWTH

2008

UNEMPLOYMENT

FINANCIAL MARKETS

RECENT ANNOUNCEMENTS

MARCH 11TH, 2009


2008

Nestle Waters (January 2008) Chesapeake( 2008) CArvinMeritor (January 2008) Chesapeake

Montague Farms (May 2008) WindsorKraft Foods/Planters Peanuts (June 2008) Expansion/SuffolkOOCL Logistics (July 2008) SuffolkPolaris (July 2008) ChesapeakeADS (August 2008) Expansion/VBCryomax (Sept 2008) ChesapeakeGreatwide Logistics (October 2008) SuffolkUS Auto Parts (January 2009) ChesapeakeGreatwide Logistics (January 2009) Expansion/Suffolk

MARCH 11TH, 2009


GVA ADVANTIS –Now 16 Locations

2008

MARCH 11TH, 2009


GVA

TOTAL TRANSACTION VOLUME$1,038,781,427

TOTAL SQUARE FEET15,837,107

2008

ADVANTIS

NUMBER OF DEALS1,374

TOTAL ACRES42,316

TOTAL MANAGED PROPERTIES 13,825,847 Square Feet

TOTAL CONSTRUCTION VOLUME$51,000,000

MARCH 11TH, 2009


“HIGH CUBE” SPACE CHALLENGED

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MARCH 11TH, 2009


PORT BENEFITS ARE LEGITIMATE

“HIGH CUBE” SPACE CHALLENGED

ECONOMY MAY WORK TO OUR FAVOR

APPLAUD THE “PIONEERS”

ONE OR TWO TENANTS…

MARCH 11TH, 2009


INDUSTRIAL CORE STILL HEALTHY

MARCH 11TH, 2009



MARCH 11TH, 2009



MARCH 11TH, 2009



MARCH 11TH, 2009



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MARCH 11TH, 2009


2009 FORECAST

MARCH 11TH, 2009


2009 FORECAST

MARCH 11TH, 2009


WAVERTON COMMERCE PARK

2009 FORECAST

MARCH 11TH, 2009


WAVERTON COMMERCE PARK

2009 FORECAST

MARCH 11TH, 2009


THINK REGIONALLY

CONCLUSION

THANK THE MILITARY

HAVE FAITH IN THE PORT OF VIRGINIA

WORK FOR OUR INDUSTRIAL COMMUNITY

Hampton Roads Office Market

Katherine C. CampbellOffi S l & L iOffice Sales & Leasing

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Hampton Roads Office Market22 Submarkets 22 Submarkets DOWNTOWN NORFOLK

AIRPORT/NORTHAMPTON

CENTRAL NORFOLK

CHESAPEAKE/GREENBRIER

HILLTOP/OCEANFRONT

CORPORATE LANDING

KEMPSVILLE

LYNNHAVEN

LITTLE NECK

528 Buildings528 Buildings

LITTLE NECK

MILITARY CIRCLE

NEWTOWN/WITCHDUCK

PEMBROKE/CENTRAL BUSINESS DISTRICT

PORTSMOUTH

SUFFOLK

DOWNTOWN HAMPTON

DOWNTOWN NEWPORT NEWS

HAMPTON ROADS CENTER

COLISEUM CENTRAL

NEWMARKET

OYSTER POINT

SUBURBAN NEWPORT NEWS

WILLIAMSBURG/JAMES CITY/YORK COUNTY


2008 Absorption435,000 sf




Favorable interest rates and lending standards of 2006 and 2007

resulted in 400,000 sf of office condo development


• Downtown Norfolk 3,295,000 rsf(multi-tenant)

• Suburban Southside 14,600,000 rsf(multi-tenant)(multi-tenant)

• Peninsula 6,500,000 rsf(multi-tenant)

Hampton Roads Office MarketDowntown NorfolkDowntown Norfolk


Downtown NorfolkDowntown Norfolk2009 Forecast2009 Forecast

Bank of America Building• 150,000 sq ft

Wachovia Center• 75,000 sq ft

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Hampton Roads Office MarketDowntown NorfolkDowntown Norfolk

Hampton Roads Office MarketSouthside SuburbanSouthside Suburban

• Overall Absorption 560,000 sfVirginia Beach CBD, Central NorfolkNewtown/Witchduck, Harbourview

• Greenbrier Absorption (136,000 sf)• New Construction 750,000+ sfNew Construction 750,000 sf

YE 2007 YE 2008

Avg. Rent % Vacant Avg. Rent % Vacant

Class A $19.77 7.48% $20.22 11.66%

Class B $14.66 13.02% $14.78 10.62%

Class C $11.14 2.68% $11.18 6.46%

Total $15.20 7.73% $19.08 11.20%

A & B Only $16.79 10.25% $19.43 10.88%


Over 750,000 sf of new office space Face rents of $23.50 rsf to $26.50 rsf

ConvergenceCenter III• 99,000 sf• 97% Leased• $23.50

Corporate Center VI • 59,000 sf • 31% Leased• $23.50

Two ColumbusCenter • 109,000 sf • 36% Leased• $26.50


Independence Place73,345 sfGold Level LEED Certified


Overall Absorption (95,000 sq ft)New Construction 56,000+ sq ft

Oyster Point & Hampton Roads Center

PeninsulaPeninsula

Oyster Point & Hampton Roads Center• 2 million square feet • 11% vacancy

Coliseum Central • 2008 19.75% vs. 2007 12.00%

Williamsburg• 2008 18.64% vs. 2007 12.49%


Oyster Point 2008 Class A Rents $19.55

PeninsulaPeninsula

Town Center I• 60,000 sf• $24.00 - $28.00 psf

Cedar II• 27,000 sf• $22.00 psf

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2008 YE Office Market 24,414,000 sf2008 YE Vacancy 2,840,000 sf (8.6%)

2009 New Construction 372,000 sfUSAA Building 360,000 sf2009 YE Offi M k t 25 146 000 f2009 YE Office Market 25,146,000 sf

2009 Absorption?

• 435,000 sf ~ 12.5% vacancy• 217,500 sf ~ 13.3% vacancy



Snow Ballet

China WhiteMoondance

Sentimental

Whispering Wind

Garlic CloveCrumb Cookie

Queen Anne’s LaceWhispering Wind

Delicate WhiteMoonlit Snow

Dogwood Blossom

Airy MistGypsum


Crossways I

CrosswaysCenter

CrosswaysCommerceCenter II

CrosswaysCommerce

Center I Annex

CrosswaysCommerceCenter ICenter

Crossways II

2009 HAMPTON ROADSREAL ESTATE

MARKET REVIEW AND FORECAST

CONSUMER SPENDING AS SHARE OF GDP

3/12/2009

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RETAILING IN U.S. ECONOMY

• Retailing = 70%+ of U.S. GDP• “Hiccups” have major implications• “Perfect Storm” for consumers

2008/2009:–Wealth evaporated–Credit over-extended–Jobs uncertain

U.S. RETAILING STATISTICS

• 148,000 stores CLOSED in 2008

• 73,000 stores projected to close , p jduring first half of 2009

• Net decline of 40,000 stores in 2009

FAREWELL OLD FRIENDS• Mervyn’s• Boscov’s• Linens n Things• Steve & Barry’s

• CompUSA• Movie Gallery• B. Moss• Bombay• Steve & Barry’s

• A & N Stores• Geoffrey Beene• The Sharper

Image

• Bombay Company

• Circuit City• Value City• KB Toys

RETAIL INDUSTRY DYNAMICS

• Operate fewer stores to maximize profitability per unit

• Eliminate marginal units• Pressure on every deal:

D d t– Downward pressure on rent– Upward pressure on tenant allowance– Caps on CAM charges and extra fees– Store sizes decreasing

RETAILERS’ WOES• Reduced capital for expansion hurts

public companies where stock value is based on sales growth fueled by unit growth.

• Curtailed consumer spending hurts ALL retailers and shifts focus to “profit margin.” This is problematic since U.S. retailing model is “high volume/low margin.”

TOTAL TAXABLE RETAIL SALES

MILLIONS CHANGE

SOUTHSIDE

2006 $11,849.6 ‐‐‐

2007 $12 243 0 +3 8%2007 $12,243.0 +3.8%

2008 $11,922.9 ‐2.6%

PENINSULA

2006 $5,629.6 ‐‐‐

2007 $5,936.3 +4.8%

2008 $5,712.1 ‐3.8%

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SOUTHSIDE TAXABLE RETAIL SALES PENINSULA TAXABLE RETAIL SALES

SOUTHSIDE CLOTHING PENINSULA CLOTHING

SOUTHSIDE FURNITURE PENINSULA FURNITURE

3/12/2009

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SOUTHSIDE BUILDING MATERIALS PENINSULA BUILDING MATERIALS

SOUTHSIDE AUTOS/PARTS PENINSULA AUTOS/PARTS

2008 TOTAL TAXABLE SALES 2008 BY QUARTER

3/12/2009

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2009 MARKET STUDY DATA

• 50.37 million SF (+157,800 SF)• Net absorption: 128,600 SF

• Average rent: $16.41 PSF– Southside rent: $16.78 ( + $0.10 PSF)– Peninsula rent: $15.63 ( + $0.22 PSF)

2009 MARKET STUDY DATA

• Vacancy: 7.67% = 3.86 million SF– Southside vacancy: 6.48% ( - .22%)– Peninsula vacancy: 9.97% ( + .53%)

• Big Box vacancy: 1.78 million SF (Unchanged from 2008 and at lowest point since 1998)

TOP 5 SOUTHSIDE NODESSQ. FT. VACANCY

GREENBRIER 4,140,568 3.7%

MILITARY HIGHWAY / JANAF 3,373,001 3.4%

PEMBROKE 2,753,504 8.7%PEMBROKE 2,753,504 8.7%

CHESAPEAKE SQUARE 2,111,322 2.8%

LITTLE CREEK ROAD / WARDS CORNER

2,023,794 11.8%

TOP 5 PENINSULA NODESSQ. FT. VACANCY

PATRICK HENRY / OYSTER POINT

4,534,709 3.4%

WILLIAMSBURG 4,385,688 9.6%, ,

COLISEUM CENTRAL 2,510,870 9.0%

DENBIGH 1,458,959 19.2%

NEWMARKET / MAIN 1,389,156 16.8%

WORDS TO LIVE BY

2008 = PRUDENCE

2009 = PATIENCE, PERSISTENCE

RETAIL ALLIANCE

(757) 446‐1600(757) 446 1600

WWW.RETAIL‐ALLIANCE.COM

3/12/2009

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2009 Multi-Family2009 Multi-FamilyM k t R i & F tM k t R i & F tMarket Review & ForecastMarket Review & Forecast

March 11, 2009March 11, 2009

Dan W. JohnsonSenior Vice President

CB Richard Ellis

Dan W. JohnsonSenior Vice President

CB Richard Ellis

TOPICSTOPICS

Market data as of October 2008Conclusions and consensus from multi-family executivesNew additions to the supply

Market data as of October 2008Conclusions and consensus from multi-family executivesNew additions to the supply

The Operational SideThe Operational Side

Where are the jobs coming from to occupy new supply?Forecasting

Where are the jobs coming from to occupy new supply?Forecasting

National salesSales in Hampton RoadsNational salesSales in Hampton Roads

The Investment SideThe Investment Side

Call to Action and ClosingCall to Action and Closing

MultiMulti--Family OccupancyFamily OccupancyMajor Southeastern CitiesMajor Southeastern CitiesMultiMulti--Family OccupancyFamily OccupancyMajor Southeastern CitiesMajor Southeastern Cities

89.2%90.0%

90.8% 90.8% 90.9%

92.4%93.1%

900%

92.0%

94.0%

Occupancy Levels in Major Southeastern MarketsOccupancy Levels in Major Southeastern Markets

84.0%

88.2%88.4%

80.0%

82.0%

84.0%

86.0%

88.0%

90.0%

Jackso

nville, FL (1

/09)

Columbia,

SC (11/08

)

Greensbo

ro, NC (10

/08)

Greenvil

le, SC (12/08)

Charleston

, SC (9/08)

Savannah

, GA (8/08)

Raleigh,

NC (2/09)

Charlotte,

NC (9/08)

Richmond, V

A (2/09)

Norfolk, V

A (11/08

)

Source: Real Data

Rent growth here has cooled down for the time being.Rent growth here has cooled down for the time being.Rent growth here has cooled down for the time being.Rent growth here has cooled down for the time being.

Average Rents, Second Half

$745

$785

$823

$862$871

$800

$900

Average Rents, Second Half

$592

$619

$660

$693

$745

$500

$600

$700

2000 2001 2002 2003 2004 2005 2006 2007 2008Year

Source: Real Data

Virginia Beach is still the rent leader.Virginia Beach is still the rent leader.Virginia Beach is still the rent leader.Virginia Beach is still the rent leader.

Submarket Rental Rates

York

Chespaeake

Va. Beach

Submarket Rental Rates

$750 $775 $800 $825 $850 $875 $900 $925 $950

Newport News

Portsmouth

Norfolk

Hampton

Overall

Williamsburg

Suffolk

Source: Real Data

3/12/2009

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Vacancy, by October, had crept up to 6.9%.Vacancy, by October, had crept up to 6.9%.Vacancy, by October, had crept up to 6.9%.Vacancy, by October, had crept up to 6.9%.

Hampton Roads Vacancies

6.9%8.0%9.0%

Hampton Roads Vacancies

3.8% 3.9%3.4%

2.8%

4.1% 3.8%4.4%

5.1%

0.0%1.0%2.0%3.0%4.0%

5.0%6.0%7.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008

Year

Source: Real Data

Submarket Vacancy ComparisonsSubmarket Vacancy Comparisons

66% 6.7%

7.2%7.6%

8.6%

7.7%

7.0%

8.0%

9.0%

Source: Real Data

5.2% 5.3%

6.6%

2.0%

3.0%

4.0%

5.0%

6.0%

Chesapeake Norfolk Hampton Virginia Beach Newport News Wmsburg/ York Suffolk Portsmouth

Vaca

ncy

New Additions to SupplyNew Additions to Supply

1,670 units under construction1,670 units under construction

As of OctoberAs of October

1,985 units are planned (some will take a while)1,985 units are planned (some will take a while)

Where are they?Where are they?

Under Construction or PlannedUnder Construction or Planned

500

600

700

800

900

UnderConstruction

0

100

200

300

400

Chesapeake Hampton Portsmouth Norfolk NewportNews

VirginiaBeach

WilliamsburgCities

Planned

Source: Real Data

Where is the job growth?Where is the job growth?Tracking Net Job Creation/ Loss Announcements

Chesapeake

Suffolk

Portsmouth

Norfolk

Tracking Net Job Creation / Loss Announcements

-8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Newport News

Virginia Beach

Hampton

York Co./ Glouchester

Isle of Wight

Williamsburg/J.C. Cty

Hundreds

Source: Hampton Roads Economic Development Alliance and recent Virginian Pilot articles

Countervailing ForcesCountervailing ForcesCountervailing ForcesCountervailing Forces

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Our Trump Card: Rent vs. BuyRent vs. Mortgage Costs

$1,500$1,600$1,700$1,800$1,900

& I,

30

yr.

$1,300$1,400$1,500$1,600$1,700

Mortgage CostMonthly Rent

$700$800$900

$1,000$1,100$1,200$1,300$1,400

,

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Mor

tgag

e Pa

ymen

t (P

&

$500$600$700$800$900$1,000$1,100$1,200

,

Conclusion and ConsensusConclusion and Consensus

1. That was correct1. That was correct

Finding: Oct. 08 vacancy was 6.9%Finding: Oct. 08 vacancy was 6.9%Consensus:Consensus:

2 It has risen by 30 to 40 basis points since then2 It has risen by 30 to 40 basis points since then2. It has risen by 30 to 40 basis points since then2. It has risen by 30 to 40 basis points since then

1. If viewed as effective rents, they got it right1. If viewed as effective rents, they got it right

Finding: Rent growth stopped. In fact, rentsFinding: Rent growth stopped. In fact, rentsdeclined 0.8% in LH 2008declined 0.8% in LH 2008

Consensus:Consensus:

2. Most owners struggling to hold at current 2. Most owners struggling to hold at current levels. “Flat is the new up!”levels. “Flat is the new up!”

Conclusion and ConsensusConclusion and ConsensusQuestion: Question: Have delinquencies and uncollected increased?Have delinquencies and uncollected increased?

Consensus: Consensus: Yes, but only by 5 to 10% over last yearYes, but only by 5 to 10% over last year

Question:Question: What are the most challenging submarkets?What are the most challenging submarkets?Question: Question: What are the most challenging submarkets?What are the most challenging submarkets?

Consensus: Consensus: Williamsburg, some parts of Newport Williamsburg, some parts of Newport News, Eastern Va. BeachNews, Eastern Va. Beach

And the next year? And the next year? Chesapeake and NorfolkChesapeake and Norfolk

Conclusion and ConsensusConclusion and ConsensusQuestion: Question: What is the strongest marketing tool at this time?What is the strongest marketing tool at this time?

Consensus: Consensus: Early renewals, no matter what it takes!Early renewals, no matter what it takes!

Question: Question: Have you altered credit policies for delinquent payers?Have you altered credit policies for delinquent payers?

Consensus: Consensus: No clear consensus. As some owners say, “workouts No clear consensus. As some owners say, “workouts won’t work,” but others, citing not only unemployment, but won’t work,” but others, citing not only unemployment, but underemployment, are allowing some flexibility.underemployment, are allowing some flexibility.

Question: Question: Where will the vacancy bottom out?Where will the vacancy bottom out?

Consensus: Consensus: 8% to high 9% depending on submarket8% to high 9% depending on submarket

The Investment SideThe Investment Side

Apartment Sales Nationally

Hampton Roads

Apartment Sales Nationally

Hampton RoadsMulti-Family SalesLargest Deals of 2008Multi-Family SalesLargest Deals of 2008

National Multi-Family Sales

$100,000,000,000

$90,000,000,000

$80,000,000,000

$70,000,000,000

Garden apts.

Mid/Highrise

Sour

ce: R

CA

His

toric

al A

ll Ty

pe 2

001-

2008

$70,000,000,000

$60,000,000,000

$50,000,000,000

$40,000,000,000

$30,000,000,000

$20,000,000,000

$10,000,000,000

$02001 2002 2003 2004 2005 2006 2007 2008

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18

MultiMulti--Family Sales Family Sales Hampton RoadsHampton Roads

Volume of Sales and Cap Rates

250,000,000

300,000,000

7.2

7.4

7.6

50,000,000

100,000,000

150,000,000

200,000,000

2004 2005 2006 2007 20086

6.2

6.4

6.6

6.8

7

%

Volume of SalesCap Rates

Source: Real Data

Largest MultiLargest Multi--Family Sale 2008Family Sale 2008Buyer: Harbor Group InternationalBuyer: Harbor Group InternationalProperty: Runaway Bay ApartmentsProperty: Runaway Bay Apartments

Second Largest MultiSecond Largest Multi--Family Sale 2008Family Sale 2008Buyer: Harbor Group InternationalBuyer: Harbor Group InternationalProperty: Mariner’s Cove ApartmentsProperty: Mariner’s Cove Apartments

ThirdThird--Largest MultiLargest Multi--Family Sale 2008Family Sale 2008Buyer: Harbor Group InternationalBuyer: Harbor Group InternationalProperty: Waterman’s Crossing ApartmentsProperty: Waterman’s Crossing Apartments

Time for Operational Excellence Time for Operational Excellence

Challenge Challenge allall your old assumptions.your old assumptions.

Select and invest carefully in your staff.Select and invest carefully in your staff.

Challenge them to do more inChallenge them to do more in--house.house.

Work very closely with your vendors.Work very closely with your vendors.Think of them as your partners.Think of them as your partners.

Time for Operational Excellence Time for Operational Excellence

Tenant retention is absolutely Tenant retention is absolutely key.key.Investment here is better than Investment here is better than turnover costs or vacancy.turnover costs or vacancy.

Ramp up your Ramp up your outreach marketing.outreach marketing.

3/12/2009

19

Don’t let them take

…and, whatever you do,…and, whatever you do,

Don t let them take away your…

Thank You!k RESIDENTIALRESIDENTIALMARKET UPDATEMARKET UPDATE

20082008Van Rose, MIRMVan Rose, MIRM

President, Rose and President, Rose and WombleWomble New HomesNew Homes

15 Year Closing15 Year ClosingNew Construction & Resale HistoryNew Construction & Resale History

Source:

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20

Hampton Roads Housing StatsHampton Roads Housing Stats20082008

Average Price of SF New HomeAverage Price of SF New Home$400,451$400,451

A Decrease of $30,680 or 7.1%A Decrease of $30,680 or 7.1%A Decrease of $30,680 or 7.1%A Decrease of $30,680 or 7.1%

Average Price of SF Existing HomeAverage Price of SF Existing Home$267,123$267,123

A Decrease of $16,384 or 5.8%A Decrease of $16,384 or 5.8%Source:

2008 2008 SALESSALES

RESALE: 14,621 RESALE: 14,621 20.3%20.3%

NEW HOMES: 2,855 NEW HOMES: 2,855 16.2%16.2%

Source:

Market Share for Existing Homes Detached Sales by Price Range

19%

6%7% 6%

6%

16%

Source:

68% 72%

Market Share for New Construction Detached Sales by Price Range

19%

23% 17%

20%

Source:

25%

33%29%

34%

Market Share for Existing Homes Market Share for Existing Homes Attached Sales by Price RangeAttached Sales by Price Range

28%

4%3% 3%

4%

28%

65% 65%

Source:

Market Share for New Construction Market Share for New Construction Attached Sales by Price RangeAttached Sales by Price Range

21%

13%6%13%

6%

60%

60%

21%

Source:

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21

Average Market Time Average Market Time Existing HomesExisting Homes

Source:

20092009

Resale10,544 units11.3 months supply

Inventory

New Homes 1,695 units8.5 months supply

Source: *Inventory on 02/23/09. Based on sales pace of last 6 months

Hampton Roads Residential InventoryHampton Roads Residential Inventory2007 to 20092007 to 2009

Source:

Hampton Roads Residential Inventory by Price Range

15%

13%26%

14%

7%

Source:

34%

31% 24%

9%

27%

Existing Existing Home Home

InventoryInventoryInventoryInventoryBy City/ By City/ CountyCounty

Source:

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22

New New Homes Homes

InventoryInventoryInventoryInventoryBy City/ By City/ CountyCounty

Source:

Challenging CreditCredit

Environment

Hampton Roads Short Sale/Foreclosure Market Share

Source: Source:

Source:

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23

New Homes

Inventory Will Be

Absorbed by 4th

Quarter 2009

Southside ATT <$200,000

2.7 Mo

Southside ATT $200K-$250K

3.6 Mo

Southside ATT $250K-$300K

5.3 Mo

Peninsula DET $200K-$250K

4.2 Mo

Peninsula ATT <$200,000

4.5 Mo55Southside DET $200K-$250K

5.4 Mo

Southside DET $250K-$300K

5.8 Mo

Peninsula ATT $200K-$250K

4.7 Mo

Peninsula ATT $250K-$300K

3.2 Mo

Buyer Confidence Will Buyer Confidence Will Begin to ReturnBegin to Return

Hampton Roads Hampton Roads Employment to Permit RatioEmployment to Permit Ratio

Hampton Roads Housing DemandHampton Roads Housing Demand

3,700 Units

ShortfallShortfall

2,000 Units

3/12/2009

24

New, affordable product offerings New, affordable product offerings will raise new home sales numberswill raise new home sales numbers

New Construction Product MixNew Construction Product Mix2008 Closings2008 Closings

Source:

Average SFD Home SizeAverage SFD Home Size

YTD 2009Average: 2,435

2005Average: 2,742

AND THEAND THE

Hampton Roads

Top 5 Builders

WINNERS WINNERS

ARE……..ARE……..

Source:

# 5

94

# 4

157

3/12/2009

25

# 3

218

# 2

275

# 1

314

Old Dominion University Hampton Roads Real Estate

Thank you for attending!Thank you for attending!

Please Join Us for the ReceptionPlease Join Us for the Reception

pMarket Review and Forecast

Presented by: E.V. Williams

Center for Real Estate and Economic Development

2009 market slides - odu · 2020-03-13 · deborah stearns, gva advantis richard thurmond, william...

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