Hampton Roads November 2022 – Key Take-Aways
- There has been a rapid vacancy compression in the multi-family market from 2018 to 2021. New supply was coming online, but there was tremendous demand. Vacancy has started to expand but it’s still tight despite the reversal. (Mike Cobb – CoStar Group)
- Some of the most negativity is taking place in workforce housing. Seeing a rise in evictions once the moratoriums were lifted. Demand for high quality apartments has been positive. (Mike Cobb – CoStar Group)
- In 2020, rents grew by 5%. A normal year would be 2-3%. In 2021, they grew by 12%. In 2022 rent growth has slowed in the later half of the year as demand has dropped. (Mike Cobb – CoStar Group)
- Multi-family sales volume is soaring. With yields being squeezed in major metros, investors are looking to markets they might not have otherwise targeted.
- The gap between sellers and buyers is as wide as it’s been. Sellers are looking to sell at 2021 prices, but buyers want late 2022 prices. Lots of deals are on hold and there is a slowing of investment activity which will likely persist through 2022. (Mike Cobb – CoStar Group)
- There will likely be more vacancy expansion, though it might not be as dramatic as anticipated. High interest rates may keep people renting. (Mike Cobb – CoStar Group)
- The office market has been steady over the past three years. There has been some vacancy expansion, but it’s currently at around 8% vacancy, which is where we were exiting the great recession. (Mike Cobb – CoStar Group)
- Lease activity is not back to pre-pandemic numbers. A lot of tenants are streamlining their footprints, so deals are happening but the footprints are smaller. Likely have not seen the full effect of it as tenants weigh their options. (Mike Cobb – CoStar Group)
- There was more sublet availability than 2020, but similar to years prior to that. Close to 2015 territory. A lot of the sublet availability is concentrated in Greenbriar. (Mike Cobb – CoStar Group)
- There has not been much development in the office market. (Mike Cobb – CoStar Group)
- Office rent growth has started to simmer. Uncertainty has been rising. (Mike Cobb – CoStar Group)
- Forecasting a continued vacancy expansion as the office needs of companies are changing. (Mike Cobb – CoStar Group)
- The industrial market is at about 2% vacancy, and it’s difficult to get much tighter than that. (Mike Cobb – CoStar Group)
- There is not a lot of industrial space available to lease. (Mike Cobb – CoStar Group)
- Hampton Roads industrial development is soaring. 4.5 million sq ft underway, but 60% is already committed. (Mike Cobb – CoStar Group)
- Newer buildings are in higher demand because they’re better able to meet the demands of modern businesses. (Mike Cobb – CoStar Group)
- Industrial rent growth is soaring, but it’s unclear if it’s peaking. (Mike Cobb – CoStar Group)
- Industrial investment is at all-time highs. (Mike Cobb – CoStar Group)
- Retail has been a big concern considering all the changes with ecommerce but has become one of the strongest sectors locally. (Mike Cobb – CoStar Group)
- Retail vacancy has compressed over the past few years. Currently it’s at about 5% vacancy, which is one of the tighter markets in recent history. (Mike Cobb – CoStar Group)
- Demand is currently outpacing supply, which is the first time since 2018. Tenants are looking to renew and some are expanding. (Mike Cobb – CoStar Group)
- Malls have more vacancies than other retail. (Mike Cobb – CoStar Group)
- Retail leasing is remaining consistent. (Mike Cobb – CoStar Group)
- Retail development remains tame. Most development is aimed at small, walkable areas. (Mike Cobb – CoStar Group)
- Retail rent growth has continued to rise over the past few years, particularly in the Sun Belt with migration of people from northern areas. (Mike Cobb – CoStar Group)
- Seeing a lot of grocery-anchored centers. (Mike Cobb – CoStar Group)
- Retail forecast is pretty positive overall. There has not been a lot of development and leasing activity has continued. (Mike Cobb – CoStar Group)
- The office market in Hampton Roads is better than the average in the US. Hampton Roads has less exposure to industries going to remote based work. (Mike Cobb – CoStar Group)
- Things have slowed down. There are still deals, but there is less volume. Seeing more extensions on due diligence, so the deals that are taking place are taking longer. (Richard Crouch – Woods Rogers Vandeventer Black PLC)
- The Corporate Transparency Act requires additional disclosures about company ownership and was designed to combat money laundering. Takes effect 1/1/24 for existing companies. Penalties for non compliance are severe. (Richard Crouch – Woods Rogers Vandeventer Black PLC)
- There are still shifting problems with materials and it’s important to keep a close eye on lead times. (Dan Shelton – Whiting-Turner)
- There has been a smaller influx of RFPs at this time of year. (Dan Shelton – Whiting-Turner)
- Higher education and healthcare projects tend to be steady. (Dan Shelton – Whiting-Turner)
- The fundamentals are strong in affordable multi-family. (Kris Knepper – Lawson)
- Development pipeline is slow. (Kris Knepper – Lawson)
- Liability premiums are stabilizing a little from the hard market over the past few years. (Mike Moore – London & Norfolk)
- Cyber insurance is still going up. (Mike Moore – London & Norfolk)
- Rates are increasing to cover replacement costs which are rising. (Mike Moore – London & Norfolk)
- Seeing separate policies for water damage with higher deductibles. (Mike Moore – London & Norfolk)
- Vacancies are a concern for insurers because it’s higher risk. (Mike Moore – London & Norfolk)
- Best month to renew is April or early Q2, before hurricane season. There can be moratoriums during hurricane season. (Mike Moore – London & Norfolk)
- Leases are including clauses that require a tenant or, if they’re allowed to vacate, they still have to comply with all the maintenance. (Chris Ambrosio – Woods Rogers Vandeventer Black PLC)
- Have seen a lot of turnover in multi-family with properties being sold at top dollar. (Janet McCaskey – McCaskey & Associates Insurance)
- Carriers are pulling out of the market due to being close to the water. (Janet McCaskey – McCaskey & Associates Insurance)
- Rate increases can be as much as double because replacement cost estimates are going up and new policies have more specific deductibles. (Janet McCaskey – McCaskey & Associates Insurance)
- Rents have started to slow in growth. (Adam Saich – Featherstone Partners)
- Getting difficult to look at acquisitions with so many changes happening. (Adam Saich – Featherstone Partners)
- Capital market space has been tricky and deals are sticking to a 30 day timeline because they didn’t want to have the rate resized. (Hannah Taylor – Featherstone Partners)
- Labor and material costs continue to be a challenge and units may get stuck offline waiting for materials. (Hannah Taylor – Featherstone Partners)
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