Hampton Roads February 2023 – Key Take-Aways
Keith Slattum – Dollar Bank
- Right now, one of the biggest challenges we have is an inverted yield curve by about 100 basis points.
- This makes it tough for the banks because it is cheaper for people to borrow money on the long term rather than short term.
- Something else I have noticed is no one is quoting prime based any more it is all SOFR (secured overnight financing rate) based.
- Some of the self-storage lease appetite has slowed.
- Money market and CD rates are going up.
- By all technical account we have already experienced a recession, which is two negative quarters of GDP. However, there is a “political influence” that has to be taken into account to call it an actual recession.
- For our local economy is hard to actually judge a recession because of the large amount of military population. Even if the nation goes into a light recession, we will tend to not go into one locally.
- On the other side of that if there is a big nationwide growth, we tend to not grow as much as well because of the same reason, the large military population.
Dan Shelton – Whiting-Turner
- Not much has changed. Still lots of problems with the electrical supply chain.
- One of Whiting-Turner’s projects, the Google Bay View Campus, was recognized as the 2022 global best project by ENR (Engineering News Record).
- There is still a little bit of TI work in the MOD market.
- Healthcare is a little slower, but still going.
- From an office standpoint, we are still going however there is some hesitancy on how many people are actually going to come back into the offices.
Nicole Campbell – Divaris
- On the office side of things downtown Norfolk is struggling.
- Maybe due to parking
- Lots of people are not coming back to downtown Norfolk.
- Town Center VA Beach on the other hand is 100% occupied.
- Rates in VA Beach are not dropping.
- Owners are saying if I have to spend my money to do these buildouts (lots of places have some obsolescence that needs retrofit), amortize it into my rate.
- Annual escalations are now around 3.5% or CPI where they were at 2.5% to 3%.
- Landlords are trying to figure out ways to recoup funds burned off due to inflation.
- Peoples are building office space that have more shared space rather than cubed individual space.
- Using It as a rerouting tact for those coming out of the work from home environment. Making the office space more comfortable.
- The only group of people we don’t see coming back to the office is call centers.
- Office market vacancy in Hampton Roads is about 7.5%. Anything under 10% is good.
Greg Schmitt – Kimley Horn
- On the office side we are seeing a lot more exterior improvement. Creating exterior employee spaces. Gathering areas and eating areas outside.
- Largely been the foreign companies doing this.
- Have not seen a lot of ground-up office.
- The first two months of the year does seem a bit slow.
- On the public sector, lots of RFPs and grants are being released. A lot of the infrastructure money seems to be trickling down.
- Seems like a lot of the smaller local municipalities got a big chunk of that infrastructure money.
- Hiring has been successful.
- We (Kimley Horn), have adjusted our flexibility philosophy to be more attractive to compete with the work from home market, and to appeal to this generation of hires.
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