Experts Take Stock of the Hampton Roads Commercial Real Estate Market
by Think Currituck, on 3/23/21 3:06 PM
3 Big CRE Takeaways from the 26th Annual Hampton Roads Real Estate Market Review and Forecast
Every year, a group of experts gathers to talk about the state of real estate in Hampton Roads. They are an all-star team of economists, business leaders and commercial real estate professionals. Nobody has a better finger on the pulse of the past, present and future of our region.
But none of them could have predicted what happened in March of 2020.
COVID was the biggest curveball in history. It affected everything and everybody from freelancers to Fortune 500 companies.
This year, the all-star team gathered virtually to present the 26th Annual Hampton Roads Real Estate Market Review and Forecast.
For over two decades, the E.V. Williams Center for Real Estate has been working with Hampton Roads’ industry leaders to produce the Market Review. As part of Old Dominion University’s Strome College of Business, the E.V. Williams Center for Real Estate strives to connect the Hampton Roads’ real estate community to the research, curriculum, and students at the University.
The full report is full of great data and insight, but here are three big takeaways focused on the state of Hampton Roads commercial real estate...
1. Work from Home is Here to Stay
Deborah Stearns, Senior Vice President at JLL, addressed the dramatic shift to working from home that became the norm during COVID. She noted that most employees now expect working from home (WFH) to be included as an official company benefit.
Stearns also highlighted some numbers from a PricewaterhouseCoopers (PwC) Remote Work Survey that showed:
- 39% worked from home before COVID
- 77% worked from home during COVID
- 55% are expected to work from home after COVID
Locally, Stearns pointed to several commercial real estate transactions that reflected those significant WFH changes, including:
- The 115,000 SF building in Chesapeake put up for sale by Capital One after the company decided that all of its staff would work from home indefinitely
- A 50,000 SF space given up by QVC for the same reason
- The 40,000 SF office property available for sublease from Trader Interactive in Norfolk after the company chose to have employees work from home
Overall, Stearns said that it was most likely that Hampton Roads would see a 10-15% reduction in office occupancy over the next 2-3 years, with the WFH changes eventually being offset by stabilizing densification.
2. Industrial is the New CRE MVP
Geoff Poston, Vice President of Industrial at Cushman & Wakefield | Thalhimer, talked about how industrial real estate broke records in 2020. Poston pointed out that e-commerce has helped fuel record demand for industrial properties, leading to historically low vacancy rates and increased property values.
Poston noted that CoStar tracked the Hampton Roads market as having an all-time high of 7 million SF of leasing activity in 2020 (71% due to Amazon). He also pointed out that 874,000 SF of industrial space was brought to market and the region's current inventory of industrial space under construction is also at an all-time high.
Looking forward, Poston highlighted the continued rise of e-commerce and the tremendous opportunity ahead in the development and expansion of offshore wind.
3. Retail Survival Depends on Innovation
Mike Zarpas, Vice President of Retail Brokerage and Development at S.L. Nusbaum Realty Co., applauded the adaptability of retailers who managed to survive and sometimes thrive during COVID.
His segment focused squarely on the changing face of retail post-COVID, which will be dominated by stores who think outside the big box. Zarpas stressed that only the innovative and technology-savvy will survive and offered kudos to retailers such as Home Depot, Taylor's Do-It Center and Sherwin Williams.
Customer experience is also key, and any outlets that can deliver "cool new concepts" to bring customers in and keep them coming back will get an advantage over their competition.
What about malls?
Zarpas said, "When the dust settles, there will likely be two dominant malls in the region, one on the Southside and one on the Peninsula. The others will become hybrid developments or risk losing relevance altogether."