Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 11, 1990 TAG: 9003123182
SECTION: HOME PAGE: B-2 EDITION: METRO
SOURCE: SANDRA BROWN KELLY BUSINESS WRITER
DATELINE: LENGTH: Long
Inclusion on the list, compiled by the National Association of Realtors, got Roanoke nationwide publicity in USA Today, which circulates more than a million newspapers daily.
Roanoke Councilman James Trout said the label was proof that the area is going places.
He hopes potential developers saw Roanoke's name and will show up with money to invest in Virginia Tech's Hotel Roanoke project or the town houses he envisions being built near downtown after the widening of Franklin Road into Old Southwest.
On the other hand, Ed Hall, a veteran of the commercial-industrial leasing business, said he read the USA Today article and thought, "Oh my goodness, I hope no developer sees this and wants to come here and build a spec [speculative] building."
The National Association of Realtors studied 88 markets in the country's four real estate regions. The cities cited for their investment potential included 18 with populations greater than 1 million and at least 15 million square feet of office space. Also included were 13 secondary or smaller cities, which included the Roanoke Standard Metropolitan Statistical Area, with its approximately 2.6 million square feet of office space.
The Realtors' organization said the 31 areas were chosen because they show economic strength and growth potential greater than the country as a whole.
Each of the cities had growth rates for all economic indicators in the top 30 for primary markets and the top 25 for secondary markets. Each also had an office vacancy rate no higher than the national average of 17 percent or an industrial vacancy rate no higher than 10.4 percent.
Roanoke's vacancy rate was given as 13.4 percent for 1989. It now is about 15.8 percent, according to a survey by Hall Associates Inc.
By Ed Hall's standards, 15 percent is high enough. "Four or five years ago, if you were over 10 percent you'd be in deep water," he said.
Hall takes a conservative attitude toward the "ripe market" designation. The smaller a market is, the more deceiving percentages become, he said.
"Thirteen percent sounds wonderful compared to a 30 percent vacancy for a Denver, but when you look at North Roanoke County . . . anybody who would build speculative space there would need to have his head examined," Hall said.
North County has a 34 percent vacancy rate for its top, Class A, office space; 42 percent for Class B space. This happened because two major projects, Valleypoint and Northpark, "came out of the ground simultaneously," said Hall.
And with the Faison office building and the Norfolk Southern office building plans for downtown Roanoke, Hall believes the Roanoke Valley could get overbuilt.
Hall said that if he got a call from a potential developer, he would tell that person: "There may be some niches for development, but you need to study the area carefully. The Roanoke Valley is not a deep market.
"The office space market has been soft the last 15 months or so. It's improving but we still have space to digest," Hall said. "Three, four or five years from now, we might need more."
Hall said there are only so many tenants who will pay the $23-per-square-foot rate asked for the Faison space or the $28-per-square-foot that a similar space will cost a few years from now.
Roanoke's downtown office vacancy rate ranges from 6 percent for the best space to 24 percent for Class C space. South County vacancy rates are about 15 percent, but Colonnade II, with 60,000 square feet of new space, is under construction.
The National Association of Realtors study was based partly on data obtained from the Society of Industrial and Office Realtors and the Commercial Investment Real Estate Council.
"For the nation as a whole, economic expansion is expected to be slow this year," the study said. "Slow growth, along with overbuilt conditions in many markets, will cause the pace of real estate activity - both residential and non-residential - to remain moderate."
But the 31 cities could do better than moderate. They "could excel in 1990," the association said.
The primary cities are Seattle, Wash.; Tampa-St. Petersburg-Clearwater and Orlando, Fla.; Sacramento, Calif.; Washington, D.C.; Atlanta; Portland, Ore.; Dallas; Baltimore; Minneapolis-St. Paul; Columbus, Ohio; Salt Lake City-Ogden, Utah; Nashville and Memphis, Tenn.; Charlotte-Gastonia-Rock Hill, N.C.-S.C.; Pittsburgh; Miami-Hialeah; and Indianapolis.
The second cities in addition to Roanoke were Wilmington, Del.; Fresno, Calif.; Reno and Las Vegas, Nev.; Jacksonville and Lakeland-Winter Haven, Fla.; Des Moines, Iowa; Oxnard-Ventura, Calif.; Portland, Maine; Honolulu; South Bend-Mishawaka, Ind.; and El Paso, Texas.
The 31 cities were not ranked and were not necessarily the only areas that could be strong markets, nor does the list include some of the fastest-growing Metropolitan Statistical Areas, Trisha Morris of the realtors' association said. She also said she had heard from officials in cities that weren't included, asking why they were left out. "Cleveland and New York have called," she said.
Fifteen of the markets on the list are in the South.
"Florida truly is having its days in the sun," said association President Norman D. Flynn.
In its news release, the association said the population shift to the South that began in the 1980s is expected to continue in the early 1990s. It said the availability of skilled and relatively low-cost labor, combined with moderate real estate prices, will encourage business relocations to the South and the establishment of new businesses.
The list was compiled from second-half 1989 data after a look at the areas' commercial real estate conditions, population and employment trends, and prospective growth.
The reasons given for anticipated growth in the areas were as diverse as the listings. The association said Orlando is becoming a movie industry hub with none of the traffic congestion or high development costs of California; Las Vegas is becoming a major retirement center due to its low taxes, favorable climate and affordable housing.
"Growth in the non-manufacturing section is expected to offset the Midwest's sagging automobile and steel industry," the report said. "Like the South, employers are drawn to the Midwest by the region's relatively low wages and highly skilled work force."
by CNB