THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, February 3, 1995 TAG: 9502030548
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY MYLENE MANGALINDAN, STAFF WRITER
LENGTH: Medium: 69 lines
In the aftermath of the Federal Reserve's seventh interest-rate hike in a year, commercial real estate brokers showed cautious optimism Thursday over the news that vacancies dropped last year in Hampton Roads.
Local real estate brokers involved in a national survey of the office and industrial market said that the Fed's recent actions will make it more difficult to develop new office real estate in 1995.
On the other hand, that should be good news for those leasing existing property because rental rates should go up with the lack of new development, said Deborah K. Stearns, a senior vice president at Goodman Segar Hogan Hoffler who helped administer the Society of Industrial and Office Realtors survey released Thursday.
Office vacancies throughout Hampton Roads fell for the second consecutive year, to 14.2 percent in 1994. Vacancies stood at 16 percent in 1993.
The expansion of environmental, service and medical companies, and law firms helped push occupancies up, Stearns said. Companies like First Hospital Corp., Household Finance Corp. and others are looking for more space for existing operations.
With the completion of Main Street Tower, which increased the amount of unoccupied office space in downtown Norfolk, overall office vacancy rose to 21 percent, compared with 16.7 percent in 1993.
Elsewhere in Hampton Roads, vacancies remained relatively low at 12.3 percent, down from 15.2 percent in 1993. It demonstrates that the suburban market continues to tighten, brokers said.
Some of the hottest submarkets with less than 10 percent vacancies are the Lynnhaven area and Newtown Road/Greenwich Road corridor in South hampton Roads. On the Peninsula, downtown Hampton, Hampton Roads Center and Oyster Point range between 7 percent and 9 percent vacancies.
Lynnhaven's proximity to the Oceanfront, where many corporate officers and business people live, makes it an attractive office location, said John Profilet of S.L. Nusbaum Realty Co. Newtown and Greenwich Roads are located near the intersection of Interstates 64 and 264, which make it a popular location.
Some construction has taken place - Continuous Electronic Beam Accelerator Facility in Suffolk, Contemporary Cybernetics in Newport News, Integrated Systems Control Inc. in Virginia Beach - which should help relieve some of the tension in the marketplace, Stearns said.
But developers do not expect to build any `spec' space - buildings not preleased before construction - because average market rents that tenants are asking do not make the cost of construction feasible, said William W. Hamner, president of Hamner Development co. in Newport News.
Lack of speculative building affects the industrial market directly because the supply of warehouses and distribution space is extremely limited, said John M. Lee, vice president at Goodman Segar Hogan Hoffler. According to the industrial survey, vacancies in South Hampton Roads have fallen to 4.6 percent in 1994, down from 5.4 in 1993.
Although lack of resources prevented the survey from including the Peninsula, vacancies on the north side of the water are lower than those on the south side, Lee said.
The need to store commodities, particularly bulk materials - like cocoa beans and crude rubber - shipped through the port, has driven the industrial market. Port officials do not expect demand for storage space to drop, Lee said.
Build-to-suits, facilities built to meet tenants' specific needs, will drive the construction market in the next year, he predicted. ILLUSTRATION: Maps
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