THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, June 5, 1995 TAG: 9506030191
SECTION: BUSINESS WEEKLY PAGE: 04 EDITION: FINAL
TYPE: Editorial
SOURCE: Ted Evanoff
LENGTH: Medium: 82 lines
One generation has passed since the Hampton Roads Bridge-Tunnel was built between Hampton and Norfolk. Once the car ferries were replaced by tunnels, now used by at least 2 million vehicles a month, the idea spread about a cohesive economy uniting cities on either shore.
The idea was simple. The tunnel quickened travel, and as businesses on either side relied on one another, commerce would bind the region's economy. At least that was the thought. It hasn't happened, though, exactly as stated.
The Peninsula, home to about 500,000 people, remains in its own economic orbit. One sure sign of this appeared last week.
House sales, considered a measure of the economy's strength, rebounded on the Peninsula in April, although the southside's deep sales slump persisted for the third month, the Virginia Association of Realtors reported.
On the Peninsula, April sales about matched those in April '94. That was a major improvement. Peninsula sales fell 18.2 percent in March and 15.2 percent in February compared to the same '94 months. In South Hampton Roads, sales declined 13.8 percent in April and more than 18 percent in each February and March.
Southside real estate agents looked at the numbers and some attributed the slump to arithmetic. They said southside sales resumed a normal pace that appeared weak only because '94 was strong.
There may be merit in the argument, though the longer view of economist Russel Deemer of Crestar Bank in Richmond is equally compelling.
Crestar monitors the rate of house sales in Virginia. Its house sale index shows Hampton Roads tends to move in tandem. Higher house sales on the Peninsula match higher sales on the southside. When Peninsula sales decline, so do the southside's.
The index tracked that way in the '80s and early '90s. Recently, however, Deemer noticed the index split.
Coming out of the '91 recession, Peninsula house sales rose to a higher peak on the index than the southside's, and dropped to a shallower trough as interest rates climbed in '94. By April '95, Peninsula house sales exceeded the rate on Crestar's January '81 index by 100 percentage points, while the southside rate was up only 61 points.
``The rates have diverged in the last 18 months for very strange reasons,'' Deemer said about Crestar's index. ``I'm not really sure why.''
Deemer, employed until last winter at the Hampton Roads Planning District Commission, a research body in Chesapeake whose tasks include measuring the region's economy, wonders about the downsizing Navy.
``If I had to say it's related to anything, it's very possible the southside had a larger number of houses on the market when we hit the peak after the recession,'' Deemer said. ``While the Navy has plans to consolidate in Hampton Roads, the whole Navy is shrinking, and the number of Navy personnel is declining in Hampton Roads.''
The Navy doesn't say how many personnel reside in the region, though most of Hampton Roads' 100,000-plus armed forces members are stationed on the southside, where the total civilian and military population numbers 1 million.
``I think there are some different dynamics at work on the Peninsula and the southside,'' Deemer said. ``The Peninsula has a lot of defense contractors and they knew ahead of time about the defense cuts and adjusted accordingly. The Navy on the southside . . . it doesn't plan for budget cuts. It just happens as the budget comes down.''
Most of the region's big commercial enterprises - including the major banks, law firms and real estate developers, as well as the cultural endeavors - are in Chesapeake, Norfolk, Portsmouth and Virginia Beach. They'll help stabilize the southside as the Navy shrinks.
Meanwhile, the Peninsula has developed small high-tech companies, entrepreneurial offspring of the NASA Langley Research Center in Hampton. Deemer said high-tech bolstered the Peninsula amid the defense industry layoffs.
``If you had looked at the Peninsula and the southside 20 years ago, they were very different,'' Deemer said. ``What was the same was the shipyards. Now the Peninsula has much more of a high-tech focus to it as opposed to the southside, which has more military and blue-collar.
``The intellectual qualities of the labor force on the Peninsula are much higher than what you see on the southside. If there are a lot of job cuts, many of them have the skills to start up their own businesses.'' by CNB