THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, September 18, 1995 TAG: 9509160183
SECTION: BUSINESS WEEKLY PAGE: 04 EDITION: FINAL
TYPE: Column
SOURCE: Ted Evanoff
LENGTH: Medium: 86 lines
Ed Miller knows of 60 acres in Hampton prime for industrial development. The land is near Interstate 64, next to NASA Langley Research Center, and perfect as an engine for job growth in almost every respect but one: There are no empty buildings on the property.
Miller, an economic development official in Hampton, a Peninsula city of 130,000, knows companies relocating to the region want to move into empty buildings rather than await construction of a new office.
So an economic development arm of Hampton plans to build a building. That's right, the city is going into the development business.
It's applied for a $1.5 million state loan to finance construction of a 50,000- to 60,000-square-foot building in an industrial park near NASA.
Hampton's move could raise eyebrows in South Hampton Roads. For one reason, it's a gamble. No tenant is in sight. Hampton's building will sit like an empty shell until a tenant or buyer comes along and fixes the interior to fit its needs.
What's more, southside developers insist government should not assume the traditional role of private industry.
But Miller figures erecting a shell building on speculation is an opportunity. Today, large blocks of office space are scarce in Tidewater. It's no wonder why.
Hampton Roads has been in the spotlight of big corporations all spring and summer.
United Parcel Service rolled out plans for a package tracking station in Newport News. Avis, the car renter, picked Virginia Beach for its operations headquarters.
Canon Computer Systems selected Chesapeake for a technical service center. Trans World Airlines chose Norfolk for an East Coast flight reservations center.
It'll be some months before UPS, Avis, Canon and TWA are up and running in Tidewater, employing a combined total of about 1,700 workers. But the developments reflect the pace of the commercial real estate market.
Businesses large and small have expanded throughout the region. They've filled up almost all the surplus office space left from the '80s building boom. Hardly any empty office space is available in blocks larger than 50,000 square feet.
What has kept developers from putting up new office buildings in part has been the banks, which today shun loans on speculative buildings. As a result, office vacancy rates have fallen to the lowest point since the mid '80s - 11 percent on the Peninsula, 13 percent on the southside.
``We put UPS in a closed Kmart. We're looking at empty stores now because there are virtually no empty industrial buildings sitting around,'' said Paul Miller, Newport News planning and development director.
Newport News led the way on the Peninsula. The city has put up four shell buildings on speculation since 1988 in its Oakland Industrial Park. Canon suppliers and a subsidiary now occupy three of the buildings.
Plans are afoot for a fifth spec building of 80,000 square feet.
Not far up I-64, James City County is putting the finishing touches on its first shell building in Stonehouse Commerce Park near Toano. It's a speculative building financed with a state loan.
A shell building, eventually sold to printing equipment maker IDAB Inc., went up in Hampton in '90 under the auspices of a regional economic agency disbanded in '91. Current plans for a shell building are the first undertaken by the city itself .
``We have had a lot of inquiries - more than five - about spec buildings in the city,'' said Hampton's Miller.
``We need to build one so we have something we control when a prospect comes in,'' Miller said. ``I've heard people say, `I need 100,000 square feet and you guys don't have it.' Usually when someone needs a shell building they need it quickly. If we don't have it they might go find one in another city or another state.''
While shell buildings built by the government are part of the Peninsula's economic development strategy, they're off the table on the southside.
``There's a sense that, from the private sector side, the public sector shouldn't be competing with the private sector,'' said Hans Gant, the new president of Norfolk-based Forward Hampton Roads, the economic development arm of the Hampton Roads Chamber of Commerce.
``That's a fairly strong feeling in this area,'' Gant said. ``Up until most recently we've had an ample supply on the southside of office space. All of a sudden we are faced with a shortage of large blocks of leasable office space.''
KEYWORDS: COMMERCIAL REAL ESTATE by CNB