THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Wednesday, January 29, 1997 TAG: 9701290518
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY MYLENE MANGALINDAN, STAFF WRITER
LENGTH: 71 lines
Expansion of small businesses, more aggressive economic development marketing and greater investor demand helped push warehouse and office vacancies down last year while raising the price of buildings or land for sale.
Office vacancy rates fell in Hampton Roads for the fourth consecutive year, to 9.2 percent in 1996, compared with 11.2 percent in 1995, according to the latest Society of Industrial and Office Realtors/Landauer survey, a national look at the condition of real estate in major markets. The study surveyed 17 million square feet of space in the region.
Downtown Norfolk saw office vacancies fall to 15.7 percent and South Hampton Roads watched vacancies drop to 8.5 percent. Vacancy on the Peninsula was 9 percent last year.
``Investment demand returned to the office market in 1996,'' said Deborah Stearns, chief operating officer of Goodman Segar Hogan Hoffler. Investors outside the region bought a few office towers, including the Patrick Henry Corporate Center for $9.9 million. Sale prices for buildings exceeded $100 per square foot at the end of the year, up from $75 per square foot in early 1996, Stearns said.
Much of the increased occupancy in the office market can be attributed to the growth of existing firms. But some big companies like Avis in Virginia Beach and TWA in Norfolk continue to build and occupy their own offices.
Brokers expect rental rates to climb steadily this year. Leases in the suburbs should jump from $14 or $15 per square foot to $19 or $20 per square foot this year, they said.
Construction of new office buildings is starting again, which should push some land prices up. For instance, 360 Communications' purchased 1.3 acres in Virginia Beach's Pembroke area for $450,000 per acre.
Industrial, or warehouse, vacancies fell to 9.2 percent overall in the region, with the Peninsula showing a slightly lower vacancy rate of 8.3 percent than South Hampton Roads' 9.6 percent. The overall vacancy rate had been 10.8 percent in 1995. The 1996 survey examined 59 million square feet of warehouse space.
Escalating land prices and the occupation or conversion of formerly ``obsolete'' buildings marked the two emerging trends in 1996, said R.L. ``Abe'' Ellis, senior vice president of Virginia Commercial Real Estate Services. He noted that a parcel of property in Cavalier Business Center sold for $60,000 per acre.
Aggressive economic development efforts by the region's two marketing agencies and the Virginia Economic Development Partnership have sparked the sale of properties like the Mercedes Benz building in Hampton. Prospective companies entering the region have shifted from predominantly telemarketing to manufacturing or industrial firms, which has helped push vacancies down, he said.
Companies seeking industrial space will continue to move to the western side of Chesapeake and farther, to benefit from the I-664 transportation link, the Monitor-Merrimac Memorial Bridge Tunnel, Ellis predicted.
Small warehouse space, considered 5,000 square feet or less, has been leasing quickly, brokers said. Small companies or entrepreneurs who use the so-called ``incubator space'' mark the start of a bigger market cycle, they said.
``It's a healthy indication of what will happen in the next year or two,'' said Jonathan Guion, an industrial specialist with S.L. Nusbaum Realty Co. Those smaller companies start a chain reaction as they tend to graduate to bigger warehouse space, pushing medium-sized companies to larger buildings, he said.
In addition, Hampton Roads is still benefiting from Navy-related companies or contractors seeking to be near consolidated operations here, said Robert M. Thornton, vice president of Morton G. Thalhimer Inc. Realtors.
Buildings custom built for a corporate occupant and pre-leased warehouses will continue to be strong products in the market, said William Hamner, president of Hamner Development Co.
KEYWORDS: OFFICE SPACE VACANCY