THE HAMPTON ROADS MARKET: INDUSTRIAL HIGHLIGHTS

The outlook for development and construction in the Hampton Roads industrial market is exceptionally bright. A combination of consistent year over year manufacturing gains in the Region; continued and consistent record TEU volumes through the Port of Virginia; a restructuring and streamlining of the Virginia Port Authority; and, finally, more than $8 billion in public and private sector investment in the Region’s transportation infrastructure has positioned the market to compete and capitalize on new industrial market opportunities.
Over the past eighteen months, the Port of Virginia has been the fastest growing port system in the United States as measured by increases in TEU volumes. The Port of Virginia will continue to take market share from competing ports along the Eastern Seaboard for discretionary cargo seeking alternatives to the West Coast due to the impending expansion of the Panama Canal. By 2016, the impact of the Panama
Canal expansion will be felt in the Hampton Roads market area.
The Hampton Roads industrial market is now at an inflection point due to a true lack of supply of Class A warehouse, distribution and manufacturing product: there are increasing supply limitations for logistics providers to house product on dock with the Virginia Port Authority as the Region transcends from a third tier to a second tier port system. In addition to the supply/demand imbalance, an existing stock of industrial buildings are showing their age with Class A direct vacancy approaching 5.7 percent since the peak of 14.3 percent in the first quarter of 2011. A majority of users seeking expansion options or more efficient building operations are being forced to sit on the sidelines due to the lack of modern, high-bay space options offered on a speculative basis.
In Hampton Roads, the core industrial submarkets absorbed leasing volumes in excess of 1.7 million square feet over the past four quarters. Build-to-suit activity has again re-emerged as evidenced by Oceaneering International’s 154,000-square-foot build-to suit
in the Greenbrier submarket, and Friant and Associates furniture manufacturing facility, which is under construction within one-tenth of a mile from the Westport Commerce Park site. There has been no speculative development in the Region for the past six years; only these and a handful of other BTS transactions have been developed during that period.
The recent designation of the Ports of Virginia as an Exchange Traded Certified Port Intercontinental Exchange Futures U.S. (ICE) makes the Port of Virginia a delivery point for the Arabica coffee futures contract, effective with the September 2016 contract. This will double or even triple the demand in the Hampton Roads market for coffee related warehouses beyond the 700,000 square feet currently utilized for this product. There are no existing exchange certified coffee warehouses in Virginia.
In addition to coffee, food related products (while currently a small portion of overall port traffic volume) represent one of the fastest growing components of throughput at the Ports of Virginia. The regional market is currently underserved for both food grade and frozen food grade warehouse facilities by an estimated half million square feet.
With the ongoing confluence of the above factors, landlords with available warehouse distribution spaces now have dramatically increased prospect activity; and especially in the range of 50,000 to 100,000 square feet, these owners are seeing competing interests for the same vacant facilities. This trend is expected to continue for the foreseeable future as the Hampton Roads region continues to benefit from additional investment from the U.S. Government, Commonwealth of Virginia, Norfolk Southern and CSX, the Virginia Port Authority and private stakeholders.
Hampton Roads: Industrial Sales
Reported institutional sales volume in existing facilities has steadily increased in Hampton Roads over the past two years and has been fueled by the major portfolio sales by First Potomac to Indcor, and the acquisition by Liberty Property Trust of the Indian River Distribution Center as part of its acquisition of the Cabot Industrial Fund IV. In addition, the industrial sales metrics have been further supported by local area companies acquiring their own operational facilities.
Commonwealth of Virginia Accolades:
Virginia named Top State for Business – Forbes (2013)
America’s Top States for Business – CNBC (2013)
Best Business Climate – Business Facilities (2013)
State with Highest Concentration of Tech Workers as a percentage of the private sector workforce – Cyberstates (2013)
Best State for Making a Living – Money-Rates.com (2013, 2012)
Top States for Entrepreneurship and Innovation –
U.S. Chamber of Commerce’s Enterprising
States Report (2013)
Most Business-Friendly State – Pollina Corporate Real Estate Inc. (2013)
Best Overall Education System – Education Week, Quality Counts (2013)
Over the past eighteen months, the Port of Virginia has been the fastest growing port system in the United States as measured by increases in TEU volumes. The Port of Virginia will continue to take market share from competing ports along the Eastern Seaboard for discretionary cargo seeking alternatives to the West Coast due to the impending expansion of the Panama Canal. By 2016, the impact of the Panama
Canal expansion will be felt in the Hampton Roads market area.
The Hampton Roads industrial market is now at an inflection point due to a true lack of supply of Class A warehouse, distribution and manufacturing product: there are increasing supply limitations for logistics providers to house product on dock with the Virginia Port Authority as the Region transcends from a third tier to a second tier port system. In addition to the supply/demand imbalance, an existing stock of industrial buildings are showing their age with Class A direct vacancy approaching 5.7 percent since the peak of 14.3 percent in the first quarter of 2011. A majority of users seeking expansion options or more efficient building operations are being forced to sit on the sidelines due to the lack of modern, high-bay space options offered on a speculative basis.
In Hampton Roads, the core industrial submarkets absorbed leasing volumes in excess of 1.7 million square feet over the past four quarters. Build-to-suit activity has again re-emerged as evidenced by Oceaneering International’s 154,000-square-foot build-to suit
in the Greenbrier submarket, and Friant and Associates furniture manufacturing facility, which is under construction within one-tenth of a mile from the Westport Commerce Park site. There has been no speculative development in the Region for the past six years; only these and a handful of other BTS transactions have been developed during that period.
The recent designation of the Ports of Virginia as an Exchange Traded Certified Port Intercontinental Exchange Futures U.S. (ICE) makes the Port of Virginia a delivery point for the Arabica coffee futures contract, effective with the September 2016 contract. This will double or even triple the demand in the Hampton Roads market for coffee related warehouses beyond the 700,000 square feet currently utilized for this product. There are no existing exchange certified coffee warehouses in Virginia.
In addition to coffee, food related products (while currently a small portion of overall port traffic volume) represent one of the fastest growing components of throughput at the Ports of Virginia. The regional market is currently underserved for both food grade and frozen food grade warehouse facilities by an estimated half million square feet.
With the ongoing confluence of the above factors, landlords with available warehouse distribution spaces now have dramatically increased prospect activity; and especially in the range of 50,000 to 100,000 square feet, these owners are seeing competing interests for the same vacant facilities. This trend is expected to continue for the foreseeable future as the Hampton Roads region continues to benefit from additional investment from the U.S. Government, Commonwealth of Virginia, Norfolk Southern and CSX, the Virginia Port Authority and private stakeholders.
Hampton Roads: Industrial Sales
Reported institutional sales volume in existing facilities has steadily increased in Hampton Roads over the past two years and has been fueled by the major portfolio sales by First Potomac to Indcor, and the acquisition by Liberty Property Trust of the Indian River Distribution Center as part of its acquisition of the Cabot Industrial Fund IV. In addition, the industrial sales metrics have been further supported by local area companies acquiring their own operational facilities.
Commonwealth of Virginia Accolades:
Virginia named Top State for Business – Forbes (2013)
America’s Top States for Business – CNBC (2013)
Best Business Climate – Business Facilities (2013)
State with Highest Concentration of Tech Workers as a percentage of the private sector workforce – Cyberstates (2013)
Best State for Making a Living – Money-Rates.com (2013, 2012)
Top States for Entrepreneurship and Innovation –
U.S. Chamber of Commerce’s Enterprising
States Report (2013)
Most Business-Friendly State – Pollina Corporate Real Estate Inc. (2013)
Best Overall Education System – Education Week, Quality Counts (2013)