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Author Charles Dalton
Data Analysis/Layout Real Data
Financial The E. V. Williams Center for Real Estate and Economic Support Development (CREED) functions and reports are
funded by donations from individuals, organizationsand the CREED Advisory Board.
Disclosure The data used for this report is deemed reliable; however, neither Old Dominion University, the E.V. Williams Center for Real Estate andEconomic Development, nor sponsoring companiesand/or individuals makes any representation or warranty as to its accuracy.
Multi-Family
Acknowledgements
73
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General Overview
he Virginia Beach-Norfolk-Newport News Apartment Re-port, published by Real Data, is a detailed analysis of therental market within conventional apartment communities
in the Hampton Roads region. The area has been divided into ninesubmarkets: Chesapeake, Hampton, Newport News, Norfolk,Portsmouth, Suffolk, Virginia Beach, Williamsburg and York County. Combined, these areas contain a surveybase of over 85,000 units within conventional apartment communities of 50 or more units each.
The Virginia Beach-Norfolk-Newport News market is divided into two portions by the James River. The Penin-sula area is north of the James River and contains Hampton, Newport News, Williamsburg and York County. TheTidewater area is south of the James River and contains Chesapeake, Norfolk, Portsmouth, Suffolk and VirginiaBeach. The submarket with the highest concentration of units is Virginia Beach, which accounts for one-quar-ter of the region’s apartment units.
The occupancy rate in the Hampton Roads region is consistently one of the highest in the southeast, but has beenfalling during the last several years. As of October 2008,the average occupancy rate was 93.1%.
As the overall economy moved into a full recession, de-velopment activity has slowed down. As of October2008, there were just under 1,700 units under con-struction, and nearly 2,000 units were proposed.
The average quoted rental rate is $871, with one-bed-room rents averaging $779 per month, two-bedroomunits with an average rental rate of $876, and three-bed-room units reporting an average quoted rental rate of$1,031. Rental rates from existing inventory increasedby only $6.70 in the last twelve months.
T
10%Chesapeake
12%Hampton
22%Newport
News
16%Norfolk
8%Portsmouth
26%VirginiaBeach
1%Suffolk
2%York County4%
Williamsburg
Submarket Percentages
Virginia Beach-Norfolk-Newport NewsA total of 86,335 units were surveyed for this report. Development of apartment units in this market peaked during twotime periods, the early 1970s and the late 1980s. Development during the 1990s and so far in the 2000s is minor comparedto past development.
H ISTOR ICAL APARTMENT DEVE LOPMENT
25,000
20,000
15,000
10,000
5,000
0
Pre-‘64 ‘65-‘69 ‘70-‘74 ‘75-‘79 ‘80-‘84 ‘85-‘89 ‘90-‘94 ‘95-‘99 ‘00-‘04 ‘05-
Num
ber
of
Unit
s
Table I Historical Apartment Development
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HISTORICAL MULTI-FAMILY BUILDING PERMITS VIRGINIA BEACH-NORFOLK-NEWPORT NEWS
Overall housing development in the region was at its peak from 2002-2006 with more than 10,000 permits issued an-nually for single and multi-family housing. With the slow down in the overall housing market, residential permits issuedfell to 6,317 in 2007 which was a 44% decrease compared to the peak of activity in 2005.
Multi-family permit activity, which includes rental and for-sale units, was strongest in 2005. However, much of the per-mit activity has not been rental apartments, but instead for-sale condominiums and townhouses, especially in recentyears when a decline in interest rates made it easier for many people to get into the for-sale arena. Multi-family per-mits have increased in the last twelve months but remain well below the levels of 2002-2005.
MULTI-FAM I LY P ERM IT ACTI V ITY
3,200
3,000
2,800
2,600
2,400
2,200
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
Pe
rmit
s I
ssu
ed
1,31
5 1,73
9
1,10
2 1,21
6 1,38
4
684
1,51
9
2,35
5
2,29
2
2,33
9
3,08
5
1,15
9
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008(thru Nov.)
Table II Annual Multi-Family Permit Activity
77
As of October 2008, there were nearly 1,700 apartment units under construction within eleven communities in theVirginia Beach-Norfolk-Newport News market. There are an additional 1,985 apartment units in the planning stage.
APARTMENT DEVE LOPMENT ACTI V ITY
Table III Multi-Family Permits Past 12 Months
700
600
500
400
300
200
100
0
Num
ber
of
Perm
its
46 53
240
24
96 91 72 84
259
133
122
29
632
Nov. 2007
Dec. 2007
Jan. 2008
Feb. 2008
Mar. 2008
Apr. 2008
May 2008
Jun. 2008
Jul. 2008
Aug. 2008
Sep. 2008
Oct. 2008
Nov.2008
1,000
900
800
700
600
500
400
300
200
100
0
Nu
mb
er
of
Un
its
Chesapeake Hampton Newport News Norfolk Portsmouth Suffolk Virginia Beach Williamsburg York County
Table IV Apartment Development Activity (as of October 2008)
Under ConstructionProposed
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Demand for housing can be measured by calculating the number of housing units absorbed within a given timeframe. Absorption is defined as the net change in occupied units. Therefore, positive absorption occurs when previ-ously vacant or newly built dwellings become occupied. Based on historical performance, the Virginia Beach-Nor-folk-Newport News area is expected to absorb between 600 and 900 units annually. The collapse of the housingmarkets nationwide and the weakening economy has caused a significant drop in demand for rental housing in 2008.Absorption was negative (-774) rental units in the last year, the weakest demand in over 10 years.
The only areas to see a positive demand for rental housing were Chesapeake, Williamsburg and Virginia Beach.
DEMAND
1400
1200
1000
800
600
400
200
0
-200
-400
-600
-800
-1000
Unit
s A
bso
rbed (D
em
and)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Table V Absorption
79
The overall vacancy rate for the Virginia Beach-Norfolk-Newport News market at the end of 2008 was 6.6%. Whilethis is the highest the vacancy rate has been in nearly 10 years, the market is still relatively healthy. However, basedon the current development pipeline and a lingering recession, vacancy rates are expected to rise above 8% in 2009.
VACANCY
300
200
100
0
-100
-200
Chesapeake Hampton Newport News Norfolk Portsmouth Suffolk Virginia Beach Williamsburg York County
Table VI Submarket Absorption - 2008
Abso
rpti
on (A
nnual)
7.0
6.5
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
.5
0
Vacancy
Rate
(A
nnual)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Table VII Overall Vacancy
Southside
Chesapeake
Norfolk
Portsmouth
Suffolk
Virginia Beach
Williamsburg
Peninsula
Hampton
Newport News
York County
Multi-Family Submarkets
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Every submarket experienced an increase in vacancy rates over the past year. The most significant increases were inHampton, Portsmouth and York County.
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Chesapeake Hampton Newport News Norfolk Portsmouth Virginia Beach Williamsburg York County Overall
Table VIII Submarket Vacancy Rates
Rate
As of October, the average rental rate in Virginia Beach-Norfolk-Newport News was $871. With increased competi-tion from the for-sale housing market and an overall weak housing market, apartment communities have begun offer-ing greater concessions to help boost traffic and demand. This has caused rents for existing communities to drop bynearly 1% in the last half of 2008.
RENTAL RATES
October 2007October 2008
$900
$800
$700
$600
$500
$400
$300
$200
$100
$0
Ave
rage R
enta
l R
ate
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Table IX Average Rental Rates (New & Existing Communities)
83
Average overall rents ranged from a low of $800 in Newport News to a high of $944 in Virginia Beach. Newport News,Portsmouth, Norfolk, and Williamsburg all reported rents lower than the average rent of $871, while Suffolk, Chesa-peake, York County and Virginia Beach all reported rents higher than the average overall rent.
AVERAGE RENTS
$1000
$900
$800
$700
$600
$500
$400
$300
$200
$100
$0
Newport News Portsmouth Norfolk Hampton Overall Williamsburg Suffolk York County Chesapeake Virginia Beach
Table X Average Rent by Submarket – October 2008
Ave
rage R
ent
(low
est
to h
ighest
)
2009 Hampton Roads Real Estate Market Review
2 0 0 9 R E T A I L
RoanokeRoanoke has fewer than 10,000 conventional apartment units within communities of atleast 30 units. The area reached its highest occupancy level in over 10 years with an over-all occupancy of 95.5% as of August 2008. Development activity has been very moder-ate over the last several years which have enabled occupancy rates to rise. Asoccupancies have risen so have rents; rents have been rising steadily for the last threeyears with annual rent growth averaging 3.5% per year. The average rental rate was $647as of August 2008.
RichmondThe Richmond metro area contains approximately 60,000 conventional apartment unitswithin communities of at least 50 units. Richmond has consistently had one of the higheroccupancy rates in the southeast due to limited development activity. As of August 2008,the area's occupancy rate was 94.2% with an average rental rate of $816 per month. De-velopers have taken notice of the area's low vacancies, and consequently construction ac-tivity has been on the rise in 2008 with nearly 2,000 new units underway. Rent growth hasbeen in the 3% range for the last several years but slowed to 2% in 2008.
REG IONAL TRENDS
There were nearly 450 conventional apartment communities with more than 50 units surveyed in the Hampton Roadsregion in October. Out of more than 85,000 apartment units surveyed, the top fifteen firms manage nearly half ofthese units in the Virginia Beach-Norfolk-Newport News apartment market.
MANAGEMENT
S.L. Nusbaum
Great Atlantic
Drucker & Falk
Lawson Companies
Breeden Management
WMCI
AIMCO
Perrel Management
PRG Real Estate
Ripley-Heatwole
Table XI Top 10 Management Companies
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