MARKETBEAT

HAMPTON ROADS, VA

INDUSTRIAL SNAPSHOT
A Cushman & Wakefield Research Publication

Q2 2013
locally. This is another precursor of demand and rent growth. On the other hand, the regions over-reliance on government contracting combined with a sluggish economy may have a negative effect on demand and absorption. Overall industrial vacancy rates are not expected to change in the short term, but look for rental rates to stabilize for the balance of 2013. STATS ON THE GO
Q2 2012 Overall Vacancy Direct Asking Rents (psf/yr) YTD Leasing Activity (sf) 7.6% $5.23 1,514 ,811 Q2 2013 7.5% $4.95 1,593,153 Y-O-Y CHANGE -0.1pp -5.3% 5.2% 12 MONTH FORECAST

ECONOMIC OVERVIEW
More Americans joined the ranks of the employed in May, adding 175,000 jobs. April added 149,000 jobs. It sounds like a good increase in employment, but unfortunately the unemployment rate has been essentially unchanged between April (7.5%) and May (7.6%). In May, employment gains were seen in food services, retail trade, and professional and business services. Employment growth averaged 172,000 jobs per month, over the past 12 months.

ABSORPTION
Year-to-date leasing activity is essentially unchanged compared to last year, approximately 1.6 million square feet (msf) leased this year, compared to 1.5 msf in the same period last year. The overall vacancy rate has decreased through the second quarter of 2013 from 7.9% to 7.5%. While year-to-date direct net absorption of 463,225 square feet (sf) shows improvement over last years mid-year total of 186,083 sf, two sizeable transactions totaling over 363,000 sf made up the bulk of that number, with both deals being struck on the Peninsula. All things considered, the market should continue to show modest improvement in overall net absorption for the balance of 2013.

OVERALL RENTAL VS. VACANCY RATES

$7.00 $6.50 psf/yr $6.00 $5.50 $5.00 $4.50 $4.00 2009 2010 2011 2012 Q2 13 9.0% 8.5% 8.0% 7.5% 7.0% 6.5%

TRENDS
While there is a lot of political uncertainty with numerous government policies, consumer confidence has increased in the second quarter. Port activity is improving with Norfolk experiencing an 11.4% annual growth rate, some of the best container volume growth year to date for North America ports. The trend of industrial leasing activity is improving and heading in the right direction for the upcoming third quarter.

OVERALL NET RENTAL RATE

OVERALL VACANCY RATE

LEASING ACTIVITY VS. ABSORPTION

5.0 4.0 3.0 2.0 1.0 0.0 -1.0 -2.0

OUTLOOK
Port volumes are an important indicator of industrial market potential. The 11.4% increase in container volume for the Port of Virginia should translate into increased demand for warehouse space. Absorption of large block industrial space has reduced high cube vacancies to less than 5.0%, and is expected to produce rent growth in this sector. Housing construction starts are up nationally and

msf

2.7

2.5

4.2

2.5

0.8

0.2

-0.4

2009

2010

2011

-0.2

2012 ABSORPTION

2013 YTD

LEASING ACTIVITY

Thalhimer The Town Center of VA Beach 222 Central Park Drive, Suite 1820 Virginia Beach, VA 23462 www.cushmanwakefield.com/knowledge

For more information, contact: Amanda Wallace Brokerage Services Associate 757 213 4162 amanda.wallace@thalhimer.com

The market terms and definitions in this report are based on NAIOP standards. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. 2013 Cushman & Wakefield, Inc. All rights reserved.

1.6

0.5

HAMPTON ROADS, VA
SUBMARKET INVENTORY OVERALL VACANCY RATE YTD LEASING ACTIVITY YTD USER SALES ACTIVITY UNDER YTD CONSTRUCTION CONSTRUCTION COMPLETIONS YTD DIRECT NET ABSORPTION YTD OVERALL NET ABSORPTION HT Copeland Gloucester Mathews County Oakland Oyster Point Williamsburg Extended PENINSULA Airport Industrial Park Bainbridge Cavalier Central Norfolk Cleveland Franklin City Greenbrier Isle of Wight Lynnhaven Norfolk Industrial Park North Suffolk Portsmouth South Suffolk West Norfolk SOUTHSIDE TOTALS 12,790,494 293,128 48,194 4,936,906 4,927,730 8,468,617 31,465,069 3,452,073 10,225,391 6,176,181 5,942,348 3,815,804 378,054 2,670,637 3,660,213 9,835,433 8,900,169 2,202,255 5,601,055 10,502,166 3,031,462 76,393,241 107,858,310 8.0% 12.7% 4.5% 5.0% 3.9% 5.8% 6.3% 7.3% 3.9% 10.0% 7.5% 14.2% 81.6% 10.2% 0.6% 17.6% 3.5% 3.9% 6.4% 4.6% 10.6% 8.1% 7.5% 564,490 2,000 0 75,223 59,348 25,898 726,959 94,876 167,536 84,577 69,218 41,334 0 66,125 0 101,418 77,734 0 62,672 68,261 32,443 866,194 1,593,153 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 80,000 0 0 30,479 0 0 110,479 110,479 0 0 0 13,500 0 0 13,500 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 13,500 368,618 2,100 0 47,504 20,481 60,807 499,510 30,426 175,140 (16,870) (127,765) 50,007 (156,046) 31,852 0 (216,528) 58,613 20,500 (37,193) 208,786 (57,207) (36,285) 463,225 372,985 2,100 0 71,504 21,171 60,807 528,567 30,426 175,140 (16,870) (117,765) 50,007 (294,846) 13,336 0 (216,528) 58,613 20,500 (37,193) 208,786 (48,233) (174,627) 353,940 $6.50 $0.00 $0.00 $0.00 $0.00 $0.00 $6.50 $0.00 $0.00 $0.00 $9.95 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $9.95 $6.96 MF $4.68 $0.00 $0.00 $5.07 $0.00 $4.00 $4.74 $3.50 $0.00 $4.25 $0.00 $3.00 $0.00 $0.00 $0.00 $4.51 $3.50 $0.00 $4.03 $4.07 $0.00 $4.14 $4.32 DIRECT WEIGHTED AVERAGE NET RENTAL RATE OS W/D $3.27 $0.00 $0.00 $10.39 $9.85 $6.00 $6.65 $6.90 $7.64 $10.48 $6.81 $8.56 $0.00 $7.35 $0.00 $9.33 $5.93 $0.00 $5.84 $7.04 $6.26 $6.90 $7.24 $5.06 $0.00 $0.00 $6.73 $6.38 $4.39 $5.19 $4.83 $4.94 $5.14 $4.31 $5.49 $2.00 $6.31 $8.00 $4.59 $5.15 $0.00 $5.83 $3.69 $6.01 $4.85 $4.73

* RENTAL RATES REFLECT ASKING $PSF/YEAR

HT= HIGH TECH

MF = MANUFACTURING OS = OFFICE SERVICE W/D = WAREHOUSE/DISTRIBUTION

Thalhimer The Town Center of VA Beach 222 Central Park Drive, Suite 1820 Virginia Beach, VA 23462 www.cushmanwakefield.com/knowledge

For more information, contact: Amanda Wallace Brokerage Services Associate 757 213 4162 amanda.wallace@thalhimer.com

The market terms and definitions in this report are based on NAIOP standards. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. 2013 Cushman & Wakefield, Inc. All rights reserved.

MARKET HIGHLIGHTS
SIGNIFICANT Q2 2013 LEASE TRANSACTIONS 150 Industrial Park Drive 5820 Ward Court 2620 Indian River Road SIGNIFICANT Q2 2013 SALE TRANSACTIONS 1960 Diamond Hill Road 2000 Gateway Boulevard 1400 Cavalier Boulevard SIGNIFICANT Q2 2013 CONSTRUCTION COMPLETIONS N/A SIGNIFICANT PROJECTS UNDER CONSTRUCTION 1501 Taylor Farms Road 4018 Seaboard Court 3432 Airline Boulevard General Booth Blvd. & Corporate Landing Pkwy. SUBMARKET South Suffolk Airport Industrial Greenbrier SUBMARKET Bainbridge Copeland Cavalier SUBMARKET TENANT Lumber Liquidators ACOSTA Givens BUYER Blackstone Blackstone Blackstone MAJOR TENANT PROPERTY TYPE Warehouse Warehouse Distribution PURCHASE PRICE / $PSF $24,200,000/$34 $44,100,000/$105 $10,200,000/$34 COMPLETION DATE SQUARE FEET 150,000 62,500 49,801 SQUARE FEET 712,339 421,100 299,983 BUILDING SQUARE FEET

SUBMARKET Lynnhaven Portsmouth Portsmouth Lynnhaven

MAJOR TENANT Speculative Speculative R.E. Michel Green Flash Brewery

COMPLETION DATE Q3 2013 Q3 2013 Q4 2013 Q1 2015

BUILDING SQUARE FEET 22,000 15,000 15,479 58,000

* RENEWAL - NOT INCLUDED IN LEASING ACTIVITY STATISTICS

Thalhimer The Town Center of VA Beach 222 Central Park Drive, Suite 1820 Virginia Beach, VA 23462 www.cushmanwakefield.com/knowledge

For more information, contact: Amanda Wallace Brokerage Services Associate 757 213 4162 amanda.wallace@thalhimer.com

The market terms and definitions in this report are based on NAIOP standards. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. 2013 Cushman & Wakefield, Inc. All rights reserved.