THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Monday, January 20, 1997 TAG: 9701180249
SECTION: BUSINESS WEEKLY PAGE: 10 EDITION: FINAL
SERIES: 1997 FORECAST
SOURCE: BY MYLENE MANGALINDAN, STAFF WRITER
LENGTH: 59 lines
Commercial real estate brokers aren't looking for a break-through in speculative building in 1997. But they're optimistic rental rates will continue to climb as vacancies continue to drop.
``We're not sure the rental rates are at a point that would justify a lot of new construction in the office market,'' said Bill Hamner, president of Hamner Development Co. in Newport News.
``We have seen continued lease up of existing product, both in the office and the industrial market. What that has meant to property owners is the rates are continuing to get stronger.''
Market activity heated up in 1996.
Gee's Group, a family-owned real estate concern, broke ground on a speculative office building called Southport Centre. Commercial real estate professionals started building a few partially pre-leased projects.
Several big structures went on the market. One Columbus Center in Virginia Beach was offered for sale at $17 million. The Patrick Henry Corporate Center in Newport News was sold for $9.9 million, followed by the Greenbrier Corporate Center, acquired for $10.2 million, signaling rising values for commercial real estate, said industry watchers.
Warehouse vacancies fell to 9.4 percent last year, down from 10.8 percent. The office market also looked strong, with downtown Norfolk vacancies for class A and B space at 17 percent, according to Donald Crigger, director of office leasing at Goodman Segan Hogan Hoffler. Suburban office vacancies hit 9 percent.
The torrid pace of economic development activity has bestowed both a blessing and a curse upon the local commercial real estate market - a blessing in the sense that relocating companies are snapping up large empty spaces.
Vanguard, a military insignia supplier, moved into an existing 40,000 square foot building in Norfolk Industrial Park.
In other cases, economic development efforts are problematic. Commercial developers are reluctant to embark too haphazardly into industrial development because they're competing with aggressive municipalities like Newport News.
Newport News agreed to build a flex office building for relocating companies like Pennsylvania-based Iceland Seafood Corp. last year. Brokers are also having trouble finding enough large blocks of contiguous space for prospective new companies.
``There are a lot of inquiries coming about what sort of space is coming open on the market,'' said Michael Katsias, president of The Katsias Co., who predicts that some underutilized areas like Suffolk will see more interest from prospective tenants.
``Suffolk has been on the fence for more explosive activity for some time now, with the way the road arteries are linking,'' Katsias said. ``In 1997, you'll definitely see some moves in that direction.''
Other industry watchers say that build-to-suit structures will continue to dot the landscape as banks are still reluctant to finance speculative buildings. Pre-leased buildings, or as much as half the building pre-leased, are still the direction that banks are leaning.
``It's going to be spotty,'' Crigger said of speculative building. ``We'll see a few spec buildings but they'll be partially pre-leased.''
KEYWORDS: 1997 FORECAST OFFICE SPACE