Market Review
Total Page：16
File Type：pdf, Size：1020Kb
RETAIL 2014 HAMPTON ROADS REAL ESTATE MARKET REVIEW Author David Machupa Cushman & Wakefi eld | THALHIMER Survey Collection Kyllie Bullion E.V. Williams Center for Real Estate and Economic Development Old Dominion University Data Analysis/ David Chapman, Ph.D. Layout Old Dominion University Financial The E. V. Williams Center for Real Estate and Economic Support Development (CREED) functions and reports are funded by donations from the CREED membership, organizations, and individuals. Disclosure The data used for this report are deemed reliable; however, neither Old Dominion University, the E. V. Williams Center for Real Estate and Economic Development, nor sponsoring companies and/or individuals make any representation or warranty as to its accuracy. 2014 RETAIL 13 2014 RETAIL General Overview his report analyzes the 2013 retail real estate conditions within the Virginia Beach-Norfolk-New- port News, Virginia Metropolitan Statistical Area (MSA) which is commonly referred to as Hampton Roads. The report examines supply, vacancy, construction, absorption, and rent data to provide a comparison of data for the specifi c submarkets and product types located within the Southside and Peninsula regions of the Hampton Roads MSA. Southside properties surveyed for the purpose of this report included those located in the cities of Chesapeake, Norfolk, Portsmouth, Smithfi eld, Suffolk and Virginia Beach. Peninsula properties surveyed are located in the cities of Gloucester, Hampton, Newport News, Poquoson, Williamsburg, and York County. This survey is recognized as the most comprehensive analysis of retail real estate trends in the Hampton Roads MSA. The report includes information on all retail property types including regional malls, freestanding buildings and strip centers of various classifi cations. The scope of the report also includes a summary of new retail construction activity, an analysis of absorption, and a review of selected retail investment sales that have occurred in the region in 2013. METHODOLOGY This survey gathered information about strip shopping centers and regional malls located in the Hampton Roads MSA that were generally 30,000 square feet in size or larger. Additionally, information on retail-oriented freestanding buildings at least 23,000 square feet and freestanding buildings that contained furniture stores, discounters, grocery stores or category killer retailers that met the established size criteria were included in the survey. Automotive uses and buildings containing “downtown storefronts” were not included. Although available retail space in many submarkets (e.g. Ghent) is best described as a collection of small specialty shops, storefronts or freestanding buildings, practical limitations dictated that the focus of the survey be on larger product types. The survey data was collected between October 2013 and January 2014. Questionnaires were mailed to owners, leasing agents and property managers responsible for retail properties meeting the selection criteria. Direct contact was utilized as a follow-up to the mailing to encourage participation. Information on square footage for freestanding buildings was obtained from building owners, tax records, store managers and retail real estate representatives. Sales information was obtained from property owners, real estate agents, appraisers and real estate assessors. 14 2014 Hampton Roads Real Estate Market Review DEFINITIONS OF TERMS Asking Rates: The market rate per square foot of a retail property (excluding freestanding buildings and malls), exclusive of additional rents that may be paid under a triple net lease. Interpretation of average retail rates in different product types and submarkets should be viewed cautiously given the tremendous variability in rates for like products and for properties located within the same submarket. Factors such as visibility, co-tenancy, and accessibility, are some of the many sources of variation in market rates which should be considered. Big Boxes: Contiguous retail space that is at least 23,000 square feet and located in any one of the identifi ed product types. Retailers occupying big boxes include, but are not limited to, the following: category killers, specialty stores, discounters, furniture stores, grocery stores and theaters. Bowling alleys, automotive uses, roller rinks and ice-skating rinks were not included. CAM: Common Area Maintenance. Product Types: Properties were classifi ed according to one of the following nine retail product types. The International Council of Shopping Centers defi ned the fi rst six categories. Three additional categories were included to accurately categorize the remaining properties. Neighborhood Center 30,000 to 150,000 square feet; supermarket anchored Community Center 100,000 to 350,000 square feet; discount department store, supermarket or drug store anchored Fashion/Specialty Center 80,000 to 250,000 square feet; fashion anchored Power Center 250,000 to 600,000 square feet; category killer, home improvement and discount department store anchored Theme Festival Center 80,000 to 250,000 square feet; restaurants, entertainment anchored Outlet Center 50,000 to 400,000 square feet; manufacturer’s outlet store anchored Freestanding Individual building not considered a shopping center Mall Shopping center with area designed for pedestrian use only 2014 Other Any center that does not fi t into a typical category RETAIL Regional Mall Node: Submarket anchored by regional mall. Small Shop: In-line retail space usually less than 10,000 square feet located in a multi-tenanted shopping center. Submarkets: Hampton Roads is divided into 35 retail submarkets (25 Southside submarkets and 10 Peninsula submarkets) which refl ected general concentrations, pockets or corridors of retail product type. Geographical boundaries of the retail submarkets were infl uenced by density of existing retail product, physical or geographical obstacles, existing transportation networks, municipal boundaries, population concentrations and retailers’ per- ceptions of the MSA. Final determination of specifi c boundaries of each submarket was made by a subcommittee of retail real estate professionals who are actively involved in the MSA. Also highlighted were specifi c submarkets that are anchored by regional malls. A map which identifi es the general location of each submarket is included in the centerfold of this report. Triple Net Lease: Type of lease under which a tenant pays its pro-rata share of real estate taxes, insurance and common area maintenance. 15 2014 RETAIL YEAR IN REVIEW 2013 The Hampton Roads market appears to have stabilized. 2013 saw the re-emergence of grocery stores to the market as Walmart and Kroger continued to expand their presence. On a national level, the retail market remained stable and, as such, remained stable here in Hampton Roads. 2013 did not bring a mass exodus of retailers; however, a few large box brands did limp into 2014 and we expect a thinning of the herd as these retailers attempt to remain viable. The fi nancing market is stable with lenders actively seeking opportunities. A disconnect remains on product valuation between buyers, sellers and lenders of retail centers and, as such, we did not see a great deal of investment sales in Hampton Roads this past year. 2013 brought increased activity from grocery stores. Kroger, Walmart Neighborhood Market, and Harris Teeter were very active. Harris Teeter was purchased by Kroger and we will pause to see how this will curtail expansion by both retailers. Walmart opened on Jefferson Avenue and is under construction in the Pembroke area of Virginia Beach with a Super Center. Five of the smaller Neighborhood Market concepts are under construction in Hampton Roads. Harris Teeter will open in the Red Mill area of Virginia Beach and in the Wards Corner area of Norfolk. Kroger opened its 124,000 square foot Marketplace concept on Holland Road in Virginia Beach and is under construction with two more in Portsmouth and Northern Suffolk respectively. Additionally, Whole Foods has an- nounced they will anchor Tech Center at Oyster Point in Newport News and The Fresh Market will open in the Ghent section of Norfolk. Dave and Buster’s opened at Lynnhaven Mall and West Marine opened in Loehman’s Plaza in Virginia Beach. Starbucks opened a drive thru only location in Virginia Beach; this was the fi rst in Virginia and only the seventh in the country. CVS and 7-11 both continued aggressive expansion within the market. Simon Properties has Lake Wright under contract and is working to bring an outlet mall to the Norfolk site. We saw two small redevelopment projects along Lynnhaven Parkway near the mall with Noodles, Five Guys and Mattress Firm anchoring those developments. Lynnhaven Convenience, a mostly vacant property along Virginia Beach Boulevard anchored by Farm Fresh, is being redeveloped. Farm Fresh closed and has been replaced by Walmart Neighborhood Market, One Life Fitness, and Hobby Lobby. Bahama Breeze and Old Navy opened at the entrance of Pembroke Mall. Settler’s Market in Williamsburg came full circle. After starting off slowly, going through foreclosure, and sitting partially constructed, the new ownership was able to re-energize the project and Home Goods, Stein Mart, Michaels, Ulta, Shoe Carnival and 5 Below opened in March occupying roughly 200,000 sf of a 250,000 sf project. There is concern for certain retailers as they continue to struggle on a national level. K-Mart and Sears are closing stores on both a local and national level. K-mart closed the Chesapeake Square and Tidewater Drive locations with many more being offered for lease with or without K-Mart. J.C. Penney’s announced the closing of the Military Highway location, while Ruby Tuesday shuttered thirty stores across the country and one here in Virginia Beach. Blockbuster fi nally threw in the towel and closed the last of its stores across the country, Radio Shack is closing 500 stores, Best Buy tried to go private, but could not obtain fi nancing and Barnes and Noble placed themselves for sale, but did not fi nd any suitors. The retail landscape is constantly changing and those tenants that do not change with it will be closing their doors.