Q2 2012 Norfolk/Hampton Roads, Virginia Commercial Real Estate Economy

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Q2 2012 Norfolk/Hampton Roads, Virginia Commercial Real Estate Economy

In an era of military base closings and cuts in defense spending, the major role played by the U.S. naval installations in the local economy is an occasional matter of concern. While Hampton Roads recently lost the Joint Forces Command headquarters, the Defense Base Closure and Realignment (BRAC) base-closing axe which descended in 2005, and which likely would have had more serious local effects, missed the local economy, sparing it the loss of a major base. When the possibility of a new round of BRAC-driven base closures reared its head again in the current administration, Hampton Roads dodged yet another bullet. “Defense Secretary Leon Panetta said there will be no new round of military base closings next year, abandoning a proposal he made in February that Congress was set to oppose,” Bloomberg Businessweek reported in August. “It’s now clear obviously there will not be a round of BRAC authorized” in 2013, Secretary Panetta stated in a speech at the time. Still, it likely will be only a matter of time before Hampton Roads again faces the possibility of base closings.

Indeed, all is not safe. In late June the Navy “unexpectedly” announced that it would shift three locally-based ships to Mayport Naval Station in the Jacksonville, FL area two years earlier than expected, Inside Business, The Hampton Roads Business Journal reported at the time. According to Hampton Roads Planning District Commission, the loss of the ships will cost the local economy 5,220 jobs and $590 million. “The departure of those dollars will be felt by retailers, malls, restaurants, auto dealerships, home builders and apartment owners,” notes the Journal.

While the Metropolitan Statistical Area (MSA) has other assets, including a viable Leisure and Hospitality sector (more than 12.0% of total non-farm employment), the role of the defense-related federal sector should not be underestimated. According to the U.S. Bureau of Labor Statistics (BLS), the Government sector overall accounted for fully 21.4% of total non-farm jobs as of August. BLS data as of August, meanwhile, report total MSA non-farm employment up 2,200 jobs (0.3%) and 5,400 jobs (0.7%) over the preceding 12-and 24-month time spans. These are not strong gains alongside any number of U.S. metro areas. Moreover, more than half of the numerical increases can be attributed to job growth in the federal government sector. In addition, small recent gains are reported by the BLS for the MSA in the state and local government subsectors as well. Meanwhile, some portion of what Hampton Roads will lose in the form of three ships sailing away, it may retrieve in a sports arena. The

Sacramento Kings professional NBA basketball franchise has proposed moving its team to and building a new stadium in Virginia Beach, Inside Business reported in late August. An arena deal was “in the works” later that month.

Signs of improvement have appeared in the “distressed” Hampton Roads housing market, The Virginian-Pilot reported in July. “The number of homes listed for sale continued to drop in June to 11,532, down 2.3% from May and [down] 18.6% from the same time in 2011,” according to the report. In South Hampton Roads, which includes Virginia Beach, the decline has been more “dramatic.” According to CoreLogic as cited by this source in July, 87,710 area homes were “underwater” as of March 31, down from 93,081 at the end of 2011. At $210,000, the June median selling price was reported up 6.1% for the month and was up 12.6% year-over-year.