Hampton, Virginia's Newmarket South shopping center is one of three retail properties sold through Divaris' Investment Sales Division in the fourth quarter of 2003.

Demand Outpaces Supply for Hampton Roads 
Investment Properties 

HAMPTON ROADS, VIRGINIA:  In 2003, a year marked by record-low interest rates and consequent high demand from investors, Divaris Real Estate, Inc., represented the sellers of three shopping centers in Hampton Roads, Virginia.

The three properties sold in 2003 were Coliseum Corner, a 49,444 square-foot strip center in Hampton that was sold by Crown Life Insurance Company to Ziff Properties of Charleston, South Carolina; Dominion Marketplace, a 75,506 square-foot grocery-anchored neighborhood center in Chesapeake that was sold by Equity Investment Group to Focused Retail Property Fund I, LLC; and Newmarket South Shopping Center, a 391,785 square-foot community center in Newport News that was sold by Equity Investment Group to The Dilweg Companies of Durham, North Carolina. 

Michael Divaris, Alex Divaris and Jason Oliver of Divaris Real Estate’s Investment Sales Group represented the sellers in all three sales, and were joined by Daniel Finkle of Holliday Fenoglio Fowler, LP in the sales of Dominion Marketplace and Newmarket South.

All three assets offered unique opportunities within their respective submarkets, most being "older centers with potential," according to Alex Divaris, an investment sales associate and underwriter in Divaris Real Estate’s Virginia Beach office.  Though sales such as these present a significant challenge, DRE’s Investment Sales Group creates a specialized approach for each property to most effectively achieve the sellers’ objectives.

Coliseum Corner, anchored by Rugged Wearhouse and Washington Mutual Finance, is located within Hampton's Coliseum Central submarket, a dense collection of retail and office buildings centered around the Hampton Coliseum and the regional Coliseum Mall.  This submarket is currently experiencing significant activity related to the opening of The Power Plant, a lifestyle center anchored by Bass Pro Shops and Lowe’s Home Improvement.

Food Lion and Family Dollar anchor Dominion Marketplace, a well-established neighborhood center located in the Great Bridge section of Chesapeake.  The center, which was fully occupied as the time of sale, benefits from mature surrounding neighborhoods and continued growth patterns.

Newmarket South Shopping Center, a 45-year old property located on the heavily-traveled Mercury Boulevard at the Hampton-Newport News border, presented an exceptional opportunity to its buyers.  While local demand for retail remains strong, shifts in population concentrations led to the development of newer retail areas in the Coliseum Central submarket to the east and additional submarkets to the north. 

However, local activity continues to be strong as evidenced by Food Lion developing a new store at the property, joining existing anchors, A&N Superstore and The Dump, a national discount furniture outlet.  According to Jason Oliver, an investment sales associate with Divaris Real Estate, "The Dilweg Companies plan to upgrade the center by investing over $2 million in remodeling and by increasing below-market rents to take advantage of the opportunity to create additional value from the property."

In a year when the number of listings was fairly modest and the number of buyers high, the Hampton Roads Peninsula saw activity somewhat disproportionate to its share of the Hampton Roads market as a whole.  According to Alex Divaris, " The difference in activity is not due to investor interest in one geographic area over another, but rather opportunities that are created from shifting market trends."

Because of the large military and federal government presence in Hampton Roads, demand remains relatively unaffected by extreme changes in the national economy.  "We don't see the highs and the lows that most markets see," said Oliver.  While this may mean that the region does not experience the growth in activity that characterizes economic booms, the region is also fairly protected from decreasing rental rates and increasing vacancies that have characterized other markets during recent recessions.  This stable economic climate, coupled with interest rates at historic lows, has resulted in the demand for investment property exceeding the supply available for sale. 

"There is a multitude of buyers for all property types," said Oliver, but low interest rates have given owners the option to refinance their properties rather than sell.  However, low interest rates have also enabled buyers to make higher offers for available properties and, as a result, produced record-low capitalization rates.

What does 2004 hold for the Hampton Roads investment sales market?  According to Divaris and Oliver, more of the same, as investors continue to seek well-anchored shopping centers and multifamily developments, a trend also observed on a national scale. 

"As long as interest rates remain low, there will continue to be demand to support current capitalization rates,” said Oliver.  The area's economy is expected to remain stable, as numerous defense contractors within the region benefit from the government's increased emphasis on national and homeland security.  "Notwithstanding interest rates, which are expected to remain close to current levels, neither positive nor negative changes in the national economy are expected to have much impact on activity in the region," says Divaris.

Existing market conditions generate an optimistic forecast for investment sales in Hampton Roads.  As low interest rates augment the region's abundant inherent advantages, from its numerous recreational attractions to its strong business climate, demand for investment properties in the area should continue to grow and sellers should expect to see increasing returns from property dispositions.  As such, Divaris Real Estate’s Investment Sales Group plans to bring several retail and office properties to the market for sale in 2004 and 2005.