2021 ends as a year of stabilization for the Norfolk Office Market, although long-term uncertainty looms.
Summit Pointe delivered phase II earlier this year, adding 170,000 square feet of Class A office space to the market. This delivery, which is currently in lease-up, was the first speculative development to be delivered to the market since 2014. The building has secured multiple large tenants, including Map Communications, who occupied 28,813 square feet of space in November, and Arizona College of Nursing, who is set to occupy 21,880 square feet of space in January of 2022.
Available sublease space has become more prevalent within the market, with 271,493 square feet of sublease space available to end Q4 2021. This is almost double the amount of available sublease space that the market showed at the beginning of the pandemic when the market showed 148,492 square feet of available sublease space.
There are 70 tenants looking for almost 700,000 square feet of office space in the Norfolk market, highlighting the office demand in the region. Some of the most prevalent tenant types looking for space in the market include defense contractors, government entities, and medical office users.
“The office market in general continues to exhibit strong fundamentals with stable rental rates, largely due to a lack of new construction and very low pre-pandemic vacancy rates. The office market is certainly interesting right now, it seems to be one step forward, one step back in terms of vacancies
and activity. A positive story of a tenant expanding and taking vacancy off the market, then another putting a space up for sublease. Vacancy rates differ greatly from submarket to submarket. For example Chesapeake currently has seven blocks of 20k square feet whereas Lynnhaven has one. There
are more large blocks of 20,000 SF+ coming available in the Chesapeake market which will mean more competition for Landlords and more options for Tenants. Other submarkets remain stable and in some cases like Harbour View area of Suffolk, the market is much tighter and there is increased demand. We continue to see office users evaluating their needs for space, particularly larger users who are working to understand their employees work needs. Many employers are adopting some form of a hybrid work from home model. 2022 should be an interesting year for the Hampton Roads office market as more users return to the office after the latest Omicron variant of Covid-19 surge.” - Ricky Anderson| Executive Vice President