Economy: Major Defense Industry Awards
Significant defense-related contract awards and manufacturing investments continued to strengthen Hampton Roads' economic foundation during the third quarter. The U.S. Navy awarded Huntington Ingalls Industries (HII) and Newport News Shipbuilding a $76.6 billion contract supporting Columbia-class and Virginia-class submarine construction and shipyard infrastructure improvements, alongside a $5.1 billion contract for the refueling and overhaul of the nuclear-powered aircraft carrier USS Harry S. Truman. These awards, coupled with the Navy's acceptance of the USS John F. Kennedy (CVN 79), provide sustained employment and economic activity that supports demand across the industrial sector. Workforce development remains a priority, with a $1.2 million state grant funding maritime career training programs for workers in shipbuilding, advanced manufacturing, logistics, warehousing, port operations, and energy security. Building on LS GreenLink’s nearly $700 million advanced manufacturing facility in Chesapeake, the largest private investment in Virginia’s history, LG Electronics announced a $64 million investment in a new Isle of Wight County manufacturing campus dedicated to HVAC system production, creating 164 new jobs.
Supply and Demand: Renewed Market Momentum
Leasing activity accelerated through the third quarter and has topped 2.3 million square feet (msf) for the year with noticeable momentum in active requirements, tours, and lease signings over the last 90 days. Demand has been driven by a combination of new market entrants including Ciuti Olive Oil Distribution and Terminal Corporation, tenants evaluating relocation options as leases approach fair market renewals, and expansion activity among defense contractors. Prospect activity is strong with multiple key requirements circling the market including several defense technology firms continuing to expand, often doubling or tripling their footprints as they transition from research and development operations to growth-stage businesses.
With most planned construction starts still on hold, new speculative (spec) development activity remains limited. Rockefeller and Matan have gone vertical with the next building at Port 460 in Suffolk with walls for the 1 msf facility tilted in the third quarter.
Pricing: Investment Sales Headwinds
Rising interest rates continue to influence investment sales activity, prompting lenders and investors to adopt more conservative underwriting assumptions and stricter deal structures. While rising interest rates have impacted the investment environment, investor appetite for quality industrial product remains robust, driving year-to-date sales volume beyond $600 million despite a constrained inventory of opportunities.
