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The Land Rush is on for Warehouse Space at the Port of Hampton Roads

Posted on: Monday, 30 January 2006, 15:00 CST

By Patrick Lynch, Daily Press, Newport News, Va.

Jan. 29--Developers from Virginia and well beyond Hampton Roads are ratcheting up a land grab in preparation for the major port expansion that is set to begin in 2007.

As officials expect continued growth in the number of containers shipped through the Port of Hampton Roads, developers are building more flexible warehouse space on the speculation that soon businesses will need facilities to prepare their imports for shipment inland.

The volume of cargo containers passing through the Virginia Port Authority's three terminals has more than doubled in the past 10 years, and port officials expect Hampton Roads container traffic to double again by 2020. Those expectations include projections for the new Maersk terminal in Portsmouth coming online in 2007 and the possibility of a new VPA terminal at Craney Island.

With shipping increasingly shifting to containerized cargo -- the truck-sized metal boxes that carry everything from raw materials to televisions -- developers and economic development officials say businesses will need buildings where they can offload cargo and ship it out by truck or rail.

"There's a significant increase in the level of interest, and a significant increase in the number of national developers looking at our Hampton Roads marketplace for warehouse and distribution," said Thomas A. O'Grady, economic development director for Suffolk, the sprawling city attracting much of the attention for this kind of development because of its available land and access to several highways.

While Hampton Roads has landed several "big box," single company distributors in recent years -- from Wal-Mart in James City, to Target in Suffolk, to Cost Plus in Isle of Wight -- much of the current rush is to build speculative warehouse space, that is, flexible buildings that any number of businesses could lease rather than a build-to-suit tenant.

They include smaller projects, like Liberty Property Trust's plan to build three warehouses in northern Suffolk of roughly 150,000 square feet. And large-scale, long-term proposals, like Charlotte-based Regional Property Development's plan to build a $60-$70 million, four-warehouse project in western Suffolk with a total of 1.1 million square feet. For perspective, Target's big-box distribution center in Suffolk is about 1.8 million square feet.

Spartanburg, S.C.-based Johnson Development Associates is making its first entry into the Hampton Roads market with a 330,000-square-foot building near Windsor. The building could be expanded to about 800,000 square feet, and the company intends to construct a second building after the first is leased. After the second, there may be a third, said Garrett Scott, an associate with Johnson.

"We're coming hard and as soon we finish the first one we're going to do it again," Scott said. "We're very bullish on the port markets."

Johnson, which specializes in speculative projects, is also building space best suited for port-related distribution in Houston and Savannah right now. In the long term, Scott said the company expects the U.S. consumer economy to continue to demand more foreign imports.

"It's increasingly making sense for that product to come into the southeast United States," Scott said.

Liberty, one of the region's largest owners of office and industrial space, began looking at its three-building project in Bridgeway Commerce Park about four years ago, vice president Craig Cope said. Port growth was expected at that time, but it was before plans were announced for the new private terminal in Portsmouth and the port authority's Craney Island expansion.

"We kind of took a leap of faith and said, 'We think there's enough demand there,'" Cope said.

Now the buildings are going up, and their construction has dovetailed with the increased demand.

Cope said Liberty is looking for more land to make a larger deal somewhere in western Suffolk. The competition has picked up, he said.

"How many developers can be successful is the bigger question," he said.

Denver-based Triumph Real Estate asked that same question. The company, which opened an office in Hampton Roads about three years ago, announced a plan last January to build a 135,000-square-foot speculative project in Suffolk.

The company backed out of those plans about six months ago, said John Ruff, who works out of Triumph's Hampton Roads office. Too much competition, he said.

"I know there's going to be growth," Ruff said, adding that he thought that with all the space being built, some of it might sit empty for awhile. "(Other developers) may be able to sit on a project ... but it wouldn't work for us."

Still, port authority officials are bullish on projected shipping growth for Hampton Roads, and the distribution space needs that will follow, or precede, that growth.

Engineering firm Moffatt & Nichol studied future distribution needs in a commissioned report for the authority. The report recommends the region should develop a massive distribution park, saying that 20 to 60 million square feet of new distribution space will be needed in the next 25 years.

As China and India continue to develop, port officials are trying to position themselves to take in more of those countries' exports.

"Norfolk is best positioned to take advantage of that," said Tom Capozzi, marketing director for the Virginia Port Authority. "We're developing the terminal facilities to handle that type of volume."

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Copyright (c) 2006, Daily Press, Newport News, Va.

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Source: Daily Press

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