NORFOLK — More housing starts and improved wage growth could beckon a national economic resurgence this year, albeit much slower for Virginia and Hampton Roads.
“The U.S. economy has done better,” said Mark Vitner, Wells Fargo managing director and senior economist. “The one thing I caution is you don’t want to get too giddy about this. There are still 1.7 million, fewer full-time workers today than there were in December 2007. “
Vitner delivered his 2015 economic forecast to more than 100 members of the Hampton Roads Association for Commercial Real Estate at the Doubletree Hotel in Norfolk Thursday afternoon.
The Virginia Beach-based Hampton Roads Association for Commercial Real Estate is an organization of nearly 700 members that advocates for the commercial real estate industry.
Highlighting his forecast was an obvious contrast between national job and wage growth.
Vitner said while job growth has increased nationally, including improvements in Virginia and Hampton Roads, wage growth continues to lag, a problem for businesses solely dependent on consumer spending.
But that trend could reverse itself this year, if the economy continues on its current positive trajectory.
Vitner said that while Hampton Roads’ economy lags behind many of the state’s metros in job growth — because of its large dependence on federal defense spending and the effects of sequestration — the region continues to show signs of improved job growth, mostly from the private sector.
“I think there is a pretty good chance in 2015 that we would have recovered all of those full-time jobs and be back where we were in 2007,” Vitner said.
Earlier this week, Hampton Roads Planning District Commission senior economist Greg Grootendorst, echoed similar sentiments, adding that while much of the nation has recovered, Hampton Roads continues to lag.
“We’ve seen the nation move forward, and there’s been a sustained work recovery following the Great Recession,” Grootendorst said. “In Hampton Roads, it’s not taken place as much.”
Forecast growth in the region’s gross product of 1.1 percent and in civilian employment of 0.9 percent is dampened because of losses in federal contracting and the reduction in military and civilian defense personnel, Grootendorst said. While the retail, hospitality and construction sectors added jobs in the past year, their wages don’t quite compensate for the loss of high-paying government, scientific and technical jobs, he added.
“The good news for the region is that the national economy is doing well. A strong national economy is certainly good for us,” Grootendorst said.
Housing is also expected to strengthen in 2015.
Vitner said economists expect the single-family housing market to have more than a million new housing starts during the first quarter of 2015. That’s up from nearly 930,000 home starts during the first quarter of 2014.
And while multifamily construction appears to be on the incline across the region, Vitner cautioned that apartment construction is beginning to slow across Hampton Roads.
“Apartments are booming across the country, but they’re not booming here,” Vitner said. “It’s low relative to where it’s been historically, and vacancy rates are low.”
He’s right.
A number of developers that specialize in multifamily construction say the demand is prevalent in Hampton Roads, but the type of product — mostly luxury, high-end apartments — is being produced in a market where such demand is severely waning.
“What you’ve seen in multifamily construction in recent years has been luxury-class apartments,” said Jonathan P. Skinner, vice president of acquisitions and development with Hampton-based Harrison & Lear Inc. “There is a limited supply of class B and class C affordable apartments being developed, which are greatly needed in our area.”
Skinner said financially, high-end luxury apartments have fast projections in capital return, but current demographics, such as wage and job growth trends, do not support the construction of luxury, class A apartments in much of Hampton Roads.
In closing, Vitner said Hampton Roads’ economy is improving, with 2015 proving to be a good year for the area.
“This year will be better for Hampton Roads,” Vitner said. “We’ll see stronger job growth … some of the drag from sequester seems to be waning; it’s no longer getting worse.”
O’Neal can be reached by phone at 757-247-4744. TidewaterBiz reporter Tara Bozick contributed to this report.