The economy of Hampton Roads is strong and appears to be on target for its fourth consecutive year of growth, according to the 25th annual State of the Region Report produced by Old Dominion University’s Dragas Center for Economic Analysis and Policy.
“The region’s economic engine has picked up speed,” said Robert M. McNab, director of the Dragas Center and lead author of the report.
The region is growing faster, on average, than any time over the last 15 years. Wages in 2023 were higher than prior to the COVID-19 pandemic and more people were employed in the civilian workforce than ever before. Inflation, which peaked at 9% in 2022, fell below 3% in the summer of 2024. That trend, along with falling interest rates, will continue in the next year.
However, not all is rosy in Hampton Roads, the report revealed. Negative points to consider include the departure of residents seeking better opportunities as job growth lags behind Northern Virginia and consumer perception sours on the high cost of housing, goods and groceries.
“We are poised for growth in 2025. That is a seismic change in terms of how the economy is performing in Hampton Roads. It’s not a minor change. It’s moving up more than 150 points in terms of the rankings of Hampton Roads relative to other metro areas,” McNab said.
Regarding Hampton Roads’ “Three Pillars” – defense, the Port of Virginia and the hospitality and tourism industry – there is mostly good news. Defense spending, which accounts for approximately $4 out of every $10 in the region’s economic activity, locally exceeded $28 billion in 2023 and will likely exceed $30 billion by 2030.
The Port of Virginia outperformed most other East Coast ports, but the amount of cargo that moved through it declined because of decreased consumer and producer demand for imports. Key indicators, however, reveal the investments made to improve the port were successful and it is primed for future expansion.
“We were able to compete for cargo at all the other ports. Investment in the port is paying off and the port has become efficient,” said Vinod Agarwal, economics professor and deputy director of the Dragas Center for Economic Analysis and Policy.
The hospitality and tourism industry outperformed state and national markets, based on the hotel industry’s number of rooms, nights sold and the rate at which rooms were sold.
Less promising economic news relates to the lack of affordable housing for the workforce. Housing costs continued to rise due to a 15-year deficit in construction. Home prices are approximately 56% higher than in 2015. Many families are housing-cost-burdened, meaning that more than 30% of wages are spent on a mortgage or rent.
Unlike interest rates or international trade, however, local cities and counties can improve the housing market by changing regulations to make building in the region easier for developers, the report concluded.
Building any kind of housing, whether multifamily apartments or new neighborhoods of single-family homes, influences the overall market, the report noted, putting the onus on cities to make the necessary changes to alleviate the housing burden.
The State of the Region Report also contains chapters about public libraries, the aging population and disability rates. The full report, as well as previous State of the Region reports, are available at this link.
Above: Robert M. McNab, economics professor and director of the Dragas Center for Economic Analysis and Policy, addresses an audience of more than 700 at the 25th annual State of the Region presentation. Photo Chuck Thomas/ODU