Virginia Beach is experiencing a wave of commercial construction activity driven by the $335 million Atlantic Park development at the Oceanfront, ongoing Town Center expansion, the $200 million Pembroke Mall redevelopment, and billions in military infrastructure investments across Hampton Roads. For developers and investors seeking construction financing, the city offers a combination of strong economic fundamentals, designated growth areas with streamlined zoning, and multiple demand drivers that support new development across property types.
Whether you are building a multifamily complex near NAS Oceana, developing retail in Lynnhaven, constructing office space for defense contractors at Corporate Landing, or breaking ground on a mixed-use project in one of Virginia Beach's Strategic Growth Areas, this guide covers everything you need to know about construction lending in the Virginia Beach market.
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Why Is Virginia Beach Attracting New Commercial Construction?
Virginia Beach's construction sector posted approximately 10.1% job growth in 2025, the largest of any employment sector in the city. This growth reflects a convergence of demand drivers, public investment, and policy initiatives that are creating favorable conditions for ground-up commercial development.
The $335 million Atlantic Park project at the Oceanfront is the most visible development catalyst. Phase I includes restaurants, shops, experiential attractions, more than 300 multifamily homes, office space, a 70,000 square foot entertainment venue, and a 2.67-acre surf park. Parking garages opened in 2025, with the broader project progressing through 2026 and beyond. This single project is transforming the Oceanfront from a seasonal beach destination into a year-round entertainment district.
The $200 million Pembroke Mall redevelopment, directly across Virginia Beach Boulevard from Town Center, is adding a seven-story hotel, 272 apartments, and public parking garages. Combined with Armada Hoffler's ongoing Town Center expansion, the Pembroke corridor represents the largest concentration of mixed-use development in the Hampton Roads region.
Military construction adds another massive demand driver. The proposed 2026 NDAA includes $380 million for privatized Navy barracks in Hampton Roads, $188.6 million for dry dock modernization at Norfolk Naval Shipyard, and approximately $93 million for electrical distribution upgrades. While these projects are primarily on-base, they generate construction workforce demand, housing needs, and support service requirements that spill over into Virginia Beach's commercial real estate market.
Virginia Beach's unemployment rate of approximately 2.8% and the diverse economic base provide confidence that new commercial construction will find tenants and buyers upon completion. The contracting multifamily supply pipeline (down 40% from 2024 peak) and tight retail vacancy (3.9%) create market conditions where new development fills genuine demand gaps rather than adding speculative inventory into soft markets.
For financing context beyond construction, visit our Virginia Beach commercial loans overview.
What Types of Construction Loans Are Available in Virginia Beach?
Construction financing in Virginia Beach spans multiple structures designed for different developer profiles, project types, and risk tolerances.
Bank Construction Loans are the most common financing vehicle for experienced developers. Regional and national banks with Hampton Roads market presence offer rates from approximately 7% to 9%, with leverage up to 70% to 75% of total project cost (LTC) and terms of 18 to 36 months. Bank construction loans typically require the developer to demonstrate prior project experience, provide personal guarantees, and show pre-leasing activity (usually 30% to 50% for speculative projects).
SBA 504 Construction Loans serve owner-occupants who want to build their own commercial facilities. This program combines a bank first mortgage with a fixed-rate CDC second mortgage, providing up to 90% financing with as little as 10% equity. SBA 504 is ideal for medical practices, defense contractors, professional firms, and other businesses building owner-occupied space in Virginia Beach. The program covers land acquisition, construction costs, and equipment.
Private/Hard Money Construction Loans offer faster approval and more flexible qualification at rates from approximately 9% to 14%. These loans typically cap leverage at 65% to 70% LTC but require less documentation and can close in 14 to 30 days. Private construction financing serves developers who need speed, have unconventional financial profiles, or are building in markets where banks are hesitant to lend.
Construction-to-Permanent Loans combine the construction phase and permanent financing into a single loan closing, saving developers time and closing costs. Rates start at approximately 7% to 8.50% during construction and convert to a permanent rate (typically the prevailing market rate) upon completion. These loans provide certainty that permanent financing will be available at project completion, eliminating refinance risk.
Mezzanine Construction Financing provides supplemental capital above the first mortgage, allowing developers to achieve 85% to 90% total leverage. Rates are higher at 12% to 15%, reflecting the subordinate position, but mezzanine financing enables projects that would not proceed with traditional equity requirements alone.
What Are Virginia Beach's Strategic Growth Areas and How Do They Benefit Developers?
Virginia Beach has designated several Strategic Growth Areas (SGAs) that offer significant advantages for commercial developers, including streamlined zoning, higher density allowances, and potential access to public incentives.
Pembroke/Town Center SGA is the most active development zone in Virginia Beach. The area is governed by a form-based zoning code that allows mixed-use development with residential densities up to 100 units per acre, significantly above standard suburban zoning. The form-based code focuses on building design, streetscape, and pedestrian experience rather than traditional use-based restrictions, giving developers flexibility to respond to market demand. Tax Increment Financing (TIF) has been used to fund public infrastructure improvements that support private development.
Oceanfront Resort SGA covers the resort corridor from Rudee Inlet to 40th Street. Development regulations prioritize tourism-oriented mixed-use projects with ground-floor retail, entertainment, and dining. The Atlantic Park project is the anchor development for this SGA, and the city has invested in infrastructure improvements including the 17th Street Boulevard project and beach replenishment to support continued private investment.
Burton Station SGA is positioned along the planned light rail extension from the existing Tide route in Norfolk. This area represents a longer-term development play, with transit-oriented development potential that will increase as light rail construction progresses. Developers with longer time horizons can acquire land at relatively lower costs and benefit from infrastructure improvements as the SGA develops.
Newtown SGA near the I-264 interchange benefits from transit access and proximity to Town Center. The area is transitioning from auto-oriented commercial uses to higher-density mixed-use development.
Construction lenders view SGA projects favorably because the streamlined entitlement process reduces permitting risk, and the public infrastructure investments signal the city's long-term commitment to these growth corridors.
How Does the Construction Loan Process Work in Virginia Beach?
The construction loan process is more complex and longer than acquisition financing, requiring developers to navigate pre-development, entitlements, lending, and construction management in a coordinated sequence.
The pre-development phase is critical and often underestimated. Virginia Beach's coastal location introduces site-specific requirements that affect construction costs and timelines. Geotechnical studies determine soil conditions and foundation requirements, particularly for sites near the water table. Environmental assessments evaluate contamination risk, wetland presence, and habitat considerations. Flood zone analysis determines whether the project requires elevated construction, flood-proofing, or other mitigation measures that add to development costs.
The entitlement process in Virginia Beach varies significantly by location. Projects within Strategic Growth Areas benefit from form-based zoning that streamlines approvals, potentially reducing the entitlement timeline from 6 months or more to 2 to 3 months. Standard rezoning applications require Planning Commission review followed by City Council approval, a process that can take 4 to 6 months.
The construction loan application requires a comprehensive package: final architectural and engineering drawings, a detailed construction budget broken into hard costs (construction) and soft costs (architecture, engineering, permits, legal, interest), a guaranteed maximum price (GMP) contract from the general contractor, evidence of pre-leasing or pre-sales activity, the developer's personal financial statement and track record, and an appraisal of the as-complete project value.
During construction, the lender manages a draw process where funds are released as construction milestones are completed. A third-party inspector verifies work completion before each draw is approved. Developers should expect a 10% to 15% retainage that is held until project completion and certificate of occupancy.
What Are Current Construction Loan Rates and Terms in Virginia Beach?
Construction loan rates in Virginia Beach reflect both national capital markets conditions and the project-specific risk factors that lenders evaluate.
Bank construction loans start at approximately 7% to 9% for experienced developers with strong financial profiles and projects in established Virginia Beach submarkets. Private construction loans range from approximately 9% to 14%. SBA 504 construction financing offers the most competitive long-term rates at 5.50% to 7.00%, though the program is limited to owner-occupants.
Several factors determine where your rate falls within these ranges. Developer experience is the single most important variable. Lenders offer their best terms to developers who have successfully completed similar projects in the Hampton Roads market. First-time developers or those building outside their typical property type will face higher rates and lower leverage.
Pre-leasing activity significantly influences both rate and approval probability. Speculative projects with minimal pre-leasing face the most conservative terms, while build-to-suit projects with signed leases from creditworthy tenants receive the most competitive pricing. For Virginia Beach multifamily, lenders may accept market demand analysis in lieu of pre-leasing given the tight 5.2% vacancy.
Project location within Virginia Beach affects lender confidence. SGA locations like Town Center and the Oceanfront command more favorable terms than projects in less established areas. Properties in flood zones may face additional insurance requirements that affect project economics.
What Are the Key Risks in Virginia Beach Construction Projects?
Construction development in Virginia Beach carries inherent risks that developers must proactively manage to protect their investment and maintain lender confidence.
Cost overruns are the most common risk in any construction project, and Virginia Beach's coastal location introduces specific cost factors. Flood zone compliance, wind-rated construction materials, and salt air corrosion resistance add costs that developers from inland markets may not anticipate. Build contingency reserves of 10% to 15% above the construction budget.
Permitting delays can push project timelines beyond the original construction loan term. While Virginia Beach's SGAs offer streamlined approvals, standard zoning changes and conditional use permits follow a public hearing process that can extend timelines. Plan for potential delays in your loan term and negotiate extension options.
Coastal weather events including hurricanes, nor'easters, and tropical storms can halt construction for days or weeks during the Atlantic hurricane season (June through November). Factor weather delays into your construction timeline and ensure adequate builder's risk insurance coverage.
Flood zone requirements affect a significant portion of Virginia Beach development sites. FEMA flood zone compliance may require elevated first floors, flood-proofing for below-grade areas, and additional engineering that adds to both cost and timeline. Verify flood zone status and elevation requirements early in the pre-development process.
Subcontractor availability can tighten during peak construction periods, particularly when major projects like Atlantic Park and military infrastructure are absorbing local construction labor. Secure subcontractor commitments early and include contractual provisions for timeline accountability.
For permanent financing after construction completion, explore refinance options to transition from your construction loan to long-term debt. Contact Clearhouse Lending to discuss construction-to-permanent financing strategies.
How Do You Structure the Permanent Financing Exit?
The exit from a construction loan to permanent financing is a critical milestone that should be planned from the project's inception, not addressed after construction is complete.
For multifamily construction projects, the most common permanent financing exit is an agency loan from Fannie Mae or Freddie Mac, offering rates starting at approximately 5.11% with LTVs up to 80% and terms of 5 to 30 years. Agency lenders require the property to demonstrate stabilized occupancy (typically 90% or higher) for at least 90 days before closing the permanent loan.
For commercial properties (retail, office, industrial), conventional commercial mortgages at 5.23% to 7.00% or DSCR loans at 6.00% to 8.50% serve as the permanent exit. CMBS loans provide non-recourse options for larger stabilized assets.
The construction-to-permanent loan structure eliminates exit risk entirely by combining both phases into a single closing. While the construction phase rate may be slightly higher than a standalone construction loan, the certainty of permanent financing at closing provides significant risk mitigation, particularly for developers building in emerging Virginia Beach submarkets where the permanent lending market may be less established.
Use our DSCR calculator to model your project's stabilized income and evaluate permanent financing options before breaking ground.
Frequently Asked Questions About Construction Loans in Virginia Beach
What are current construction loan rates in Virginia Beach?
Construction loan rates in Virginia Beach range from approximately 7% to 10% for bank financing and 9% to 14% for private lenders. SBA 504 construction loans offer rates from approximately 5.50% to 7.00% for owner-occupants. Rates depend on developer experience, project type, pre-leasing status, leverage level, and the overall risk profile of the development.
What down payment is required for a Virginia Beach construction loan?
Construction loan equity requirements range from 10% to 35% depending on the program. SBA 504 requires as little as 10% for owner-occupied projects. Bank construction loans typically require 25% to 30% equity. Private construction loans require 30% to 35%. Land already owned by the developer counts toward equity requirements at its appraised value.
How long does it take to close a construction loan in Virginia Beach?
Bank construction loans typically take 60 to 120 days from application to closing, reflecting the detailed underwriting of construction budgets, contractor qualifications, and project feasibility. Private construction loans can close in 14 to 30 days with streamlined documentation. SBA 504 construction loans take 90 to 120 days due to the additional CDC approval process.
What are the unique construction considerations for Virginia Beach?
Virginia Beach's coastal location introduces several construction considerations including FEMA flood zone compliance (elevated construction, flood-proofing), wind-rated materials for hurricane resistance, salt air corrosion protection for coastal sites, high water table affecting foundation design, and hurricane season weather delays from June through November. These factors add approximately 5% to 15% to construction costs compared to inland locations.
Do I need pre-leasing for a Virginia Beach construction loan?
Pre-leasing requirements vary by loan type and property sector. Bank construction loans typically require 30% to 50% pre-leasing for speculative commercial projects (office, retail). Multifamily projects may receive more flexible treatment given Virginia Beach's tight 5.2% vacancy. Build-to-suit projects with signed tenant leases receive the most favorable terms. Private construction lenders are generally more flexible on pre-leasing requirements.
Can I build in a Virginia Beach flood zone?
Yes, construction in FEMA flood zones is permitted and common in Virginia Beach, but it requires compliance with local floodplain management ordinances and the Virginia Uniform Statewide Building Code. Requirements typically include elevating the lowest floor above the base flood elevation, using flood-resistant materials, and designing foundations to withstand flood and wave forces. These requirements add cost but are well-understood by Virginia Beach contractors and engineers. Contact Clearhouse Lending to discuss construction financing for your Virginia Beach development project.