NORFOLK, Va. — Hampton Roads’ economy continues to expand, but Old Dominion University economists warn the region’s heavy dependence on federal spending could leave it vulnerable if Washington cuts budgets or slows hiring.
The 2025 State of the Region: Hampton Roads report, released Tuesday by the Dragas Center for Economic Analysis and Policy at ODU’s Strome College of Business, finds the region has grown for four straight years and is expected to record a fifth in 2025.
The annual study, now in its 26th year, was authored by Dr. Robert McNab and Dr. Vinod Agarwal.
According to the report, Hampton Roads’ real gross domestic product increased 2.6 percent in 2024 and is projected to grow another 2 percent in 2025. The region also set records for labor force participation and employment last year, with more than 883,000 residents working or seeking work and roughly 856,000 employed. The unemployment rate remained low at 3.1 percent, consistent with pre-pandemic levels.
While growth has been steady, the report notes Hampton Roads continues to trail faster-growing metro areas such as Raleigh, Charleston, and Charlotte. The region ranked 146th out of 384 metropolitan areas for economic performance in 2023, placing it in the middle range nationally.
Federal dependence
The report emphasizes that defense and federal civilian spending remain the backbone of the regional economy. More than 80,000 active-duty service members are stationed in Hampton Roads, along with about 60,700 federal civilian workers. Federal dollars also support shipyards, universities, hospitals, and contractors throughout the region.
In Fiscal Year 2024, the federal government obligated $270.9 billion in contracts, grants, and transfer payments across Virginia. Analysts found that Virginia received $1.80 in federal spending for every $1 sent to Washington in taxes, the highest ratio in the nation.
That dependence creates long-term risk if federal spending slows. The report projects that the federal deficit will continue to grow, increasing pressure to cut discretionary programs or reduce hiring. Because federal employees earn on average 1.6 times more than private-sector workers, each federal job lost would require more than one new private job to replace its income in the local economy.
Core economic sectors
Defense, the Port of Virginia, and tourism remain Hampton Roads’ three major economic pillars. Defense spending increased in 2024 and is expected to grow through 2026, but tariffs and global trade shifts are creating headwinds for port activity. Tourism remains a major driver, although hotel industry growth slowed late last year.
Housing and cost of living
Housing affordability continues to challenge families across the region. Median home values have climbed 42 percent since 2020, averaging about $368,000. Median mortgage values rose 34 percent between 2019 and 2023 to $349,200. Typical rents have increased nearly 39 percent since early 2020, outpacing national rent growth.
The report attributes these trends to limited new construction. In 2024, housing permits were down more than 50 percent from their 2004 peak, leaving supply well below demand.
Transportation and demographics
Norfolk International Airport is cited as an economic success story. The airport set a new passenger record in 2024, surpassing pre-pandemic levels and reinforcing its role as a regional connector and economic engine.
The report also details demographic shifts associated with the “Silver Tsunami,” referring to the large number of Baby Boomers reaching retirement age. The aging population is expected to increase demand for healthcare, housing, and nonprofit services across Hampton Roads.
Regional collaboration
A section authored by Hampton Roads Executive Roundtable President Drew Lumpkin highlights the progress made in regional cooperation over the past two decades. Economists say that continued collaboration among cities and business leaders will be critical to attracting private investment and diversifying the economy beyond federal spending.
Outlook
Economists at ODU expect the regional economy to continue expanding in 2025, though at a slower pace. Rising federal debt, trade uncertainty, and the potential for reduced federal spending could affect growth in 2026. The report calls for greater diversification of the local economy and renewed investment in the private sector to strengthen long-term resilience.
Key findings:
- Real GDP grew 2.6 percent in 2024; projected 2 percent in 2025.
- Record-high employment and labor force participation.
- Federal jobs and defense spending remain dominant economic drivers.
- Housing costs up more than 40 percent since 2020.
- Norfolk International Airport set a new passenger record in 2024.
- An aging population will reshape regional workforce and nonprofit needs.
The 2025 State of the Region: Hampton Roads report is published by the Dragas Center for Economic Analysis and Policy at Old Dominion University. It is available online at www.ceapodu.com.
