According to Police Chief Jim Cervera who gave a press conference a short while ago, police arrived at the scene, entered the building and exchanged fire with the shooter.
The identities of the gunman and the victims were not released.
"There is no way to describe an incident such as this", Cervera said.
The bloodshed unfolded, according to Mr. Cervera, at Building Two of the municipal center complex, a facility which houses the city's public works and utilities next door to City Hall.
Cervera said police returned fire, killing Craddock.
A police officer was among the wounded following a shootout with the suspect.
"This is unbelievable for Virginia Beach", Cheryl Benn said.
Originally, officials said 11 people died.
"When this violent act occurred, police and fire-rescue responded and did the professional thing that they do, because that's what they do", he said. The gunman used a.45-caliber pistol equipped with a "sound suppressor" device and "extended" ammunition magazines that he reloaded repeatedly during the attack.
"This is a tragic day for Virginia Beach and our entire Commonwealth", said Virginia governor Ralph Northam.
The shooter was a disgruntled employee, the report said, quoting a Virginia government source.
The White House issued a statement saying that USA president Donald Trump had been briefed on the shooting "and continues to monitor the situation". Cory Booker; South Bend, Indiana, Mayor Pete Buttigieg; and California Sen.
In addition to the 12 killed, other people were injured as well.
The public is asked to avoid the area around the municipal center as investigation continues.
One police officer is among six wounded in the incident, but is reportedly not in a serious condition.
"That was enough to make me feel safe enough to come outside and that God was with us", she said.
Survivors of a mass shooting at a Virginia Beach municipal center are reuniting with friends and relatives at a middle school.
"My boss was like, "This is not a drill, get down", she said. He rushed back to the office and saw police hiding behind parked cars with their guns drawn. Cervera said Friday that the officer's life was saved by his bullet-proof vest.
"The suspect did shoot a police officer".
Victims were found on all three floors of the building. A patient who was at Princess Anne Hospital was being transferred to Norfolk General Hospital, a Level I trauma center.
They then engaged in a long-term gun battle with the suspect, the chief said.
Megan Blanton told The Virginian-Pilot newspaper that she was in the building when the shooting began.
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