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Sunday, 20 January 2013 22:00

West Michigan real estate markets nipping at national trends year-to-year

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Trade Center building Trade Center building PHOTO: Elijah Brumback

 Last year’s real estate forecast from Colliers International had encouraging signs for some market segments, while others were expected to limp along like wounded animals.

With the 2013 forecast set to take place Jan. 25 at DeVos Place, activity in most commercial real estate markets remained relatively unchanged, although brokers continue to point to a handful of positive indicators.

If the third quarter 2012 market reports are any indicator for the new year, absorption rates for office, industrial and even retail gained modest ground, according to Colliers.

Overall, the retail segment, which was almost entirely written off for 2012, proved to be more resilient than analysts had expected. Downtown Grand Rapids saw a number of national chain restaurants move into the area, as MiBiz reported Dec. 9, and the major suburban corridors saw a handful of notable transactions, including Cabela’s, Skyzone and several restaurants. Vacancy in all markets is approximately 13.2 percent, the retail report stated.

Nationally, 2013 expectations from PwC US and the Urban Land Institute’s Emerging Trends in Real Estate Forecast call for “modest gains” in leasing, rents and pricing across most markets in the U.S.

CB Richard Ellis’ fourth quarter report for 2012 indicates technology, software and energy markets are responsible for most of the upticks in office occupancy. For retailers, a slow decline in availability continued with the vacancy rate falling to 12.8 percent in the fourth quarter 2012, the report stated.

The report also put the nationwide industrial markets in good standing. An availability rate of 12.8 percent marks the tenth consecutive quarter in which industrial availability declined. During the past two years, the industrial market has seen a slow but steady decline in availability, the report stated. Industrial vacancy was 14.6 percent in 2010, according to the report.

Brokers and real estate professionals maintain that interest in the West Michigan market from national investors and investor groups is up, as many are realizing better margins in the so-called secondary markets like Grand Rapids. Some real estate firms are seeing more Chicagoland buyers dipping their toes in the market, though they are not alone as outside interests pop up more regularly, sources said.

Deals for class A and class B office space saw flat year-to-year activity with sales dropping off slightly. However, upticks in leasing filled the gap. Notable leases include 7,368 square feet at the American Seating Business Park to ArcticAx US Ltd., a new business to the area; the first floor and portion of the second at 5537 Glenwood Hills Parkway for 36,531 square feet; and 13,400 square feet at 62 Commerce Ave SW.

With Gordon Food Service set to open its new corporate headquarters on Gezon Parkway, brokers at Colliers expects the company’s soon-to-be-vacated, 140,000-square-foot office to impact rental rates throughout the suburban market.

As for downtown office, the purchase and renovation of 50 Ottawa by CWD and 99 Monroe by Franklin Partners typified activity for the central business district.

“There is certainly a renewed interest in West Michigan from outside investors, not just Chicago per se, but across the board,” said Derek Hunderman, an industrial broker with Colliers. “There’s been a handful of notable transactions lately and the money is flowing in from sources across the nation.”

The purchase of 4700 Broadmoor, a fully leased four-tenant manufacturing facility, which was sold to investment group from Chicago, is just one example, he said.

Occupancy rates on the industrial side are also reaching a bottleneck, as MiBiz previously reported in December. Quality inventory with all the amenities that expanding manufactures are looking for has been almost entirely consumed, and brokers are hinting at the possibility of more build-to-suit and spec building.

Industrial vacancy rates are hovering around 7.6 percent, and the Colliers market report noted a positive absorption of roughly 520,000 square feet for the third quarter of 2012. Across West Michigan, the addition of Janesville Acoustics in Battle Creek and Plasan Carbon Composites in Walker are two major boosts for the region’s industrial outlook, sources say.

While Hunderman is encouraged by the interests from outside the West Michigan market, it’s still local buyers that are driving sales activity.

“There has been increased inquiry from buyers around the country, including New York and St. Louis,” said Dan Yeomans, president of Amicus Management, a Grand Rapids-based turnaround firm. “But again, most buyers come from within the market on assets under $10 million for commercial real estate. It takes a credit-rated lease like a Walgreens, a public company, or a law firm to generate interest from national investment buyers.”

Overall, most transactions seem to be West Michigan buyers who have cash and who have created a use for the property, he said.

Still, Yeomans noted that interest from investors from different markets, including Chicago and Canada, were on the rise.

“I suspect we will see more activity from both areas,” he said.

Read 13986 times Last modified on Thursday, 17 January 2013 23:51
Elijah Brumback

Staff Writer

ebrumback@mibiz.com

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