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Monday, 16 March 2015 14:26

Grand Rapids said to have lowest rental vacancy in the country

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Morton House in downtown Grand Rapids Morton House in downtown Grand Rapids PHOTO: NICK MANES

A new study shows that, despite the abundance of cranes in the sky constructing new apartment units around Grand Rapids, it’s not nearly enough. 

According to real estate research website Zillow, the Grand Rapids-Wyoming Metropolitan Statistical Area (MSA) has a 1.6 percent apartment vacancy rate, the lowest in the country. The national vacancy rate by comparison was 7 percent at the end of 2014. This is the lowest vacancy rate since 1993, according to the Zillow study.

From the Eastown neighborhood, all the way through the central business district and out to the west side, developers have new construction projects — almost entirely apartments — going full force.

According to the 2015 forecast released by real estate brokerage firm Colliers West Michigan, with approximately 1,300 apartment units “delivered, under construction or planned, the downtown Grand Rapids market will see increased investor activity continue to pressure cap rates lower.”

There are a number of factors one can point to as reasons for the ongoing apartment construction boom. Broadly speaking, both millennials and empty-nesting baby boomers are moving back into city centers and are interested in options other than owning. Developers such as John Wheeler of Grand Rapids-based Orion Construction have pointed to the historically low interest rates as a great reason to do new construction right now.

Naturally, low vacancy rates in the Grand Rapids area are having an impact on rental rates. Take, for example, the under-construction Morton House in the middle of downtown, being rehabilitated by Rockford Development. A two-bedroom apartment starts at $1,900 per month. By comparison, Orion’s Eastown Flats, a two-building, new construction development in Eastown has two-bedrooms starting at $1,425 per month.

According to a 2014 report by Chicago-based real estate firm Triad Real Estate Partners, in the Grand Rapids-Wyoming MSA, average rent prices were up 5.34 percent, nearly doubling the national rate of a 2.8 percent increase.

The same Triad report also had occupancy rates at 98.2 percent.

Numerous sources in the development community in Grand Rapids told MiBiz that much of the goal is to reach a so-called “critical mass” of residents in the downtown and near-downtown area. A desired 10,000 residents in the downtown-area would give way to many new dining, shopping and entertainment options, as MiBiz has previously reported.

Read 7416 times Last modified on Monday, 16 March 2015 15:15

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