The West Michigan economy is peaking, and with an economically successful year in 2017, it is expected that those successes will continue throughout 2018. Many are wondering if that is true, or if West Michigan should expect some headwinds. When analyzing from an economic and commercial real estate perspective, it can be broken down by the different designations; retail, office, industrial, and apartment.
After a successful year for retailers, there will be additional changes to come in 2018 that will increase the national footprint of West Michigan. Many local retailers are increasing their brand accessibility and awareness using multiple distribution avenues, both online and in physical stores. A local example of incorporating this concept is the de-malling of CenterPointe mall in Grand Rapids, as well as the Westshore mall in Holland, as both locations are becoming more accessible and convenient for consumers.
Other areas are re-inventing themselves to become new retail corridors. An area that will see new development is the east M-6 freeway area. The new Switch build-out in the former Steelcase Pyramid will bring hotels, additional offices, and will soon be followed by retail establishments.
The retail market is not without headwinds, similar to other designations. The e-commerce and delivery automation is expected to advance further but retailers are adjusting to new patterns as they take shape. The West Michigan retail market specifically will remain positive, with national brands to continue to consider this area and to find creative ways to penetrate the market. Restaurants will see demand, and downtown retail will continue to evolve and mature. There is projected to be more retail establishments opened in the United States in 2018 than closed.
Grand Rapids used to be known as the region people left to find better jobs, but that trend has reversed to more people migrating back home or deciding not to leave in the first place. The office market continues to show momentum and opportunities for employment and quality of life is high heading into 2018, making West Michigan an extremely desirable location.
The increase in residents has been a factor in the downtown office space vacancy reaching 10 percent, limiting the amount of new business growth as office locations continue to fill. The lack of vacancy has caused parking congestion, which increased the value of suburban locations, lowering the vacancy rate in those areas to 14%. The lack of options available has caused more renewal of space, and has encouraged landlords to offer multi-use spaces to reassure longevity of tenants.
Providing the space and amenities that appeal to employees is as important as ever. With the labor participation in Kent county being over 70% compared to the national average of 62.8%, and the unemployment rate has reached a resistance point of 3%, which is considered “full employment”. These numbers show that not only does the region have among the lowest unemployment in the nation, but that we have among the highest amount of people trying to find work, which are both signs of a very healthy economy. Making it essential for employers to be providing those ideal work spaces to make for a desirable work environment.
This specific market has a number of demand drivers, including furniture manufacturing and food processing; however, one driver expected to impact the region in 2018 is automotive. West Michigan has a long lineage of manufacturing, but as the industry becomes more advanced, we will need to continue to not only retain companies we currently have, but attract new and innovative ones as well.
Although automotive is expected to make an impact, there is a lack of access to skilled labor, being a constraining factor both in the automotive and manufacturing industry. The demand is present, and production has been a challenge that is also affecting real estate decisions.
Higher demand for skilled trades is higher than ever and is garnering salaries above what many jobs that require a four-year degree can offer. There is even a trend of companies paying individuals to undergo training and apprenticeships so that the company is inquiring the quality work they require.
The lack of space has also been an ongoing concern in the tight market. Many existing buildings are being repurposed by shuffling companies around to accommodate the need and to find what works best for everyone. There are also companies who are adding additional space to existing buildings, but have held off due to high cost of construction.
The Grand Rapids apartment development has been abundant, as occupancy rates peaked in early 2017 at about 96.8 percent. At this time, occupancy remains strong at 96.5 percent, the decrease caused by the increase in supply within the market. The activity causes question of when the market will become saturated. But as frequently discussed, it is expected that 2018 to continue to be a growth year.
With 101 consecutive months of growth, the United States is now in one of the longest periods of recovery in history and is expected to continue. Further growth and prosperity for West Michigan is expected in 2018. It is another great year to be a Grand Rapidian.