Published in Real Estate
The Wealthy Street corridor has become one of Grand Rapids’ hottest commercial real estate markets. While business owners once were able to cheaply scoop up abandoned properties along the strip, most of the sites have been redeveloped, leading to escalating pricing. The Wealthy Street corridor has become one of Grand Rapids’ hottest commercial real estate markets. While business owners once were able to cheaply scoop up abandoned properties along the strip, most of the sites have been redeveloped, leading to escalating pricing. NICK MANES

Wealthy Street corridor emerges as ‘jewel’ of GR real estate market

BY Friday, September 28, 2018 08:23pm

GRAND RAPIDS — The redevelopment of the Wealthy Street corridor into a trendy, upscale business district continues to gain momentum, even more than a decade after work first started.

Since the mid 2000s, the roughly half-mile stretch of Wealthy Street between Fuller Avenue and Eastern Avenue has emerged as one of the city’s hippest areas. New bars, restaurants, boutiques and yoga studios have set up shop along the strip, filling up what were once vacant buildings and — prior to that — home to a thriving African American business community.

Multiple real estate executives say they’ve seen a change in the real estate market along Wealthy Street in recent years. Instead of entrepreneurs cheaply scooping up long-vacant buildings to open new shops along the corridor, new retail tenants now are paying between $20 and $30 per square foot for their spaces.

“What you’re seeing is just this escalating, increasing price for real estate in a market that everyone wants to be in,” said Joe Rizqalla, a sales associate with Grand Rapids commercial brokerage Signature Associates.

In part, small business owners are turning to Wealthy Street as inventory remains tight in downtown Grand Rapids, which has pushed prices there even higher. The high cost downtown, coupled with concerns over parking, has many entrepreneurs looking elsewhere to open their businesses.

“Everyone is converging on Wealthy Street,” said Rizqalla, calling the area the “jewel” of Grand Rapids.

What limited buildings are left available along the corridor tend to need renovation work and have been selling for $150 to more than $300 per square foot, according to an analysis by MiBiz of recent transactions.

The rise of the Wealthy Street corridor as one of the city’s hottest markets has some local small business owners getting involved in a sector they never planned to enter: real estate development.

When Paul Lee opened The Winchester on Wealthy Street in 2008, he and his wife only planned to run a neighborhood bar and restaurant. A few years later, when the chance presented itself to redevelop a vacant gas station across the street, the restaurateurs jumped at the opportunity, eventually opening Donkey Taqueria.

Now Lee is in the process of building out a new fried chicken restaurant concept, dubbed Hancock, that he expects to open later this year at the northwest corner of Wealthy Street and Fuller Avenue.

Even after the flurry of projects in recent years, Lee says he has an appetite to do even more work in the neighborhood.

Lee and his relatives, through a variety of business entities, own a handful of adjacent parcels to Donkey. The group is in the process of fleshing out plans for the sites, which could include additional housing and retail options for the neighborhood, he said.

“Our intention was never to get into development,” Lee said, noting that his strategy changed once his first restaurant became popular. “My thinking was that people are going to come in here and they’re going to start developing it. Either we do it or someone else will. If we do it, then we can kind of protect our investment.”

DEALS CONTINUE

Other investors also plan to bring new housing, dining and retail options to the remaining vacancies in the East Hills neighborhood.

Eric Wynsma, principal with Terra Firma Development LLC, a Grand Rapids real estate firm, had previously worked in the office and industrial sectors, but has turned his attention to the Wealthy Street area in recent years.

Last summer, Terra Firma acquired the 700-square-foot building and surrounding property at 368 Diamond Ave. SE, just north of Wealthy Street, for $222,000, according to property records. Since that time, the company leased the space as an office for Five Star Real Estate.

Terra Firma also renovated buildings at 619 and 650 Wealthy Street, and leased the space to a variety of higher-end retail users.

Now Wynsma hopes to break ground in the coming weeks on a new 3,100-square-foot, one-story retail building at 626 Wealthy Street, which he expects to lease to one or two similar users.

Even amid escalating costs and lease rates, Wynsma said he doesn’t anticipate much trouble finding tenants for the space.

“The vacant buildings are being gobbled up quickly. Nothing is cheap anymore. It’s gotten expensive, but it still works,” Wynsma said. “There’s a market to support the rent and the rents that the neighborhood is producing are justifying the purchase prices of the real estate and the renovation costs, so it all seems to make sense.”

More renovations and developments also appear to be coming into the pipeline. Just before this report went to press, the city demolished the building at 706 Wealthy Street, once home to The Wild Bunch motorcycle club. The structure was badly damaged in a fire in 2017 and largely abandoned by its owners, according to city documents.

Rhonda Baker of the city’s historic preservation department said in an email that the existing or new owners would need to present redevelopment plans that align with historic preservation guidelines for the site.

Additionally, work could begin in the near term on the long-vacant five-story Kregel Building along Wealthy Street between Eastern and Charles Avenues. A subsidiary of 616 Development LLC has long planned to convert the buildings to apartments. Principal Derek Coppess declined to comment for this report, noting he was nearing completion of a deal to redevelop the site.

All the activity has stakeholders along Wealthy Street feeling as though they’re slowly building the stretch into something big.

“Now there’s people out and about at all hours,” Lee said. “It’s really starting to feel like a big city neighborhood.”

WHO BENEFITS?

The rush of activity and new projects also comes at a cost, according to some stakeholders. Jamiel Robinson, the founder of Grand Rapids Area Black Businesses (GRABB), said African American-owned businesses once anchored the Wealthy Street corridor, but they have almost entirely disappeared from the district.

Robinson cites a variety of reasons for the changes, including less opportunity and access to capital for African American entrepreneurs, as well as rising costs, particularly resulting from the neighborhood’s designation as a historic district.

One exception: Forty Acres Soul Kitchen, an African American-owned soul food restaurant and bar, which opened earlier this year on the ground floor of a new mixed-use development at 1059 Wealthy Street. The business is said to be the only full-service African American-owned restaurant in the city that also sells beer, wine and liquor.

Given the escalating real estate costs and limited inventory of available land or buildings, Robinson envisions that African American-owned businesses likely will wind up needing to stake a claim in other parts of the city.

“There will be opportunities along Wealthy Street, but they’ll just be here and there. Depending on the project, the opportunity to own is dwindling by the day,” Robinson said. “It’s becoming unaffordable overall, but especially for startup African American businesses. You have to have the right type of product.”

LAND USE QUESTIONS

A few blocks west of the hotbed of activity around Eastern Avenue, Wealthy Street takes on a very different feel with Mary Free Bed Rehabilitation Hospital’s growing campus followed by surface parking lots and a handful of vacant buildings on the north side of the street.

The vacant buildings largely are across the street from the mixed-use Tapestry Square development, owned by nonprofit developer Inner City Christian Federation.

However, proposed plans to redevelop the sites have led to renewed discussions over land use and the highest and best use of the various properties.

In mid September, officials from Mary Free Bed sought permission from the city’s Planning Commission to tear down one of the vacant buildings — which it owns — and replace it with a surface parking lot for its employees.

The request generated almost entirely negative comments from citizens and commissioners who felt that losing one of the last buildings on that stretch only to gain a parking lot would widen the gap between activity happening a few blocks to the east.

While acknowledging the benefits that an institution like Mary Free Bed provides, commissioners said the request went against the best practices for land use in the area and voted down the request.

In a statement to MiBiz, a Mary Free Bed spokesperson said the organization won’t appeal the decision and is having internal discussions about what to do with the vacant building.

In voting down the request, planning commissioners said they see opportunity to better connect the western end of  Wealthy Street SE to the restaurants, bars, shops and services taking root to the east.

“This is a critically important corridor in our city,” Planning Commission Chair Kyle Van Strien said while explaining his reasoning for voting down the request. “I see greater things (at this site).”

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