The mixed-use projects beginning to take shape around Kalamazoo’s central business district and its nearby neighborhoods point the way forward for the city’s growing commercial real estate market.
Building off the momentum created by major institutional investments in the city, developers are planning numerous projects, including some forward-thinking residential options, to serve people coming into the city for work or study. At the same time, the institutional investments and the renewed commercial development activity in the region have helped general contractors grow their business.
Industry professionals say the combination of commercial and institutional projects could be a game-changer for Southwest Michigan’s largest city.
The city’s overall revitalization has led Kalamazoo-based NoMi Developers LLC to consider some new and experimental forms of living that are only now catching on in much larger metropolitan areas such as New York, Seattle and Washington, D.C.
NoMi Developers plans a 45-unit mixed-use development with 16 micro-apartments at 508 East Frank Street, near the downtown’s East End neighborhood. The 300-square-foot units will rent for $500 per month with all utilities included, said NoMi principal Jon Durham. The units will include a small refrigerator, and tenants will have access to a common kitchen area.
Micro-apartments have been difficult to develop in many cities because the small units are often under the minimum size allowed by zoning regulations. Durham said Kalamazoo officials worked with his company and changed the zoning code to allow the project to move forward.
“The city has been very welcoming, actually,” Durham said. “They know that affordable housing is needed. … There’s nothing like that in a brand-new, really cool, safe environment in the city, and that’s what we are trying to test and see how those things go.”
Construction of the 34,000-square-foot project — dubbed Walbridge Commons — is set to begin next month, and the developers expect it to open in January. The project is located in a warehouse that dates back to 1924. There will also be a ground-floor restaurant component at the site, although a user has not yet been selected, Durham said.
The apartments will be aimed at recent college graduates and young professionals.
The Walbridge Commons project is in addition to plans the development firm has in the works to redevelop four buildings in the 700 block of North Burdick Street into mixed-use residential and commercial projects, Durham said.
LEVERAGING INSTITUTIONAL INVESTMENT
The acceleration of mixed-use developments within Kalamazoo’s central business district and its adjacent areas can be attributed to investments being made by the city’s long-standing institutions, said Patti Owens, vice president and managing partner at Kalamazoo-based Catalyst Development Co.
Officials see potential for the downtown area’s continued growth, particularly anchored by Western Michigan University’s $68 million, 350,000-square-foot Homer Stryker M.D. School of Medicine, which opened last fall.
The project kicked off a wave of interest on the part of many developers, Owens said.
“We’re a little preliminary about what will happen as a result of the medical campus, but it will make an impact,” Owens said. “I’m going to suspect you’ll see a boom.”
Downtown Kalamazoo stakeholders also are focusing their efforts into a 6.3-acre site known as Arcadia Commons West. A request for proposals from five public and private agencies — the City of Kalamazoo, Kalamazoo Downtown Development Authority, Downtown Tomorrow Inc., Kalamazoo Community Foundation and WMU — calls for high-density, mixed-use urban development on the four-block site situated around Arcadia Creek as it runs through downtown. The site was formerly home to several small businesses and a car dealership, but now largely sits vacant, according to the RFP.
The projects are coming at an opportune time, Owens said, noting that downtown Kalamazoo needs the added inventory.
Currently, the central business district is operating at incredibly low vacancy levels for residential, retail and office space. According to a 2013 occupancy report from Downtown Kalamazoo Inc., residential vacancy in the core business district was at 2.5 percent. DKI president Steven Deisler told MiBiz that a recent market study shows that the downtown area can absorb 1,000 market-rate apartments and 450 affordable units in the next five years.
Developers have already started to plan for additional units. Last September, developer Tom Huff of Peregrine Realty LLC acquired the former PNC Bank building at the corner of East Michigan Avenue and the Kalamazoo Mall with plans to redevelop the building into more than a dozen apartments, as well as restaurant and retail space.
Despite the growth opportunities and the potential for ancillary development as a result of some of the anchor projects, Owens said Catalyst has no plans to increase its development portfolio. Currently, the company has about 1.5 million square feet and is “satisfied” with its footprint in the area, she said.
The craft beverage industry is also becoming an economic driver in the central business district and the adjacent neighborhoods. Bell’s Brewing Inc., which celebrates the 30th anniversary of its founding this year, remains a dominant player.
The craft brewer is currently expanding at its Eccentric Cafe at 355 East Kalamazoo Ave. by adding a full-service kitchen and additional dining room space.
A number of startup breweries have also cropped up in recent years. Gonzo’s BiggDogg Brewing Co. LLC opened in the fall of 2013, followed by Tibbs Brewing Co. Inc. in December of that year. Battle Creek-based Arcadia Brewing Co. opened a satellite location on the east bank of the Kalamazoo River in May 2014, just outside the downtown area. Boatyard Brewing Co. and One Well Brewing Co. each opened last year as well.
Durham’s NoMi Developers is also the landlord and general contractor for a proposed, unnamed distillery project located across the street from its Walbridge Commons development. Construction is expected to begin in July, Durham said. The distillery’s owners are Jon Good and Josh Cook.
With increased development in the Kalamazoo area comes more construction opportunities. That has certainly been true for Kalamazoo-based Miller-Davis Co. As of late, the general contractor has been seeing activity coming primarily from industrial and institutional investment, especially in the K-12 educational space, said President and CEO Rex Bell.
“So far, what we have seen is pent-up demand,” Bell said, adding that was particularly true for the industrial sector. “Stuff had been postponed and (companies) are finally going through with it. That didn’t just start, but it’s continuing to increase and gain momentum.”
Recent and ongoing projects include serving as general contractor on K-12 school improvements for districts such as Hartford Public Schools and East Jackson Community Schools, largely through bond programs. The company also maintains an office in South Bend, Ind., and has worked on projects at the University of Notre Dame, such as its library renovation and a visitor’s center.
The company in recent years has also built a number of projects at Western Michigan University, including student residences and educational projects like Sangren Hall. Miller-Davis has also worked on projects at Kalamazoo College, including the award-winning Arcus Center for Social Justice facility.
Bell told MiBiz that the company has plenty of projects in its pipeline in both the short term and long term. He said the contractor continues to hire, particularly in the area of project managers and superintendents.
Other general contractors in the West Michigan area and nationally report similar trends. According to a May report from the national Associated Builders and Contractors Inc., the U.S. construction industry added 45,000 jobs in April. Nonresidential construction was by far the leader, adding 20,200 jobs, according to data from the Bureau of Labor Statistics.
But nonresidential construction spending nationwide has slipped in recent months, according another recent ABC report. For March, spending on nonresidential construction fell slightly, 0.1 percent, marking the third month in a row to see a decline.
That number doesn’t bother Bell much, though.
“Right now, we have projects that go out through 2018, so that is a huge indicator for us,” Bell said. “That tells us there is going to be a need. In the shorter term — 90 days out — it looks strong. I think when you multiply that by the other companies out there who are doing well also, that means there is going to be that demand.”