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Sunday, 02 February 2014 21:01

Outside investors increasingly find West Michigan real estate to their liking

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The West Michigan region is losing its diamond-in-the-rough status, but that’s not bad news when it comes to commercial real estate.

That was the message from presenters at the Colliers International 2014 West Michigan Economic and Commercial Real Estate Forecast held Friday at DeVos Place.

“The activity in investment in West Michigan has gone back and equaled the investment of the crazy times of 2007,” said Duke Suwyn, president and CEO of Collier’s Grand Rapids office. “All property types were active. … We expect that to continue this year, and we also expect multifamily to really take off.”

As an example of the interest in multi-family product, Colliers recently put a portfolio on the market and quickly had 15 offers on the properties, Suwyn said.

The number of out-of-market investors interested in West Michigan deals continues to rise as persistent low interest rates and solid job gains make the region a more attractive place to invest, according to presenters.

“We (came) to Grand Rapids from Chicago because it’s a growth market,” Don Shoemaker, lead partner at Naperville, Ill.-based real estate investment firm Franklin Partners, said during a panel discussion at the event. “It’s really that simple.”

Franklin Partners’ West Michigan portfolio has grown to include more than 3 million square feet of industrial and downtown Grand Rapids office space since the firm made its first industrial property purchase in 1997. The area’s diversifying economy, skilled labor force and unique sense of place were key factors in Franklin Partners’ initial decision to invest, and that’s held true for the company’s more recent forays into the downtown office market, Shoemaker said.

While attention from out-of-state interests grows, activity on behalf of local and Southeast Michigan-based firms is also keeping brokers busy looking for available inventory.

“Opportunity is what brought us here,” said Kevin Hegg, vice president of New York-based Ashley Capital’s Detroit office, referring to the firm’s purchase of the former Steelcase campus on 36th Street. “That’s what drew us in. Whereas Detroit’s kind of the big brother in Michigan, there are a lot of things you’re doing right here that we need to pull back to Detroit.”

Brokers said uncertainty caused by the federal government has many in the real estate industry worried. They’re concerned about the impact of quantitative easing and the availability of commercial mortgage-backed securities loans and a lack of quality inventory in the industrial market, presenters said.

Moreover, companies that can’t find space in the market to fit their needs have turned to building new facilities, as was the case with Gordon Food Service and Chep Pallets.

“We’re running out of good, quality infrastructure,” Suwyn said.

The cost of construction, interest rates and land prices are three things likely to continue to rise into 2014, he said, noting that construction costs are likely to be about 27 percent higher at the end of this year compared to 2010 and will be “even higher by 2016.”

“The combination of those three things are something to really watch out for,” Suwyn said.

Read 3100 times Last modified on Sunday, 02 February 2014 21:05

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