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Sunday, 19 April 2015 23:58

Report: Push for quality space drives growth in West Michigan's commercial real estate market

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A push for quality space in the best areas — rather than a focus on the best price — continues to be the biggest driver of growth in West Michigan’s commercial retail estate market.

Whether it's industrial, office or retail, the same general trends are showing through and creating tight inventory and increased construction, according to the first quarter reports released by real estate brokerage firm Colliers West Michigan.

“It’s the new normal,” said Duke Suwyn, president and CEO of the West Michigan office.

The industrial market was the first to recover from the recession, according to Suwyn. It has now hit a point where there is almost no inventory and minimal construction. Suwyn said he expects the industrial absorption rate for the next several quarters to stay fairly flat.

West Michigan’s office and retail sectors will begin to follow that trend as well, Suwyn said.

“We are at a point where we really have no inventory,” Suwyn said, specifically referring to the area’s industrial market. “We are at that point where something has to happen. It’s bottled up.”


Industrial

The current overall vacancy rate for manufacturing space in the Grand Rapids-area stands at 4.86 percent, according to the Colliers report. New construction has been minimal, largely due to rising costs. The brokerage firm reported that the extremely limited inventory of industrial space, coupled with hesitation to build, means users are constantly getting more creative.

The Colliers report calls this a “paradigm shift” in the market. Some users are adding second or even third shifts to maximize space. Others are simply rearranging the space they have.

There are still pockets of building in the area, however, particularly around Gerald R. Ford International Airport. The area has seen both speculative and build-to-suit projects as of late.

General contractor AJ Veneklasen Inc. announced last week a new $15 million, 262,000 square foot speculative industrial project on the southeast corner of Broadmoor Avenue and 52nd Street SE. The building will feature modern amenities such as 24-foot clearances and ESFR fire protection.

The first phase of the project is expected to be completed by July of this year.

A new industrial park has been proposed in Walker by Rockford Construction, as MiBiz has previously reported. Wyoming’s Site 36 also continues to hunt for prime industrial users. Construction and buildouts for tenants also remains ongoing at the Aerotech Industrial Park near the airport.


Office

With the unemployment rate trending downward as a leading economic indicator, the Colliers office report suggested that the sector will continue to see positive absorption. Indeed, that was the case in the first quarter of 2015, according to the report.

Overall, the first quarter experienced 109,163 square feet of positive absorption, with the suburban areas accounting for more than 72,000 square feet and downtown Grand Rapids absorbing 37,028 square feet.

The Breton Road and Burton Street submarket led the suburban areas.

A number of office developments in the downtown market remain in the pipeline. Arena Place and 25 Ottawa, both in the Arena South neighborhood, continue to go through the construction process. 12 Weston, a proposed office and retail tower in downtown’s Heartside neighborhood, still needs approval from the Historic Preservation Commission. As MiBiz has previously reported, the proposed height of 12 stories has been questioned by members of the HPC.


Retail

The prime corridors of 28th Street SE, Rivertown Parkway in Grandville and Alpine Avenue north of I-96 remain very active. Less desirable locations continue to struggle, Colliers reports.

The first quarter of 2015 saw little net change in vacancy for retail, with only 3,689 square feet of total absorption.

It’s hardly unusual, however, for the first quarter to experience little activity, particularly in retail, due to retailers still coming off the holiday season and assessing year-end sales, according to the report.

With the Byron Center Tanger Outlet Mall expected to open in July, however, as well as increased activity around the Knapp's Corner area on the East Beltline, there are opportunities for new power corridors, as MiBiz has previously reported.

Read 2057 times Last modified on Sunday, 19 April 2015 23:41

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