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Sunday, 06 December 2015 22:48

GR commercial real estate market continues to improve but inventory tightens

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Recent quarterly reports from two West Michigan commercial real estate brokerages point to continued growth in the area’s industrial, office and retail segments alongside increasingly tightening inventory.

According to the third quarter reports from Colliers International of West Michigan and NAI Wisinski of West Michigan, the region’s commercial real estate sectors generally experienced positive absorption, increasing lease rates and declining vacancy.

While generally seen as positive by many real estate sources, the news also speaks to challenges, particularly in the industrial market where inventory has tightened.

“Our challenge has been finding suitable space,” said Stu Kingma, an associate broker in NAI Wisinski’s industrial division. “What that translates to is new building and construction projects. That’s the only way of satisfying the demand.”

While the two brokerages cover slightly different markets and have different methods for defining buildings types, their reports share similarities when it comes to sentiment and the challenges presented by the tightening real estate market.

Executives at both firms believe the current West Michigan industrial market requires more capacity as interest particularly for heavy industrial space remains on an upward trajectory.

The firms pointed to pockets of speculative building around the region that will add some needed inventory.

However, John Kuiper, president and principal at Colliers, said that he has noticed a bit of a recent slowdown in overall lease signings, despite interest remaining strong.

He attributed the notion of a slowdown — which he referred to as more of a theory than anything he had hard data to back up — to the uncertainty in the broader economy versus any specific dip in the market.

“The market continues to be overall positive and continuing absorption is a key component,” Kuiper said. “There’s some new construction happening and there’s some new construction proposed. Rates are being pushed up. I think demand in the industrial segment is still strong, however it may have lightened just a little bit.”

Indeed, according to the reports from Colliers and NAI Wisinski, the region’s industrial market shows signs of health.

“Creative options have all but been exhausted and those opportunities that eager-to-expand businesses were able to find are simply not there now,” according to the Colliers report. “A robust industrial market fueled by diverse manufacturers and an ideal economy have pushed the market forward yet again in the third quarter, with 110,038 square feet of absorption.”

The firm noted that in the absence of any new inventory, “the sustainability of this growth is going to be a challenge. We are already seeing a slowdown heading through the rest of the year and into 2016.”

Moreover, Kingma at NAI Wisinski said the market has changed rapidly in just the last year. Previously, manufacturing companies had to get creative with space to accommodate growth. That led many industrial companies to be open to converting warehouse space to meet their manufacturing needs. While some of that trend continues, much of the warehouse space has now been absorbed, he said.

Likewise, users seeking 100,000 square feet or more of space have few if any options, Kingma said.


The region’s office market in some ways has started to resemble the industrial market, particularly looking at the downtown Grand Rapids central business district. In that area, new construction has been geared toward high-end, high-amenity Class A space, leading to higher rents, according to commercial real estate brokers.

“You have a historical expectation of the market of what rents should be and what they get for that rent — meaning what kind of quality do I get for X dollar,” Kuiper said, referring to the area’s industrial market and the kinds of amenities being built by developers. He added the trend is also occurring in a number of downtown office buildings.

“(With) the downtown office market, we’re seeing this all prove out,” he said. “We’re on the front end on the industrial end in the marketplace, but you will start to see it prove out (in the office market).”

According to the NAI Wisinski report, people driving or walking around downtown Grand Rapids will notice construction cranes dotting the sky, and more are expected in the coming months as construction starts on office and mixed-use buildings like the 12 Weston project.

NAI Wisinski’s Mary Anne Wisinski-Rosely said growth in the Grand Rapids office market expands beyond the central business district, citing Heritage Pointe, the office development First Companies Inc. is building at the corner of Burton Street and East Paris Avenue.

The project currently under construction will add between 20,000 and 25,000 square feet of new office inventory.

Wisinski-Rosely echoed Kuiper’s sentiments about users becoming increasingly willing to pay more per square foot both in the suburbs and in the downtown market.

“There is a demand for higher quality,” Wisinski-Rosely said. “People can afford higher quality now compared to a few years ago and they see opportunities to upgrade.”


Traditional suburban retail corridors along 28th Street SE and Rivertown Parkway continue to experience growth, but an urban housing boom in neighborhoods all over Grand Rapids has presented new opportunities for retailers, according to the Colliers report.

With developers planning 6,250 new units over the next five years, many of them in mixed-use buildings, the trend of ground-floor retail should only continue, brokers said.

“Retail generally follows housing population,” Kuiper said. “The population around downtown has experienced a lot of growth. Because of that, retail will continue to benefit.”

Read 5521 times Last modified on Wednesday, 16 December 2015 00:04

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