While inventory remains constrained, the value of commercial real estate transactions continues to gather momentum in West Michigan.
The total transaction value of “on-market” deals hit $201.7 million through late October, up 10.8 percent over deals from all of last year, according to data from the West Michigan chapter of the Commercial Alliance of Realtors (CARWM).
However, commercial real estate sources note the total transaction value likely far eclipses the CARWM data, which only tracks properties that were listed for sale, especially given the increasing volume of off-market deals that have been completed.
“In a marketplace like we’re experiencing today, it’s the off-market opportunities that are most likely to solve people’s space needs,” said Stu Kingma, an associate broker and industrial service provider at NAI Wisinski of West Michigan, a Grand Rapids-based commercial brokerage firm.
“If it’s on the market, you’re competing with a whole bunch of folks. If it’s off-market, you’ll still pay a market number for it,” he said, “but at least there’s an opportunity you might be presented with that ordinarily you’d miss if you’re just … making calls on signs you see when you’re driving around.”
Despite the tight inventory, commercial real estate brokers across West Michigan have been busy with transactions spanning the range of industries and investors, including global buyers chasing returns in the strong local market. Here’s a look back at deals in several key real estate sectors.
The West Michigan industrial sector remains one of the tightest markets in West Michigan with vacancy rates hovering around 5 percent, according to various commercial real estate analyses.
CARWM estimates brokers sold 2.4 million square feet of industrial space regionwide through October, while they also leased another 1.8 million square feet in the sector.
NAI Wisinski’s Kingma helped to broker a deal that resulted in Grand Rapids-based J. Walton Properties LLC acquiring 1761 Airport Ct. in Holland, a 120,000-square-foot industrial building. The $3.75 million transaction closed in early November, according to public records.
According to the CARWM data, the deal value ranked as the second highest among on-market industrial transactions, behind only the deal in which Grand Valley State University acquired the 63,000-square-foot operations center from Ferris Coffee & Nut Co. in Grand Rapids.
Brokered by Stan Wisinski, also of NAI Wisinski, the Ferris Coffee building sold in June for $6.5 million. GVSU will use the facility to expand its Padnos School of Engineering, as MiBiz reported at the time.
However, both fall short of the off-market, $9.5 million deal in which an affiliate of Rosemont, Ill.-based Brennan Investment Group acquired the Tesla Tool and Die plant at 5460 Executive Parkway in Cascade Township on Aug. 31, as MiBiz exclusively reported. The seller was an affiliate of Welsh Property Trust, a Minnetonka, Minn.-based real estate investment trust.
With available inventory of quality industrial space continuing to dwindle, manufacturers and developers have turned to new construction in some instances, as well as the acquisition of vacant land, according to Kingma.
To that end, Visser Development Inc., Robert Grooters Development Co. and others have started to build speculative, industrial buildings around the area, which sends a positive signal to brokers like Kingma.
“The whole region is as healthy as I’ve ever seen it,” he said.
With limited ownership opportunities in Grand Rapids’ central business district, growing owner-occupants largely have sought out transactions for older buildings in suburban office parks, such as Centennial Park in Cascade Township.
That was the case with a deal brokered by Scott Morgan in which Grand Rapids-based Lake Michigan Credit Union acquired a nearly 20-year-old, 39,820-square-foot office building at 5537 Glenwood Hills Parkway for $4 million in February.
“Those buildings are very well constructed and they’re typically in good locations,” said Morgan, a senior vice president focused on suburban office properties at Colliers International Inc. in Grand Rapids.
“It’s attractive to owner-occupants,” he said. “Typically, the draw is that companies can buy for half the replacement cost and renovate it for way under the cost of new construction.”
For example, LMCU could have opted to expand on available vacant land near its headquarters at Lake Drive and East Paris Avenue, but opted against new construction in favor of an acquisition and renovation, he said.
A similar story played out with a legacy retail building in Wyoming. Kent County property records show an affiliate of Portage-based developer Hinman Co. purchased the former home of Klingman’s Furniture and Roger’s Department Store at 1001 28th Street SW for nearly $3.4 million on June 7 from Holland-based Coastal Real Estate Holdings LLC, a holding company for Macatawa Bank. Advantage Sales & Marketing LLC plans to invest $4.3 million to consolidate its four local offices at the site.
Additionally, a Metro Health-University of Michigan Health medical office building near Cascade Road and I-96 in Grand Rapids Charter Township sold for $35.3 million as part of the acquisition of a national portfolio of similar facilities, as MiBiz exclusively reported in early October.
In the last year, local, national and global investors have scooped up a range of West Michigan apartment properties.
As MiBiz was first to report in July, Grand Rapids-based development and management firm The LaCati Group LLC sold The Ridges of Cascade — a new-construction, 237-unit, high-end apartment complex — for $57 million to a Lansing-based investment fund.
Additionally, public records show the 375,000-square-foot Knollwood Apartments in Kalamazoo, located near the Western Michigan University campus, sold for $53 million on May 23 in a deal with a Singapore-based firm.
In August, MiBiz exclusively reported that Stonebridge Global Partners LLC, a Beverly Hills, Calif.-based real estate fund, acquired two Grand Rapids-area apartment complexes for more than $30 million.
Michael Cagen, a senior associate based in Grand Rapids at Marcus & Millichap Real Estate Investment Services Inc., helped broker a deal in which Detroit-area-investors acquired a 12-unit Kalamazoo apartment complex, also located near the WMU campus.
“This was a California owner who wisely recognized that they got the bulk of the appreciation they were hoping to get and felt that it was a good time for them to cash their chips in and move on to the next deal,” Cagen said.
Public records show that Auburn Hills-based The Stables at WMU LLC acquired the property in November for $1.875 million from Santa Monica, Calif.-based 1315 Calimazoo Property LLC.
“They had seen rather dramatic price appreciation since they acquired it and accepted that the gains might be fairly incremental going forward, particularly with a bias toward rising interest rates,” Cagen said.
Even as large retailers around the country continue to struggle with reinventing themselves in an era of e-commerce, shopping centers around West Michigan have shown signs of life.
According to CARWM data, multiple properties along major Grand Rapids-area retail corridors such as Alpine Avenue and near RiverTown Crossings sold in deals valued at more than $1 million.
That includes the $5.25 million sale of a Jenison shopping center to a California-based investor, ET 102 LLC, as MiBiz reported in October. The shopping center is fully leased to tenants like Auto Zone, Mel Trotter Ministries and a Rebounderz indoor trampoline park.
The transactions came as several large retailers in the area closed their doors through a variety of circumstances in the last year. Still, commercial real estate executives say those closures have paved the way for more niche retailers to enter the market.
“In Q1, we predicted a new wave of retail to make its way into West Michigan as big box stores close across the region,” Jeff Hainer, a senior research analyst in the Grand Rapids office of Colliers International, said in a statement released as part of the firm’s third quarter market research report. “This quarter we saw some of those empty buildings become occupied once again and we anticipate vacant buildings will continue to fill up as we head into 2018.”