The retail industry was among the hardest hit by COVID-19 restrictions and shutdowns, but West Michigan’s commercial real estate sector is showing signs of recovery and creating optimism among experts.
“Retailers are beginning to feel cautiously optimistic about the coming months as we’re seeing signs of a rebound,” Earl Clements, senior vice president at Colliers International’s West Michigan office, said in a statement. “Retailers and restaurants worked hard to adapt during COVID-19, and they continue to do so leading to processes and practices that will likely stick around post-pandemic.”
The first quarter of 2021 showed a 5.1 percent vacancy rate for Grand Rapids retail space, a slight decrease from the previous quarter, according to a recent Colliers market trend report. The vacancy rate could start “creeping back up” slightly as landlords try to recoup rent they had previously abated, according to the report.
Colliers advisers saw tenants active in many segments, including grocery, home goods, furniture and home improvement. More activity is linked to medical-related tenants, fitness and restaurants with and without drive-thrus.
Some strip mall centers are also seeing more activity than they were pre-pandemic, said Jeff Tucker, senior managing director of brokerage and principal at Bradley Co. While retailers have seen some job displacement throughout the pandemic, the sector is coming back, Tucker said, including with some small box retail expansions.
“Restaurant activity is increasing significantly, specifically the ones that have been less impacted by COVID-19 because they have been able to capitalize on take-out operations or drive-thrus,” Tucker said.
Despite a recent surge in COVID-19 cases, Gov. Gretchen Whitmer has not issued new lockdown restrictions comparable to orders in 2020. Some restaurants have chosen to close voluntarily as Michigan leads the country in rates of new COVID-19 cases.
Industrial continues to thrive
Meanwhile, the industrial sector continues to be a bright spot for the real estate market, both throughout the pandemic and in the first quarter of 2021. Vacancy rates are at 1.68 percent statewide amid high demand and tight supplies, according to Colliers’ market report, which notes construction costs remain high and interest rates are low.
“Industrial supply continues to lag behind demand, and there’s been almost no speculative building,” said Julie O’Brien, vice president at Colliers International’s West Michigan offices. “We have businesses that want to grow but are remaining cautious in the current market. We will continue to see the vacancy rate to decrease, meaning more competition for those growing companies, like e-commerce.”
Optimistic about office
Grand Rapids’ office market continues to be in a “wait and see” mode with a vacancy rate at nearly 9.59 percent, which is expected to increase based on Colliers’ market forecast.
“The office sector has certainly been a challenge throughout the COVID-19 pandemic, but we are optimistic that the administration of vaccines and the listing of restrictions on in-person working will impact office attendance,” said Scott Morgan, senior vice president at Colliers’ West Michigan office. “While it’s uncertain whether big moves will be made in the office sector this year, we know companies will be looking for new and different spaces moving forward to accommodate social distancing.”
While in-person office work is still down, “the future is bright” for the Grand Rapids office market, said Chip Bowling, senior adviser and principal at Bradley Co.
“Specific to the West Michigan office market, consumer morale is up,” Bowling said. “Consumer confidence is up, office brokerage is up, execution of leases is up. Some businesses are finding comfort in home offices for employees, but other businesses are realizing they need their people back in the office more than ever.”
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