GRAND RAPIDS — Developers of apartments in Grand Rapids are still seeing high demand for market-rate units.
This trend has been a common theme for the last several years, as well-appointed projects have filled up quickly across the city. Since many units came online at the end of last year and into 2019, there was a small slowdown in the market for apartments, but multiple developers told MiBiz that demand is once again outpacing supply.
Along with trying to address demand, multifamily developers also note the challenge of high construction costs and limited available land, as well as the need to weigh affordability issues and how they can be addressed.
Developers have plans to bring online nearly 1,000 additional apartment units in Grand Rapids during the next year, according to the West Michigan office of Colliers International, a commercial brokerage. They will hit the market as the occupancy rate for multifamily projects stood at 89 percent as of Aug. 1, according to Colliers’ estimates.
One of the projects that came online in the last year was The Hendrik, Rockford Construction Co. Inc.’s 116-unit apartment building built above Meijer Inc.’s Bridge Street Market on the west side of Grand Rapids. The property leased up the quickest of any property in Rockford’s portfolio, according to executives.
“We opened the Hendrik in November, which is typically the most challenging time to open, but we’ve gotten a resounding response,” said Mike Mraz, president of real estate development at Rockford Construction. “With really high-quality design and nice finishes, we really thought through the designs of the apartments themselves.”
Occupancy at Rockford Construction’s properties, which include more than 400 residential units, stands at 98 percent or more.
“We’re seeing a lot of stability,” Mraz said.
According to Colliers, rapid lease-up rates are expected to persist as the West Michigan population continues to grow.
That sentiment is backed by a 2019 report from brokerage Bradley Co. LLC, which has an office in Grand Rapids. The report projected 3-percent growth in the next five years, signaling a need for additional multifamily options, even though more than 4,400 new units have come online in the West Michigan market since 2015.
“Occupancy is strong across the board, and demand is starting to exceed supply again,” said Matt Jones, associate vice president at Colliers International. “The pendulum is going to stay firmly planted in the demand exceeding supply category.”
Jones said the announcement of jobs moving to downtown Grand Rapids will prompt even more demand for housing in the urban core. This month, developers of Studio Park announced Acrisure LLC, a Caledonia-based insurance brokerage, would move its global headquarters to the new development, bringing about 400 jobs from the suburbs to downtown Grand Rapids.
Also in the works is Health Innovation Partners LLC’s Grand Rapids Innovation Park, located at the northeast corner of Michigan Street and Monroe Avenue. The project includes a 200,000-square-foot building to be partially occupied by Michigan State University, with the majority of space being leased to private-sector partners.
“These are the types of employment opportunities that will attract people that will continue to stabilize the multifamily market,” Jones said.
Construction costs top the list of concerns in the multifamily market, Jones added, also citing the availability of buildable sites and challenges with getting neighbors behind higher density developments. Finding skilled trade workers remains a challenge as well, particularly amid persistent affordable housing issues in the area.
Nonprofits, local municipalities and some private developers are continuing to assess ways to provide more affordable housing in the area.
“I see continued demand for workforce housing, for the ‘missing middle,’” said Chris Beckering, executive vice president at Grand Rapids-based construction management firm Pioneer Construction Inc. “I believe market-rate multifamily opportunities remain for the right projects in the right locations.”
Pioneer Construction recently completed multifamily projects including Diamond Place on Michigan Street on the northeast side of Grand Rapids, and 601 Bond, a luxury 16-floor apartment building with 202 units. Pioneer also is working on Tapestry Square Senior Living, an 84-unit independent senior living facility in southeast Grand Rapids. Fifty units in the building will be reserved for affordable senior housing.
Meanwhile, Wolverine Building Group Inc. is working on two affordable housing projects with Grand Rapids-based nonprofit Dwelling Place, and recently finished work on multiple market-rate developments.
For Aaron Jonker, president and co-owner of Wolverine Building Group, finding solutions to affordable housing issues remains a priority and should be a focus for others in the private sector.
“We know that, as a business, we need our community to be healthy. If our community is healthy, the business will be healthy,” Jonker said. “(Affordable housing) is a problem in our community that affects all of us. And as a member of our community, we feel like it’s our job to help where we can.”