Following a busy year for real estate transactions across the region, NAI Wisinski of West Michigan Partner Mary Anne Wisinski-Rosely, who specializes in the office market, expects more of the same in 2020. She projects strength across all commercial real estate segments, especially in the area surrounding downtown Grand Rapids.
What are your expectations for the broader commercial real estate market for 2020?
I think sales of properties will continue to be strong in 2020. Leasing will always be strong. That’s probably across the board as far as office, industrial, retail investment properties. I think in all sectors that will be true. With sales being strong, that inventory is still going to be a challenge. There’s still going to be a lack of inventory in all areas. I think pricing will remain high.
That sounds similar to what we experienced this year.
I would say that is relatively the same. I don’t think there’s going to be a lot of change in the market. I don’t think there’s going to be one big thing that is going to change a lot; I think 2020 will be much of the same.
What could affect the market and cause changes?
Whenever there’s an election year, people tend to be a little bit more cautious in their decisions, not knowing how the election is going to affect the economy and jobs and supply, things of that nature. Whenever there’s an election year, there’s always cautiousness. Especially being in West Michigan, where it’s a very conservative market, you see that too. But because it’s a conservative market, people usually plan and things don’t impact our area as much as they do in other parts of the country.
What about a slowdown in the economy?
We always wonder when it’s going to happen. It’s inevitable that something will happen from what I’ve been hearing. I think there will be a downturn at some point; I don’t think it will happen in 2020, but I do think there’s been a little bit of a slowdown in the market, but not enough to make a huge impact. We might see that in 2020, but nothing major at this point.
The office market was particularly busy in 2019. What are you expecting next year?
In office in particular, leasing will continue to be strong. Office inventory for sale, there’s going to be a lack of inventory for sale, and there will be buyers out there, so I think pricing will remain strong from a sales perspective. Lease pricing is going to remain relatively flat; I don’t think we will see a big increase or decrease in that. Cost of construction will still be high in my opinion; that sometimes affects the leasing rates a little bit, especially if there’s new construction.
How do you think Acrisure’s downtown headquarters move will affect that market?
I don’t know if it will spark more to work downtown; I think it will be healthy for downtown to have a company such as Acrisure there. It’s more expensive to occupy space downtown. Rental rates tend to be a little bit higher, and you have the additional cost of parking downtown. I think the parking crunch has been alleviated a little bit with the opening of the Studio Park parking ramp, but I still think there is a lack of parking in certain areas of downtown. The cost of parking, if you have a lot of employees, it can be a high-ticket item that you don’t need to have in the suburbs.
I think (Acrisure’s move) will spur some people to want to be downtown, but I don’t think it’s all of a sudden going to be a huge impact.
Along with parking, are factors continuing to align in favor of the suburban market?
The market surrounding downtown will still remain strong; there will be a demand for people to be close to downtown but not quite in downtown. I still think the southeast corridor will remain strong; it’s always been a strong corridor for office. We’re seeing new office space pop up on the southwest end of town in the Byron Center M-6 corridor. I think in those areas you’ll see more demand for office space as well.
Is there anything else on your mind heading into 2020?
The cost of construction is going to be high, so you won’t see any speculative new buildings. They’re going to be either partially leased or owner-occupied new construction. The reason for a lot of new construction is a lack of inventory for people who want to own, so I think you’ll see a lot of owner-occupied new construction. I see the office market staying steady, not a big up and not a big down.
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