Multifamily and industrial are the two hottest commercial real estate markets in West Michigan while the outlook for office and retail is comparatively less optimistic, according to a new first quarter commercial real estate trend report.
Coming off the first quarter of 2021, high demand continues for land in the industrial and multifamily sectors in West Michigan. The future of office space remains questionable, while the retail market continues to adjust and maintain some activity, according to Mark Ansara, senior vice president at Advantage Commercial Real Estate Services LLC in Cascade Township.
“The market overall, in our opinion, is positive,” Ansara said. “There’s a couple of categories that are still trying to find their way. The retail and the office pieces are the struggling pieces right now.”
The first quarter of 2021 saw a 24 percent drop in office leases signed in West Michigan compared to the same period last year, according to Advantage Commercial Real Estate’s West Michigan Q1 trend report. As workers eventually return to offices, employee density per square foot is expected to decrease from pre-pandemic levels, causing a slight shift away from the collaborative work environment trend that has characterized the office market for the past five years.
“Multifamily is hot, self-storage is hot, there’s a lot of vacant land being purchased,” Ansara said. “Whether they have use now or use in the future, you can’t make anymore land become available.”
Ansara’s findings on multifamily and industrial properties are in line with other recent trend reports for the region, but are also less optimistic about the retail and office sectors.
Kevin VanHaitsma, adviser at Grand Rapids-based Bradley Co., said a “fight for land” continues for both industrial and multifamily projects.
“As demand is high and trends continue to change, land stays the same,” VanHaitsma said. “Available space is very low. That’s been the challenge of new product, is finding places. We know multiple tenants that are growing and still looking for additional space.”
He added that multiple industrial buildings in the first quarter have gone under contract the same day they were listed.
Higher ed, banks downsizing space
Meanwhile, higher education and banks are consolidating and downsizing their property portfolios, said Chip Bowling, senior adviser and principal at Bradley Co. He noted a growing number of bank branches hitting the market as banks move to online banking.
As well, higher education continues to follow trends toward online instruction and consolidating multiple classroom locations into one large location for face-to-face learning, Bowling said.
“Universities and colleges are being very strategic on what they’re selling off and having one centralized location,” Bowling said. “This is a trend you’ll see throughout the rest of 2021.”
The trends in both higher education and banking are likely related to the COVID-19 pandemic.
“Banking was likely headed in this direction, and COVID-19 helped speed it up,” Bowling said. “I don’t know if that’s entirely true with higher education. As quickly as banks and campuses are consolidating and selling, right behind them are buyers and investors and developers eager to purchase these assets for redevelopment.”
Senior Reporter Mark Sanchez contributed to this report.
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