West Michigan industrial vacancy remains at all-time low

West Michigan industrial vacancy remains at all-time low
The pipeline for Holland-based Lakewood Construction typically includes several industrial projects, such as the facility for Westshore Design that it wrapped up in 2018.

GRANDVILLE — After searching for vacant sites in several other regions, the owners of Littlefoot Coffee Roasters LLC found space in Grandville that allows them to plant their roots back in Michigan and have room to expand in the future.

The process of finding space to lease for the roasting facility was a little stressful, as “a few were snatched off the market quickly,” Littlefoot co-owner Rose Quasarano told MiBiz

“We definitely found that things were filling up quickly, as well as felt like a lot of things were more for sale than for lease,” Quasarano said. 

Littlefoot, which serves cafe and wholesale partners in the Great Lakes region, eventually leased a 2,000-square-foot warehouse space at 3047 Broadway Ave. SW in Grandville, where it opened in August. The company is now part of a multi-tenant industrial building that was previously occupied by a snowboard manufacturer.

Stuart Kingma, associate broker for NAI Wisinski of West Michigan, echoed Quasarano’s sentiments that quality available space often gets scooped up quickly. 

Kingma recently brokered a deal in which an affiliate of Bloomfield Hills-based Kojaian Management Corp. purchased the 925,000-square-foot former headquarters of Amstore Corp. at 3951 Trade Dr. SE. The 24-acre property had been on the market since mid-January.

“We hope the space is filled quickly,” Kingma said. “For a building of that size, we’re off to a good start.”

Industrial clients in need of a new facility or who are looking to expand face a dearth of available properties, as industrial vacancy remains at an all-time low of 1.6 percent, according to the West Michigan office of Colliers International. Those same companies also face elevated construction costs in building out a new facility. 

Despite national trends pointing to a softening in manufacturing, West Michigan’s industrial sector as a whole remains steady and healthy, according to Colliers. 

John Kuiper, executive vice president of industrial brokerage at Colliers, said he doesn’t expect the current challenges with low vacancy and high construction costs to change the industrial market any time soon.

“It is an ultra-tight market, something that we have not historically experienced,” he said. “It creates some interesting pressures. I don’t see anything on the horizon that would really take that much pressure off the demand for space.”

The lack of existing high-quality space can be an advantage for construction companies that build new industrial projects, although Kuiper noted few developers are building speculative projects. As well, pricing has continued to go up, but even that is not stopping new construction, he added. 

Multiple manufacturers across West Michigan have built new facilities this year. That includes Hudsonville-based Royal Technologies Corp., which is investing $23 million to build a 50,000-square-foot warehouse and 270,000-square-foot plant adjacent to its existing headquarters, and auto supplier ADAC Automotive, which recently completed a 24,000-square-foot warehouse as part of its new $20 million headquarters in Cascade Township.

As well, Lacks Enterprises Inc. broke ground this summer on a 149,000-square-foot manufacturing facility on Kraft Avenue in Grand Rapids, while WAFUSA Logistics, a third-party fulfillment company, expanded with a new building in Cascade Township.

Holland-based Lakewood Construction Inc. recently completed two new industrial facilities and worked on four other expansion projects for companies in Holland and the Grand Rapids area. It currently has seven industrial projects in the pre-construction and construction phases, said Dave Ash, director of business development for Lakewood.

“It’s a tight market as far as any existing industrial space available,” Ash said. “Therefore owners are in many cases forced to build new because existing inventory is just so slim. At the end of the day, the owner needs to grow their business; they have to move forward regardless of the added (construction) costs.”

As a result, Lakewood has remained busy with consistent business among industrial clients, Ash added. The scarcity of available land also fuels the need to get more creative with developments for industrial use over the next few years, he said. 

At Littlefoot Coffee Roasters, the owners say the leased industrial space will allow the company to expand in the future with two bays and a second floor on each side of its space. After touring a handful of spots in the Grand Rapids area, the Grandville facility was average in terms of cost but offered the best space, Quasarano said.

“There was definitely some outliers, some that were newer construction that were going to be a little bit beyond what we were willing to pay,” she said. “This one fell right in the middle and was a great spot.”