Hot Medical Market Spurs Building

March 4, 2003
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NORTON SHORES — The growing market demand for health care and a low vacancy rate for medical offices locally spurred plans for a new $11 million to $12 million medical/professional building between Muskegon and Grand Haven to house primary care and specialty physician offices.

Westwind Construction Co. of Spring Lake is working to sign tenants for the 75,000-square-foot complex, planned for a 10-acre site along the southbound lanes of U.S. 31, between Sternberg Road and Ellis Avenue, in Norton Shores.

The site is within minutes of hospitals in Muskegon and Grand Haven and situated in a market where vacancy rates are low for medical office facilities, compared to general office space. That indicates a strong enough demand in the area for additional medical office space, said Tom DeBoer of Grubb & Ellis/Paramount in Grand Rapids, the commercial real estate firm representing Westwind Construction.

"That's what we're betting on — there's a big hole in between the two cities that ought to be a home run for us," DeBoer said. "When you look at the numbers, it's pretty obvious why we're going where we're going."

Class A general office space in the Muskegon County market presently has a vacancy rate of 42 percent on the 222,000 square feet available. The 390,000 square feet of class B general office space has a vacancy rate of 22 percent, and the 308,000 square feet of class C space is 32 percent vacant.

Reflecting market demand, medical office space in Muskegon County has a vacancy rate of 7.3 percent on 396,000 square feet of space. Development of what's been tagged the Ellis Shores Professional Building also follows a general national trend in health care construction, one of the few non-public sectors of the construction industry that's grown in the last two years.

The last large medical building developed in the area came just 18 months ago with the opening of the Harbor Dunes Health Center in Grand Haven. A joint project between North Ottawa Community Hospital and physician group Horizon Medical PLC, the $11 million, 74,000-square-foot medical center is nearly fully leased with just two small suites of about 1,500 square feet each remaining, Horizon Medical Administrator Ray Breiding said.

Among the tenants that moved into Harbor Dunes were specialty physician groups based in Muskegon that were actively recruited by North Ottawa and Horizon to open offices in Grand Haven.

In contrast to the Harbor Dunes facility, Westwind's medical center is speculatory. The firm is undertaking the Ellis Shores Professional Building independent and absent of involvement from any of the area's hospitals: North Ottawa in Grand Haven and Muskegon rivals Hackley Hospital and Mercy General Health Partners.

The project will put a sizable medical complex in an area where none of the competing health care providers holds a solid share of the market and that many see as up for grabs.

"That's area's such a no-man's land," said Heather Johnston, marketing director for North Ottawa Community Hospital.

Seeking to shore up its market share north of town, the Grand Haven hospital recently opened a new rehabilitation clinic in a strip mall in northern Spring Lake, near the Ottawa-Muskegon county line.

Westwind Construction will begin work on the Ellis Shores Professional Building once 50 percent of the floor space is leased, DeBoer said. He has a "pretty good feeling" he'll hit that goal by mid-summer, given what he describes as a high level of interest so far. Occupancy for the new medical building is targeted for mid-2004.

"We're confident with the interest level we've had, we're going to get to this point," DeBoer said. "The timing is right for it."

Grubb & Ellis is marketing the Ellis Shores Professional Building largely to primary care and specialty physicians. Among the potential tenants is a user interested in taking up to 20,000 square feet of space.

Not specifically targeted as yet as potential tenants are care providers such as outpatient surgical groups that would compete with hospital outpatient centers, although "it's not being entirely ruled out," DeBoer said.

Nor is Westwind ruling out bringing in general office users to the medical building, he said. DeBoer has been contacted by a law firm that has inquired about leasing an entire floor of the building.               

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