Breton Burton Office Sector Changes

June 2, 2003
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GRAND RAPIDS — The Breton/Burton office sector is a microcosm of the total office market with less than 112,000 square feet of the 13.8 million square feet in the metro area.

As the second-smallest district in the metro market, Breton/Burton is home to 14 of the 448 buildings that make-up the market.

Nine of those are on Burton Street, three are on Breton Avenue, and two are on Ardmore Avenue. Only one has three stories, and modern-day amenities for tenants are scarce throughout the district.

So Breton/Burton is undergoing a transition, largely because of the rise of offices in the East Paris area. Once a primary office location, it is evolving into a secondary sector that serves the surrounding neighborhood, anchored by the Breton Village Mall, and the local medical business.

The latest Building Owners and Managers Association (BOMA) occupancy survey listed the district as having the second-highest vacancy percentage of the 14 office sectors in the market. Only the sector near the airport has more empty space.

But just last year, Breton/Burton tied for the sixth-highest occupancy rate, only five percentage points behind the leader.

Breton/Burton has older, and what some might call, tired buildings – known as the Class C types -- that are in need of upgrades.

“Quite a few of them are these bi-level buildings that don’t have elevators, and they really need a lot of work,” said Scott Morgan, an office specialist and vice president with Grubb & Ellis/Paramount.

“And the Breton/Burton area is difficult to access. A lot of people today are moving out to East Paris and the Beltline and other locales, which have quicker and easier access to the highway system,” he added.

Morgan felt the types of buildings in the sector, and the manner in which the sector is tucked in between quiet East Grand Rapids and busy 28th Street, limits tenants to businesses that serve the district. He said insurance branches, accountants, dentists, small real estate firms and medical groups are the district’s primary office tenants.

Mark Baker, a broker with the Prime Development Co., told the Business Journal that the proximity of the district to the city’s hospitals makes it an attractive office location for some medical groups. Breton/Burton is fairly close to Metropolitan, Saint Mary’s and Spectrum Blodgett hospitals, and not all that far from Spectrum Butterworth.

“That neighborhood, for office space, has always been heavily tilted toward medical. If you look up and down Breton and Burton, the prominent tenants are medically related, even an administrative group,” said Baker.

The 2003 occupancy rate for the sector stands at 70.6 percent for the district, down from 87.8 percent in 2002. Still, the occupancy rate is higher than what was first reported. Initially, the Breton Medical Office Building at 1815 Breton was listed as being completely vacant. In reality, it is fully occupied.

Adding its 6,140 square feet to the occupancy side of the ledger lowered the district’s vacancy rate from 34.9 percent to 29.4 percent. BOMA pegged the vacancy rate for the entire office market at about 16 percent.

Despite having more vacancy than the overall market, there still is investor and tenant interest in the district. Baker represented a buyer who bought the Breton Medical Office Building from Metro Hospital in late April. Prior to the sale, half of the building was empty. After the sale, it was filled.

“They have closed on it and part of the deal was that Metro lease about half of the building. There are two other tenants that occupy the balance of the building. All four tenants are medical groups, two are directly connected to Metro,” said Baker.

“It’s where people live and it’s close enough to the hospitals that it works. That’s why I encouraged my investor to buy it. I think it’s a quality location now and for the long term,” he added.

While Breton Medical filled, three buildings in the sector took a large vacancy hit over the past year. The trio lost 12,000, 6,600 and 5,500 square feet of occupancy, major numbers for a district in which the average office building has less than 8,000 square feet of space.

One of those was 2000 Burton St. SE, the sector’s largest building with 14,500 square feet. This year it has 5,500 more vacant square feet than it had last year.

An orthodontist moved his practice from 2000 Burton to a brand new address on East Paris Avenue, one that offers a lot of amenities including underground parking. It was an expensive move, but, apparently, a necessary one.

“He is paying double the rent, not to mention all the infrastructure and improvements that he put into a brand new orthodontic practice,” said Morgan.

“He is doing that to upgrade his image and attract a new clientele.”

Morgan said he has a client in the district thinking about moving and possibly buying property along East Paris and building something new.

He also represented a group that had leased 10,000 square feet in two of the district’s buildings, but moved near East Paris and became an owner of a newer building.

East Paris is included in a sector that has almost 1.7 million square feet of office space and a vacancy rate of 13 percent. Another 54,000 square feet of space came on the market there in just the past year, about half of the square footage that all of Breton/Burton offers.

“It’s still a good area in terms of access to rooftops,” said Morgan.

“But with the age of the buildings, it’s going to be more and more difficult for them to be leased. The clientele has moved.”

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