Housing forecast for downtown shows growth potential
Downtown Development Authority Executive Director Jay Fowler’s first public response to an updated report on the district’s residential market potential was positive.
At the last DDA meeting, Fowler directed board members’ attention to a key sentence on page four of the executive summary. It read, “Downtown Grand Rapids should be able to support 282 to 437 new units per year over the next five years.”
The sentence Fowler found so satisfying came from a study done by Zimmerman/Volk Associates Inc., a New Jersey firm with a national reputation as an expert in urban housing and mixed-use developments. In fact, the report is a follow-up on a housing analysis Zimmerman/Volk did for the DDA in 2004. The board hired the company again last May and the study was completed last fall, about the time the nation’s housing market collapsed.
But what developers should know about that study’s finding, which is just one of many contained in the report, is that the majority of those new units should be rentals. Fifty-seven percent should be multi-family lofts and apartments that can be leased or rented. Thirty-four percent should be multi-family lofts and condos that can be purchased. Only 9 percent should be single-family townhouses that are put up for sale.
So it’s no coincidence that the most recently proposed housing projects to come across the DDA’s desk have been rentals. The Meridian Building Co. plans to construct 105 apartments in a new 10-story structure at Fulton Street and Sheldon Avenue, while Kendall Renaissance LLC wants to renovate a seven-story building at 16 Monroe Center NE and add a dozen apartments to the downtown mix.
“That’s great to get that mix of new construction and adaptive reuse because there is a segment of the market that wants new construction and wouldn’t consider units in older buildings. Then there’s another segment of the market that is exactly the opposite,” said Laurie Volk, the “Volk” in Zimmerman-Volk.
As for who makes up the market, younger singles and childless couples are still most likely to want to live in an urban setting — a finding that was also in the 2004 report. These two groups make up almost 70 percent of the downtown housing market. Empty nesters and retirees are about 20 percent, followed by families at 10 percent. Slightly less than half of all downtown residents would come from locations outside the city’s limits.
The latest report from Zimmerman/Volk said there has been a significant increase in the size of the annual potential downtown market since the 2004 analysis. In the first study, that potential stood at 2,500 households. In the 2008 report, the number was 3,100 households, a jump of 24 percent over the past four years. But developers know that outside factors, such as a lender’s willingness to lend, can play a major role in a market’s potential. So does Volk.
“It’s just too uncertain on what’s going to happen. So much of this is outside of people’s control. The situation with either lending or investors in housing is a disaster. When banks pull in loans on developers that they’ve lent money to, and give them 60 days notice … So many of them are filing for bankruptcy. It’s really very scary out there,” she said.
“I’m hoping that (Treasury Secretary Timothy) Geithner is right with what he’s doing and the stimulus plan is going to work, because otherwise we’re in trouble for a long period of time. It won’t be a quick recovery, I think.”
The Business Journal asked Volk how the downtown housing market, which Fowler said has seen more than 1,000 new units completed and proposed since 2004, stacked up to similar districts across the nation.
“Relative to its size, I think it’s doing extremely well,” she said.
“And also what I was amazed by, between the last time I’d been there and this time, that unlike so many other cities, a lot of the new housing was actually reasonably priced, both rental and for sale.”
But Volk did say she found a few of the newer units are overpriced. That number, though, wasn’t to the extent she has seen in other cities, which makes this market more affordable and more active than most of the downtowns she has visited.
“There were so many that had been brought on line and sold out or leased up in the interim, between when I was there and when we did that update, that I thought that was really terrific, because that shows that people were paying attention to where the market was,” she said of downtown prices.
“There has been a lot of downtown development (in Grand Rapids). But I think it’s particularly remarkable in the state of Michigan, because, as you know, most of Michigan is just suffering. And Grand Rapids, probably because of all the medical stuff that’s happening there and the research and the university, is really … I was very impressed.”