Office market still struggling
As the unemployment figure in metro Grand Rapids rose by nearly 4 percent from the end of 2008 to the midway point of 2009, the vacancy rate in the region’s office market crept up by three-tenths of one percent.
While the job-loss figure across the area jumped from 7.8 percent to 11.7 percent, the office vacancy rate rose from 20 percent to 20.3 percent, according to a report from commercial real estate firm CB Richard Ellis of Grand Rapids.
But the news of a slower-rising vacancy rate hardly warrants breaking open the champagne, as a 20 percent rate is too high to begin with.
The total market had a negative net absorption of roughly 44,000 square feet over the first six months of this year as three of the submarkets posted positive gains in absorption that ranged from 13,000 square feet to 35,300 square feet.
However, almost 112,000 square feet in the Central Business District became available since the end of last year, and that has driven the total market absorption below zero.
“With the exception of the CBD, all submarkets experienced positive absorption during the first half of 2009. Kent County’s smallest sector, the northwest submarket, experienced the greatest relief (+3.3 percent) due in large part to the expansion of a medical owner-occupant into adjacent space that was previously vacant and available for lease,” said Jill Langosch, vice president of research at CBRE/GR.
“The CBD reminds us that the market is still struggling. With few new deals, several businesses shutting their doors, and a number of users relocating to the suburbs, absorption hit a negative 111,698 square feet (-1.8 percent),” she said of the downtown market.
The report showed that if medical office space was taken out of the occupancy equation, the vacancy rate would have climbed a bit from 20.3 percent to 21.1 percent. Total medical office space had a rate of 10.8 percent, while downtown medical was at 7.1 percent.
Class A and Class B space had rates of 22.7 percent and 20.8 percent, respectively. Class C space was 19.3 percent vacant halfway through this year.
“There were no surprises from a geographic perspective. Kent County’s strongest submarket continues to be the southwest, averaging 12.6 percent vacant,” said Langosch. “The submarket experiencing the greatest vacancy is the southeast, with a 24.5 percent vacancy factor.”