Downtown Grand Rapids is booming
Report indicates robust growth across almost all sectors.
It’s official. Downtown Grand Rapids is almost full.
That’s according to a new report from Colliers International West Michigan, which released the findings as part of its third-quarter market research and forecast report. The report, which highlighted the office, industrial and retail sectors of the market, found that “repurposed buildings and revitalization of downtown drive growth with 84.4 percent occupancy.”
Colliers, a commercial real estate and property management services firm based in Seattle and with offices all over the world, noted in the report that even with inventory shortages, the city continued to see positive occupancy growth in both Class A and B office spaces. The report also found there has been a diverse mix of new developments, especially from the repurposing of downtown buildings, which addressed the inventory shortage issue.
“In a nutshell, we are reducing vacancy in the industrial market, continuing our 15th quarter of growth in office, and wrestling with lack of quality inventory in retail,” said Duke Suwyn, president, principal and CEO at Colliers in West Michigan.
“Looking ahead, we anticipate development projects surfacing in high-visibility corridors such as ‘The Gateway’ on Belknap Hill and New Holland Brewing on the west side.”
In the office sector, the Colliers report noted this was the 15th consecutive quarter for the growth of office space in Grand Rapids.
“Downtown options grow increasingly tight for tenants seeking smaller suites, while suburban submarket areas of East Paris Avenue and East Beltline Avenue exhibit the lowest vacancy rates in the market — 10.9 percent and 13.7 percent, respectively,” the report read.
“Class C space continued to struggle attracting new tenants, while Class A and Class B buildings exhibited positive occupancy growth — 30,360 and 25,521 square feet, respectively. … The total number of leases signed in quarter three (82) jumped 39 percent from last year.”
In the retail sector, Colliers found that an improving economic environment and continuation of national retailers’ interest in West Michigan had led to job growth. This was especially seen in CWD Real Estate’s expansion of the Bucktown Shopping Center in Grandville and the build-out and sale of Centerpointe Mall on 28th Street. Indeed, retail tenants continued to muster on 28th Street, Rivertown Parkway and Alpine Avenue, the report read.
“Absorption in the West Michigan retail market was -44,331 square feet, marking the second consecutive quarter of negative absorption. Reasons for this decrease can be attributed to a lack of quality inventory and increased prices,” the report read.
“Interest by both new and expanding retailers continues to grow, while available inventory in ‘A’ locations becomes increasingly difficult to find, enabling landlords to increase rates on premium spaces due to an abundance of interested tenants.”
In the industrial sector, Colliers reported the “market overall absorbed 173,656 square feet — continuing to push the vacancy rate needle down to 6.3 percent,” and the “elimination of older and functionally challenged properties could push West Michigan’s vacancy rate as low as 2 to 3 percent.”
“Five of the six submarkets tracked by Colliers International West Michigan showed positive absorption through the third quarter, particularly in the southeast market with 69,312 square feet,” the report read.
“Industrial transactions decreased by 14.6 percent in the third quarter, primarily attributed to a reduction of leases compared to last year’s numbers; however, sales transactions increased from 12 in 2013 to 18 in 2014.”
Construction activity also increased in the industrial sector through existing site expansion and build-to-suit projects, with about 41 industrial transactions occurring July 1-Sept. 30. Additionally, the region is seeing an increase in manufacturers, including Medbio, Dicastal North America, Challenge Manufacturing, JR Automation and Plasan Composites. Plasan has plans to put $29 million into expanding its facility and add 620 employees, and Dicastal has plans to add 300 new jobs in the next four years, the report read.
Although the report revealed much positive growth, Suwyn noted there is still room for improvement.
“The positive trends we are seeing in all markets is driving job growth in West Michigan; however, the lack of qualifications and training hinder many job seekers from applying,” Suwyn said.
“As our local economy continues to recover, a key focus will be placed on bridging the gap in qualified skilled labor.”