Economic Development and Real Estate

Real estate enjoys surge in 1st quarter

NAI Wisinski report indicates strength in industrial, office and retail.

May 8, 2015
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West Michigan’s commercial real estate market is improving on all fronts.

NAI Wisinski of West Michigan recently released a first-quarter market analysis that revealed positive aspects in the industrial, office and retail markets pretty much across the board.

Industrial

According to NAI Wisinski’s report, West Michigan’s industrial market continued to expand in the first quarter of 2015, even with the brutal winter weather slowing it down for a bit in the early months, similar to what happened in 2014 with the first polar vortex.

The vacancy rate is currently down over the previous quarter, and the Grand Rapids unemployment rate went down 2.2 percent from March of last year.

“Net absorption for the overall West Michigan industrial market was a positive 744,286 square feet in the first quarter of 2015,” the report read.

The vacancy rate for West Michigan’s industrial market currently sits at approximately 5 percent, according to the report.

In the Lakeshore submarket, 759,149 square feet of warehouse space and 1,496,698 square feet of manufacturing space are available.

The Northeast submarket has 321,530 square feet of warehouse and 1,118,771 square feet of manufacturing space available.

The Northwest submarket offers 592,443 square feet of warehouse and 1,017,715 square feet of manufacturing space.

In the Southeast submarket, there are 2,052,370 square feet of warehouse space and 2,160,686 square feet of manufacturing space available.

The Southwest submarket lists 864,428 square feet of warehouse and 927,849 square feet of manufacturing space as unoccupied.

With a current short supply of manufacturing space, one trend NAI has found is a number of former warehouse buildings are being repurposed as manufacturing space. New construction is also expected to bring in more industrial space.

“There continues to remain upward pressure on both sale prices and lease rates. Landlord incentive packages on the leasing side have been reduced to a minimum,” said Stu Kingma, an associate broker. “NAI Wisinski of West Michigan anticipates the second quarter growth to accelerate out of the winter doldrums, and there will be continued downward pressure on the vacancy rate.”

Office

According to NAI’s report, West Michigan’s office market ended the first quarter with a 9.4 percent vacancy rate, which is lower than it was all of last year. Rental rates continue to increase and tenants are also signing longer leases.

The downtown office market is still the highest area of demand, and several businesses are relocating to the downtown area, partly to attract new talent, according to the report.

The net absorption for the overall West Michigan office market for the first quarter of 2015 was 201,062 square feet. West Michigan’s office vacancy rate also dropped to 9.4 percent from 9.7 percent in the previous quarter.

The Downtown submarket has just 80,204 square feet of available Class A office space. Class B and C spaces have 812,354 square feet available.

In the Northeast submarket, 33,605 square feet of Class A space is available, as is 247,706 square feet of Class B and C space.

The Northwest submarket features 204,310 square feet of available Class B and C office space.

The Southeast submarket has a small amount of Class A space available — 80,021 square feet — but far more is unoccupied on the Class B and C side: 1,275,844 square feet.

The Southwest submarket has 309,468 square feet of Class B and C office space available.

“We are starting to see some new construction in the office market,” said Mary Anne Wisinski-Rosely, office specialist and partner at NAI Wisinski. “With Arena Place downtown and with the expansion of Heritage Pointe in the Southeast submarket, NAI Wisinski anticipates seeing continued demand for office space in both the suburban and downtown markets throughout 2015.”

Retail

The West Michigan retail market improved slightly in the first quarter of 2015, with the report noting “if you’re a retailer and you’re in West Michigan … the time is now to expand or do another location.”

“Net absorption was a positive 339,174 square feet. Quoted rental rates increased from fourth-quarter 2014 levels, ending at $9.38 per square foot per year. A total of three retail buildings with 44,512 square feet of retail space were delivered to the market in the quarter, with 459,800 square feet still under construction at the end of the quarter,” the report read.

In the first quarter, the vacancy rate dropped from 6.6 percent to 6.4 percent.

The report indicates the Lakeshore retail submarket has 110,428 square feet of community space, 1,488,209 square feet of neighborhood space and 126,567 square feet of strip space available.

The Northeast retail submarket features 180,294 square feet of community space, 158,334 square feet of neighborhood space and 108,742 square feet of strip space available.

Those figures in the Northwest retail submarket are 61,346 square feet, 85,490 square feet and 126,717 square feet, respectively.

The Southeast retail submarket has about 30,355 square feet of community space, 591,623 square feet of neighborhood space and 267,088 square feet of strip space.

Availability in the Southwest retail submarket includes 255,139 square feet of community space, 204,683 square feet of neighborhood space and 138,390 square feet of strip space.

“The West Michigan retail market is vibrant and active in several major corridors and cities. Recently, USA Today named Grand Rapids as the No. 1 city in the country as a ‘must-go’ visit,” said Rod Alderink, principal and associate broker at NAI Wisinski.

“These sorts of accolades for our region — from the amazing beaches in South Haven, Saugatuck and Grand Haven, to the Meijer Gardens and Sculpture Park to Beer City USA — have retailers and retail investors coming to our region, and expanding.”

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