Firms devour downtown office space
Class A vacancy rate reaches its lowest point in seven years.
Class A office space is at its lowest vacancy rates in more than seven years, according to the most recent market reports from NAI Wisinski of West Michigan.
The real estate firm released its first quarter market reports earlier this month that showed the downtown vacancy for Class A office space dropped from 6.2 percent in the last quarter of 2015 to 2.4 percent in the first quarter of this year. The northeast submarket also saw a substantial decrease, dropping from 5.4 percent to 2.3 percent.
Vacancy in the downtown submarket largely decreased because of multiple leases at Bridgewater Place and 9,000 square feet of space leased in a building at 3225 N. Evergreen Drive.
Class A, B and C space vacancies didn’t see much of a change in the southeast, southwest and northwest submarkets, but asking prices did increase.
As recently as the third quarter of 2013, the Class A vacancy rate was above 10 percent, with classes B and C cresting the 12 percent mark. Those rates now are below 5 and 10 percent, respectively, across the entire Grand Rapids market.
“Class A vacancy rates in the downtown submarket continue to decrease; we are starting to see some new Class A office construction take place,” said Jason Makowski, NAI principal, in the report. “I would suspect that we may start to see some new Class A construction start to take place in the northeast submarket given the lack of available inventory at this point.”
The report said there is approximately 188,560 square feet of Class A construction currently underway, and much of that is already accounted for in the leasing figures.
The report also found retail is developing across the entire area, with some areas seeing significant increases in activity.
Both Knapp’s Crossing and downtown were highlighted in the report summary. The report specifically mentioned the Studio C! movie theater development behind Van Andel Arena, which has a proposed 38,000 square feet of retail space.
NAI Wisinski said in the report it currently has more than 58,000 square feet of ground level retail available in downtown Grand Rapids.
While downtown, Knapp’s Corner, Alpine Avenue, 28th Street and RiverTown Crossing continue to be strong, the report cites other areas of town that previously were lagging are picking up.
“Several areas around Grand Rapids that have traditionally moved a little slower from a retail perspective are starting to see some action,” said Dick Jasinski, NAI retail advisor. “Michigan Street and Plainfield Avenue north of Leonard are two examples of areas where properties may have been listed for some time but are being sought after by buyers with redevelopment in mind.”
While retail activity continues to surge, industrial activity is slowing because of a lack of supply in the market, the report said.
The report does note supply has begun to increase with increased land sales and construction starts, but demand is still higher than the supply, especially for small facilities.
“The overall vacancy rate remained at 4.1 percent as compared to fourth quarter 2015 and is down several percentage points year over year,” NAI advisor Jeremy Veenstra said in the report. “The second quarter of 2016 is expected to continue to be a landlord/seller market with prices continuing to rise.”