Reports show steady retail growth
As big names close down, new players fill vacancies, change retail market across all sectors.
(As seen on WZZM TV 13) The quarterly report released by Colliers International West Michigan reflects a strong economy across the retail, industrial and office space sectors. Across these industries, a high demand for space is keeping vacancy low.
As the retail industry continues to shift toward e-commerce, West Michigan is witnessing a number of large retailers filing for bankruptcy and closing their doors.
“In the first quarter of this year, we knew that there were a couple big retailers that were closing their doors,” said Jeff Hainer, senior research analyst for Colliers International West Michigan. “That was time we first heard the term ‘retail apocalypse.’”
West Michigan-based retailers, like MC Sports and Family Christian Stores and “big box” retailers like Kmart and Sears, have shut their doors, but these vacancies quickly are being filled, as several locally owned small businesses move into larger locations. Despite the growth in online retail, brick and mortar remains strong throughout West Michigan.
“Ninety percent of all retail purchases are still made in brick and mortar stores,” Hainer said. “Online is still a fraction of what brick and mortar stores are doing.”
According to the report, Grand Rapids residents will witness a number of new, smaller retailers opening in 2018. Scout & Molly’s, a fashion boutique, will open at Breton Village in March. Outdoor clothing retailer Sierra Trading Post is set to open at Shops at CenterPoint in spring. Dime & Regal, a locally owned boutique, recently expanded and moved into a new space on Wealthy Street. And Athleta, a women’s activewear brand, has leased space at Gaslight Village.
Similarly, on the restaurant side, franchise expansions and new local venues are thriving where others are shutting their doors. The third quarter saw Chipotle Mexican Grill open its third Grand Rapids location at 6333 Kalamazoo Ave. SE, and Toppers Pizza opened a second location on 2675 East Paris Ave. SE. Brass Ring Brewing opened at 2404 Eastern Ave. SE, and Licari’s Sicilian Pizza will open a second location in Hudsonville.
Restaurant closures in the third quarter included Horseshoe Smokehouse, Saladworks, Shawmut Inn and Mangiamo (now Paddock Place). There also were a number of closures on 28th Street, including Romano’s Macaroni Grill, Tim Horton’s, Alfred Angelo and Paulina’s Mexican Grill. Dunkin Donuts on Plainfield Avenue also closed, and IHOP expects to close 160 restaurants nationwide by the end of the fiscal year.
Significant changes in the grocery sector for the third quarter include Trader Joe’s, which opened a second location in Kalamazoo, Dollar General, which announced it will open four new stores in the Grand Rapids area and Duthler’s Family Foods, which has since closed its location on 648 Bridge St. NW.
According to Colliers’ third-quarter report for the industrial sector, West Michigan is becoming more competitive in attracting regional and international manufacturers. Newcomers to the West Michigan region also are driving up the demand for manufacturing space.
Despite the high demand, however, speculative construction is not accelerating. The high cost of construction, coupled with a high demand for skilled workers is causing manufacturers to be more frugal with existing space.
“Instead of building more buildings, we’re seeing people adding onto existing space,” Hainer said. “We’re also seeing companies investing in automation and technology to increase the efficiency of their space.”
Despite slowed growth of speculative space, some manufacturers still are building new. FCC Construction opened its new 33,000-square-foot building at 8182 Broadmoor Ave. SE in Caledonia. Additionally, First Companies completed two construction projects earlier this year near Gerald R. Ford International Airport, including an 82,000-square-foot building for ETO Magnetic Corp. and a 124,000-square-foot building for Gourmet International. Hearthside also is adding 305,500 square feet to its building at 3016 Shaffer Ave. SE.
During the third quarter, several outside manufacturers also entered the regional market. MOVE Systems International, a company that produces eco-friendly mobile food carts and electricity pedestal devices, moved its manufacturing to Walker and created 27 jobs. J-Star Motion Corp., a Chinese manufacturer of furniture components, also opened a new plant in Cedar Springs at the former Wolverine Worldwide facility and will create more than 100 new jobs.
Grand Rapids recently submitted a proposal to Amazon for the company’s second headquarters, which would include warehousing and distribution. The facility would be a $5-billion investment that would add up to 50,000 new jobs to the area. Grand Rapids is now competing for the project with Detroit and more than 200 other cities worldwide.
“We’re excited at some of the conversations that we’ve been having, and that some organizations are deciding between, like, Texas and Grand Rapids,” Hainer said. “Ten to 15 years ago, Grand Rapids wouldn’t have had a chance at being considered.”
The third quarter report for the office space industry showed a slight uptick in vacancy in the downtown sector, as some offices consolidate space. Another factor driving office presence downtown is parking. The city of Grand Rapids’ Mobile GR and Parking Services recently rolled out a new monthly parking pass program that allows businesses to request monthly parking passes for city-owned parking lots in neighborhoods.
“We are seeing some companies decide to leave downtown because of (parking),” Hainer said. “Last time we did our parking report, we found the parking system was about 90 percent capacity.”
In spite of parking shortages, downtown office activity still saw a 12 percent increase from last quarter, as new players enter the market.
In August, Farmington Hills-based public relations firm Marx Layne and Co. entered the Grand Rapids market with a new office at 161 Ottawa Ave. NW. PwC relocated from 333 Bridge St. NW to a new 2,157-square-foot office at 80 Ottawa Ave. NW. Clearwater Place, at 1430 Monroe Ave. NW, opened in August after a nearly summer-long renovation.
Earlier this spring, Sweden-based technology company Configura signed a lease for 12,000 square feet on the top two floors of Blue35, 35 Oakes St. SW, and GZA GeoEnvironmental relocated to 601 Fifth St. NW into 3,100 square feet of space in July.
On the health care front, several hospitals and medical professionals opened new offices. Spectrum Health launched Strive, a primary care office with a forward-thinking design, in July. The 4,500-square-foot office is located on the first floor of the Waters Center at 161 Ottawa Ave. NW. Dr. Belen Amat, a primary care physician, also opened a practice at 3501 Lake Eastbrook Blvd. SE near CenterPoint.
First Companies announced plans to add to the Heritage Pointe medical campus on East Paris Avenue with a new 41,000-square-foot building that will be anchored by Bengtson Center for Aesthetic and Plastic Surgery. Bengtson Center is moving out of its office at 555 MidTowne St. NE, just outside of downtown.
“In the suburbs, we’re starting to see a little bit more construction,” Hainer said. “The medical industry is booming there. Rental rates are still standing really firm. Vacancy rates are small.”
The East Paris corridor fared the best in the third quarter, according to the report. Service Express leased 56,782 square feet at 3855 Sparks Drive SE. In August, Grand Valley Medical Specialists moved from 1900 Wealthy St. SE into a new 14,180-square-foot office at 1000 East Paris Ave. SE to accommodate growth.
The technology sector also welcomed new companies to the area this quarter. GRIT Technologies, a Clinton Township-based IT firm, signed a lease at 6157 28th St. SE. Auto-Owners Insurance also announced plans in September to expand its technology center operations at 3949 Sparks Drive SE with assistance from The Right Place and the Michigan Economic Development Corp.