82 Ionia may be poised for a rare office-to-housing conversion

82 Ionia may be poised for a rare office-to-housing conversion
The building at 82 Ionia Ave. NW was constructed in 1932 for Klingman’s Sample Furniture Co. Credit: Kate Carlson, Crain’s Grand Rapids Business

Kent County’s plan to relocate various services to northeast Grand Rapids opens a private redevelopment opportunity at a four-story office building in the heart of downtown.

Local brokers, property owners and downtown leaders say the 108,000-square-foot office building at 82 Ionia Ave. NW may be poised for a rare conversion to housing.

While such conversions have failed to gain widespread traction based on design complexities and construction costs, Grand Rapids’ well-documented housing needs may help spur a new purpose at 82 Ionia. 

“Dollars to doughnuts that will get converted to residential,” Sam Cummings, managing partner at major downtown property owner CWD Real Estate Investment, predicted about 82 Ionia.

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While the concept of office-to-residential has been discussed at length coming out of the COVID-19 pandemic, few projects have materialized. One notable project is a local developer’s plans to convert a former AT&T call center south of Grand Rapids into 150 affordable housing units.

Kent County officials are in the process of building a new administration building near Fuller Avenue and I-196 in the coming years. The county’s administration building downtown would be renovated and house employees currently working at 82 Ionia.

That frees up 82 Ionia, whose future county officials have debated for nearly a decade, for a private buyer.

RELATED: Kent County to move 180 workers out of downtown under relocation plan

Jeff Karger, senior vice president at JLL’s Grand Rapids office, said the building is “not very efficient from an office use perspective” because of its unique interior layout. He raised the idea of a potential conversion to housing or a hotel.

“Some B-type buildings downtown will be good candidates for change-of-use,” Karger said. “I don’t think the office market can absorb that in its current condition but it also depends on the timing of when they bring it to market.”

Richard Winn, president of hotel operator AHC Hospitality and chairperson of the Grand Rapids Downtown Development Authority and Grand Rapids-Kent County Convention/Arena Authority, said the redevelopment potential at 82 Ionia is a positive in the county’s plan, which also involves moving 180 office workers out of downtown.

“If I had a recommendation (for 82 Ionia), it would be residential because it’s right downtown,” Winn said. “We need more residential units downtown.”

Kent County purchased 82 Ionia for nearly $5.4 million in 2005 from Sibsco LLC, which is registered to Mark Schut, who works as an accountant for the Secchia family. The 1.32-acre lot includes 126 parking spaces in a two-story ramp.

The building was constructed in 1932 for Klingman’s Sample Furniture Co. The lower level of the building previously housed Diversions Bar, which closed in 2016. 

Kent County attempted to sell the property twice over the years. A $10 million offer from Ferris State University’s Kendall College of Art and Design in 2015 fell through. The county relisted the property in 2017, but the Kent County Board of Commissioners ultimately rejected purchase proposals that ranged from $3.4 million to $10 million. Those previous proposals lacked plans for displaced county employees and services at the time, according to reporting from MLive

While increasingly pressing housing needs in Grand Rapids may support 82 Ionia’s conversion to housing, developers still face challenges with rising construction costs and interest rates that have made financing difficult. 

Architectural firms across the country with a specialization in multifamily residential reported  that an average of 16% of their projects were significantly delayed over the past six months, according to the latest data from the American Institute of Architects. Architectural firms overall reported 14% of their projects were significantly delayed. 

New multifamily projects have been especially difficult to pencil out recently, mainly because of high interest rates. 

This is in line with what Third Coast Development LLC Partner Dave Levitt recently told Crain’s Grand Rapids when discussing the financing obstacles that have been stalling a 39-unit housing project on the city’s northeast side, near the county’s proposed campus. 

“If it’s not (using) Low Income Housing Tax Credits or high-end housing, there isn’t a lot of housing being built right now,” Levitt said. 

More from Crain’s Grand Rapids Business:

Push for new economic development incentives faces uncertain legislative future

Key investments boost Meijer Gardens’ stature as local economic driver, report finds

Muskegon-area restaurant operator brings brunch concept to Grand Rapids