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GR Office Market Stabilizes
Occupancy in the downtown office market remained steady from last year, while the rate in the suburban office markets also stayed put. Both figures remain down from five years ago, but at least neither dropped as had been the trend for the past few years.
Still, tenants find themselves in the driver’s seat.
Those are just a few of the findings from the latest annual office market survey from the Building Owners and Managers Association of Greater Grand Rapids. BOMA for short.
The 2003 effort surveyed 13.8 million square feet of office space in 13 suburban sectors and in the central business district, and reported an increase of 77,000 square feet of office space from last year.
Of that total space, 11.4 million square feet were occupied at the end of last year, giving the overall market an occupancy of 83 percent. The 2002 BOMA Office Occupancy Survey also reported an 83-percent occupancy rate. In the 2000 report, the occupancy rate stood at 89 percent. In 1998, it was 88 percent.
Occupancy in the downtown market, which has nearly 5.6 million square feet of space, was at 84 percent, the same as the previous year. Occupancy in the suburban markets, which has 8.3 million square feet of space, was at 83 percent, the same as in the 2002 survey.
A few sub-markets grew its occupancy rate over the past year, but most were by a percent or two. Standale, in the far northwest corner of the metro area, had the biggest percentage gain, raising its occupancy from 83 to 92 percent. The sector near Centrepointe Mall pushed occupancy up from 83 to 88 percent.
Office sectors that suffered the biggest tenant losses were Breton-Burton, which saw its occupancy drop from 88 to 65 percent despite a 1-percent increase in space. Kentwood fell from 83 to 73 percent, and Plainfield dipped from 93 to 87 percent.
Vacant office space went from 2.331 million square feet in 2002 to 2.368 square feet this year, putting another 37,000 square feet into the metro market.
The Burton-East Beltline market added the most office space last year, raising its square footage by 7 percent from 309,000 to 330,500. Wyoming added 6 percent of space, going from 265,800 to 282,000 square feet. And the Grandville market grew larger by 4 percent, adding 22,000 square feet last year to bring its total to 625,000.
BOMA reported three new office buildings were added to the suburban market last year resulting in 34,500 more square feet. The overall vacancy rate, though, for the three was 44 percent. There wasn’t any new construction downtown last year, but four renovations were completed in the central business district.
Higher than normal vacancy rates are expected to continue in the downtown market this year, while vacancies should drop in suburban buildings that offer good functional space. Tenants in both markets should be able to negotiate concessions from landlords, such as rent reductions, higher allowances, and possibly even free rent.
Genzink Appraisal and the BOMA Occupancy Survey Committee did the report. The 2003 survey reflects the condition of the office market on Dec. 31, 2002.
BOMA released the report, which surveys office structures throughout the metro area with at least 5,000 square feet of space, on the eve of its annual Real Estate Conference and Vendor Show, an event that happens Thursday at the Crowne Plaza Hotel in Grand Rapids.
Over 40 vendors and contractors that service the office market will be on hand. Paul O’Connor, executive director of World Business Chicago, is one of the featured speakers. Others include GRACC President John Brown, The Right Place Program President Birgit Klohs and David Hollister, newly appointed director of the state Department of Consumer and Industry Services.