West Michigan Retail A Mixed Bag

May 4, 2007
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GRAND RAPIDS — According to the latest local research, the West Michigan retail market is continuing to move ahead with new retailers and new developments, yet there are signs that the region is not immune to the difficulties of the larger Michigan economy.

The Grubb & Ellis|Paramount Commerce retail report for the first quarter of 2007, made public this morning, showed a slight increase in retail vacancy to 7.9 percent for the quarter, up from 7.5 percent at the close of 2006. The report attributes this primarily to the nearly 150,000-square-foot Rogers Department Store site on 28th Street in Wyoming, still vacant after two years.

The slightly older data of the CB Richard Ellis Retail MarketView shows a less rosy picture. That report, distributed last month as a supplement in the Business Journal, identified the vacancy rate at the end of 2006 at 9.1 percent — some 990,241 square feet — up from 5.5 percent at year-end 2005.

Much of the discrepancy is likely due to new retail investment, where the MarketView report cast a notably wider net: 164,000 square feet under construction at the time of its survey, compared to 37,000 square feet in the G&E|PC report.

For the most part, the investment is isolated to a handful of developing commercial corridors, primarily Alpine Avenue and Grandville’s Rivertown Parkway in the G&E|PC first quarter report, along with Kentwood, the M-6 South Beltline corridor and other pockets mentioned in the MarketView report.

“Alpine is always looked upon as a hotbed, as is the Grandville market and southeast 28th Street,” said Robert Lotzar, senior associate and retail advisor for CB Richard Ellis in Grand Rapids. “The bigger buzz at the moment is clamoring around the M-6 interchanges at Kalamazoo (Avenue) and Byron Center (Avenue). There hasn’t been a lot of retail development (at Byron Center), but that will take off when the new Metro Hospital opens.”

According to Lotzar, the region is dotted with “older opportunities” such as the Rogers Department Store, D&W closures and smaller spots, with little indication that will change. “The older the property is, the more likely it is for businesses to relocate or not be successful,” he said. “Those properties have unfortunately been there for awhile.”

These vacancies, combined with the new construction, have created an environment of slight “hypersupply,” according to CB Richard Ellis, with even prosperous retail areas showing higher turnover and softening demand. Plus, national retailers have a difficult time accepting the strength of the West Michigan economy compared to that of southeast Michigan.

“We need to convince people that we are the economic engine of the state,” said Bill Bussey, retail advisor and G&E|PC vice president.  

Last year’s rising star in the retail segment is 28th Street SE, where Woodland Mall recently experienced growth and Waterfall Shoppes is rapidly expanding. The latter was the site of Costco’s entry into the market, and this year will welcome The Fresh Market, the region’s first big box organic specialty store. If successful, the store could open the market to competitors such as Whole Foods Market and Trader Joe’s.

“Any new blood is exciting,” Lotzar said. “If they’re successful, we can use that to sell the strength of the market to other people.”

The Fresh Market is particularly exciting, Lotzar said, because of the historical barriers West Michigan has presented to national retailers. This at a time when Meijer and Wal-Mart are in the midst of local expansion plans, and Spartan Stores is gaining momentum from its recent acquisitions.

Both G&E|PC and CB Richard Ellis agree that the largest retail growth spurt of this decade will likely begin this year, but whether that will be in Walker or Grand Rapids Township remains to be seen. A pair of proposed “lifestyle center” type developments are currently moving forward: Orchard Park on Walker Avenue and the Village at Orchard Hills on East Beltline Avenue at Three Mile Road.

“Everybody is waiting for the shoe to fall, whether it’s going to fall on Beltline or fall on Walker,” said Lotzar. “They all have the same people on their site plans. They all show Coldwater Creek and P.F. Chang’s, and it’s difficult to say who will win.”

Infrastructure upgrades are already underway at Orchard Park, with rapid property speculation among residents and investors. If sporting goods juggernaut Cabela’s locates there, its success is all but assured. “But that hasn’t happened yet,” Lotzar said. “And there are plenty of rumors that they’re looking at other sites, like Broadmoor (Avenue) and 60th Street (near M-6).”

It is all but certain, however, that national retailers that have heretofore avoided the region, such as P.F. Chang’s Chinese Bistro, The Cheesecake Factory, the black and white store, and other niche and luxury retailers, will arrive with the first lifestyle center.

“There are certain types of upscale stores and restaurants that won’t locate in a normal mall,” Bussey said. “They’re going to be satisfied once we get our first lifestyle center.”    

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