Going In The Right Direction

August 20, 2007
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GRAND RAPIDS — According to Grubb & Ellis|Paramount Commerce, the region’s industrial market showed signs of steady improvement during the second quarter.

The commercial real estate company’s report said user sales, investment sales, and leasing activities over those three months have helped to steer the market in the right direction.

“The West Michigan industrial market continues to show steady movement in the right direction,” said Derek Hunderman, an industrial advisor for G&E|PC.

“Even though we ended the second quarter with more square footage on the market than at the beginning of the quarter, we see sales, leasing and investment in industrial properties still moving forward,” he added.

As an example of an investment sale, Hunderman pointed to Ashley Capital’s purchase earlier this year of 206 acres from Steelcase Inc. The New York-based developer leased its first building on the site to Bata Plastics last month with an option to buy, and Hunderman said the industrial plastics recycler recently purchased the building in what Ashley Capital calls the Grand Rapids Commerce Center.

“We continue to see strong national interest in this unique property, fueled by our booming health care industry and our still-strong manufacturing base,” said Hunderman.

The G&E|PC report noted that the vacancy rate dipped slightly from the start of the year to the end of the second quarter, as it fell from 9.8 percent to 9.5 percent. The report also said the number of user-owned 50,000-square foot buildings sold during the first half of this year exceed the number sold for all of last year. In addition, there were more leases of 25,000-square-foot spaces during the second quarter of this year than there were for all of 2006.

G&E|PC Research Analyst Gary Albrecht said the sales and leasing of those smaller structures and spaces indicates a healthy industrial market. He said the market activity is reflecting the regional economy, and that economy is better than what the rest of the state has.

“In the first quarter, and especially in the second quarter, we’re seeing more movement, but it’s in a little more of the smaller spaces. Right now, that is definitely the push and that is what is pushing the vacancy rate in the right direction,” he said.

“In southwest Michigan, things are better than they seem. We’re seeing activity, and I think it’s a combination of things. Obviously, our health care sector and industry is rapidly expending, and we’re seeing a lot of activity from outside investors. So West Michigan is not necessarily Michigan as a whole,” said Albrecht.

The market has about 440,000 square feet of new construction under way, with nearly 75 percent of that space going up in the southeast sector. Incubator space is the hardest to find, as only 3.7 percent of the total vacant space is devoted to that use. Warehousing space is the most plentiful at 13.4 percent.

More than 870,000 square feet of space was absorbed during the first half of this year, and Albrecht said investments, sales and leasing activity should continue in the second half.

“We should really end the year going in the right direction and having those vacancy rates trending downward,” he said. “Steady improvement. I think the key to the last year or so has been steady improvement. Not rapidly going up or rapidly decreasing, just at a steady pace.”     

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