Warehousing space has grown, albeit slowly
Of the roughly 94 million square feet of industrial space in the metro market, the amount dedicated to warehousing and distribution has varied over the years, ranging from 30 percent to 50 percent of the total square footage. The main driver of that fluctuation is how active manufacturing firms are at the time.
When local manufacturers expand, the distribution share can diminish. When manufacturing jobs are lost or outsourced, or when whole companies move or cease to operate, the distribution share can grow.
The warehousing portion has grown the past few years — albeit slowly, but grown nonetheless.
“We’ve seen a significant portion of manufacturing space converted to warehousing over the years,” said Stu Kingma, a veteran associate broker with NAI Wisinski of West Michigan who specializes in the industrial market. “In particular, a couple of sites come to mind.”
Kingma named Avistar Park, formerly the massive Lear plant on Alpine Avenue in Walker, as one that still has a fair amount of manufacturing going on but also offers plenty of warehousing space. Another he identified was the old Steelcase manufacturing site on the south side of Grand Rapids that Ashley Capital purchased several years ago.
“A portion of it remained manufacturing, but there’s also significant aspects of it that now are used specifically for warehousing and distribution,” he said.
Kingma said another former Steelcase plant, on Broadmoor Avenue, is now a mix of production and warehousing. He also pointed to the former Bosch plant on 44th Street purchased by X-Rite. There is still manufacturing going on there, but some distributors have set up shop in the site’s back building.
Kingma also noted that the former Life Savers candy plant in Holland is now largely dedicated to warehousing since the firm moved its operation to Canada a few years ago to cash in on a lower cost for sugar.
“(Distribution space) has ranged anywhere from 30 to 50 percent of the marketplace. I think it’s a combination of all of those factors,” he said.
“Now that we’ve seen an increase in manufacturing in the country, in the state and specifically in West Michigan, we are now at a point where we are low on inventory in manufacturing space — good, solid manufacturing buildings,” he added.
“We do have available space yet, however, in the distribution arena, in buildings that were built for distribution and not for manufacturing, with the primary difference being in the infrastructure … how much power it has, how much capacity the floor loading has and things of that nature.”
Kingma said the recent surge in manufacturing locally has dragged warehousing along with it. He added that the lion’s share of the distributing-space increase has come from third-party logistical firms that manage a manufacturer’s inventory and its inbound and outbound supply chain.
“Those are the groups that we’ve seen absorbing the warehousing and distribution space,” he said. Kingma named Supply Chain Solutions, Columbian Logistics and Elston-Richards as some of the third-party companies active in the local market.
As for the most active warehousing areas, Kingma said space in the southeast sector near the airport is almost filled.
“There is not a lot of choice left,” he said. Across the county, though, the northwest sector has some available space.
“It has historically lagged the southeast in its occupancy percentage, and I think that’s simply because the southeast has easier access to the Detroit market with M-6 being there. The northwest has its advantages with Muskegon and north, but Muskegon and north isn’t as attractive as Detroit and south, I guess,” he said.
At the beginning of this year, NAI Wisinski pegged the vacancy rate for warehousing properties at 10 percent. Kingma said the market had a sideways year in 2010, began to rebound in 2011 and is still getting better this year.
“As for 2013, I believe the trend will continue. I don’t believe it will be exponential; I think it’s going to be consistent,” he said “I think it’s going to be very consistent growth.”
As for the longer term, Kingma said he hopes the second bridge that would link Detroit with Windsor becomes a reality. He sees it as vital for the state’s and region’s economy.
“That bridge is an important component to the future of Michigan. It needs to be built,” he said.
“A lot of customers, a lot of clients we call on from the commercial real estate perspective, are exporters, and exporters to Canada. Canada is a big trading partner, and anything you can do to improve that is going to be beneficial.”