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Healthy occupancy rates show the city’s strong residential core.
Downtown Grand Rapids living continues to be in vogue.
More than 1,400 people on 616 Lofts’ wait list can directly attest to that, said Derek Coppess, managing director of 616 Development. The company maintains full occupancy, experiencing normal turnover but filling vacancies within a week, he said.
“We try to clean that up, but it’s hard to stay on top of,” Coppess said.
The waiting list is good, however, because Coppess said it lets the company know what people want in terms of residential housing.
“Right now, you can build crap and sell crap,” he said. “The market will stabilize and (we’ll) be rewarded if we do it right. We’re here for the long term and we try to take a community approach.”
A 2014 survey by Chicago real estate firm Triad Real Estate Partners found that Grand Rapids’ market rate apartments are at a nearly 99 percent occupancy rate, and have been at capacity for nearly two years. The survey’s data was skewed, too, as at the time 616 Lofts at Grandville had two units open, but were in the process of being filled.
“The currently constrained supply combined with growing demand allows owners the advantage of being selective when screening prospective tenants,” the survey reads.
The current occupancy rate shows the downtown area is one of the strongest in the state, DDA Executive Director Kris Larson told the Business Journal. The survey included 1,218 downtown rental units, with more than 1,200 filled.
“(Michigan State Housing Development Authority) has reported that our sub-market for downtown Grand Rapids is the strongest sub market for housing as it relates to occupancy in the state of Michigan,” Larson said. “Demand is incredibly high.”
The Gallery Apartments’ 56 units were full within a year of opening in 2010, and currently that property has a waiting list of eight applicants. Typically, tenants stay two years, said Lisa Young, marketing manager at CWD Real Estate Investment, which manages the building.
“Long lists can discourage prospects,” Young said. “Usually, a waiting list with just a few applicants can be more beneficial for everyone. It makes the property appear desirable but not unattainable.”
As the demand for downtown living increases, the prices can remain high. The $1.48 average rent per square foot number the Triad survey found is bolstered by apartments such as Plaza Towers and The Lofts at 5 Lyon, which both come in above $2.10 per square foot. The number is brought down by larger apartments in the Heritage Hill area.
Triad’s survey did not account for the more than 1,000 affordable housing units downtown, most of which lie in the South Division corridor. It also doesn’t include more than 1,100 condo units in the downtown area, including Boardwalk Condos, River House at Bridgewater, Union Square Condos and Plaza Towers Condos, all of which include more than 140 units.
Although a condo construction boom took place in the early 2000s with nearly 1,000 units built, the recession took a toll on the market. Average age of inventory between 2006 and 2010 sat at 11 months. Icon on Bond was hit so hard, the 118-unit building was flipped from condos to apartments.
“2014 finds the condo market in a solid position,” the survey reads. “Property values are surging and the average age of inventory for 2014 so far is three months.”
To accommodate the growing demand there at least 12 projects in the pipeline that should add nearly 800 apartment units to the downtown area. Those include:
- 616 Lofts on Prospect
- 240 Ionia
- Morton House
- 20 E. Fulton
- Arena Place
- Clancy Lofts
- 600 Douglas
- Lake Michigan Drive NW
- 616 Lofts Michigan
- Klingman Furniture Building
- 616 Lofts on North Monroe
- Waters Building
All of the projects should be finished by the end of 2015, and most are mixed-use developments that include retail, hotel or office components.
The survey cites another study, done by Zimmerman-Volk Associates, which found the downtown market could absorb about 435 units a year, 259 of which would be rental. The 12 projects slated for the next two years total 535 market-rate apartment units, slightly higher than the expected demand.
A cap on demand isn’t set in stone, however, Coppess said.
“I don’t know who can put a number on that,” he said. “As critical mass happens — as we have now — it can create healthy sprawl into neighborhoods and better retail.”
In the resident mix, roughly 78 percent were born after 1977, a trend Larson said isn’t unique to Grand Rapids. This trend points to more young people choosing to live in a vibrant downtown before they settle down with a family.
“(It’s) not just a Grand Rapids story, it’s an American story,” he said. “Since the 2010 census, this is the first time where more Americans actually lived inside of metropolitan areas than outside. That’s a trend that’s occurring."
CWD’s Young said a majority of The Gallery’s tenants and interest have come from that group of 20-35 year-olds, “with a big push from the medical industry and non-Grand Rapids natives.”
The Triad survey pointed to this data by saying, “Grand Rapids has reached a point of critical mass.” The survey also cites the possibility that The Rapid’s Silver Line could further bolster community development.
“Naturally, the rampant construction and repopulation of the urban core won’t continue at its current rate forever, but the city has created a solid and positive base from which to work,” the survey reads. “The cumulative result is a vibrant community where people want to live, work and play.”
Growing the downtown population isn’t as simple as putting up new residential buildings, Young said.
“Strategic, balanced growth is the key,” she said. “People who live downtown want to work downtown, and they want access to a variety of downtown amenities, public spaces and cultural and entertainment options.”