Diversified economy grows GR
Expect businesses catering to the middle class to prosper.
Grand Rapids is in for a good — but not great — 2016.
The U.S. economy is OK but falling off a bit, according to Paul Isely, associate dean of Grand Valley State University’s Seidman College of Business, and the Michigan and Grand Rapids economies are healthier than most.
Isely spoke at the 16th annual Economic and Commercial Real Estate Forecast Event last Thursday hosted by the Seidman College of Business and Colliers International|West Michigan.
“Michigan is in better shape than the rest of the country,” Isely said. “And Grand Rapids is doing better than Michigan.”
Isely said Grand Rapids is running at a 4 percent growth rate — a “breakneck” pace — with no signs of slowing down in the next year. More jobs were added in the past year, but with little homegrown talent to fill the positions.
Employers are filling the jobs with those in the 25- to 35-year-old age bracket, who are staying, returning or coming to the area for the first time, Isely said.
“We don’t expect a ton of change in the growth rates. It might slow a bit,” he said. “West Michigan started its recovery in manufacturing, ended in service, but has a good divide.
“The secret here is that diversified economy.”
That diversification is beneficial as manufacturers bring in money that is otherwise not in the area, whereas services just spread it around, he said. Services, however, will be boosted by the fact that consumers are in a better position than most think, with the median weekly wage at record levels since 1980, Isely said.
“The middle worker is earning more every week,” he said. “Our consumers are cocked and ready, and will make 2016 work for us.”
He said income is a story to watch this year, and he expects middle- and low-wage earners to see higher wages and raises this year.
“It’s a bad year for people who get income from their wealth. They’ll still be happy — they’re rich — but won’t have as much income,” he said. “The middle part of the market will percolate, and businesses that attack that market will be happier.”
Businesses focusing on the middle-market segment will prosper, but those who sell luxury goods or work in exports won’t be as happy, Isely said.
Isely also touched on the housing market.
“Grand Rapids had a bad housing crisis — it wasn’t like Detroit, but there were parts that maybe you thought were Detroit,” he said. “The housing crisis in Grand Rapids is done. Maybe it’s about time for Discovery TV to stop that show about flipping houses. It’s not so easy anymore.”
Colliers International principal Matt Abraham also spoke at the event, discussing the need for successes in the West Michigan real estate market in 2016 and upcoming projects and potential needs.
Isely also participated in a question-and answer-session with a panel of Rosalynn Bliss, Grand Rapids mayor; Kris Larson, Downtown Grand Rapids Inc. president and CEO; Mitch Shapley, Fifth Third Bank CFA; Kurt Hassberger, Rockford Development chairman and president; Kevin Hegg, Ashley Capital vice president; and Chris Brochert, Lormax Stern partner.
The discussion started with a question on redevelopment and why there’s been an increase in it.
“We see it nationwide,” Hassberger said. “It’s happening for the right reasons. Why not bring old buildings back to life?”
Downtown Grand Rapids was at the heart of several questions for the panel, largely answered by Bliss and Larson.
Bliss was excited about the catalyst for development a restored Grand River could provide.
“Thinking about city property along the river, there’s a lot that has long been under- or poorly utilized,” she said. “It’s a tremendous opportunity with a rare asset.”
Larson said since the city was built along the Grand River, it’s always provided value, but revitalizing the river will create a new type of value that will benefit the millennial generation, which will make up 75 percent of the workforce within the next 10 years.
“It’s more than what happens in the river; it’s what happens alongside the river,” he said. “It can be a thread that connects the community — a type of lifestyle amenity that is hard to replicate elsewhere.”
The panel also discussed the importance of drawing businesses to downtown Grand Rapids. Isely said it’s likely more companies will begin to focus on downtown locations to attract millennials, as baby boomers drop out of the workforce.
“A lot of companies have older leadership and they can’t wrap their head around moving downtown,” Hassberger said. “It’s not long until those kids are running the company and a lot more open to that idea.”
Isely said the premise that all millennials want to work and live downtown to be close to bars and restaurants and because they won’t have the headache of transportation is a dangerous generalization.
“Two kids and a dog might cause some issues,” he said of those millennials who are starting families.
Bliss said she wants to ensure other city neighborhoods remain attractive and synergistic so people have choices of where to live, not just downtown.
Michigan has a unique asset in the Great Lakes, and Isely said that should be better utilized in rebranding the state’s economy. The cities in Michigan offer amenities for workforce attraction similar to Denver and California, he said, with both outdoor amenities and downtown nightlife within an hour of home.
“We have so many resources devoted to automotive,” he said. “Most of the rest of the world still thinks of the Great Lakes as little fishing ponds. We have 20 to 25 percent of the world’s freshwater — we need to leverage that. We can rebrand and remind industries they won’t have droughts.”
Isely mentioned how important Spectrum Health, the city’s largest employer, is to the city.
“It’s a constant, it creates a baseline,” he said. “Grand Rapids is heavily dependent on cyclical industries, and having an anchor like Spectrum to anchor a baseline is extremely important if we want to do well in the next downturn.”
Isely finished by noting the next recession won’t happen this year, but it’s not too far off — possibly by the end of the decade. The good news, he said, is it doesn’t appear a singular event will be the direct cause.
“The probability for a recession in ’16 is low,” he said. “Last time, we had a cause and it created big ripples. If we don’t have a cause, the next ripple is smaller, and the next will be smaller still.”