Long-term growth for law market
Likely surge attributed to new firms entering Grand Rapids, existing firms expanding to more efficient space.
In its annual Law Firm Perspective, real estate group JLL highlighted how Grand Rapids’ law market is poised for growth as outside groups are entering the market.
Two Detroit-based law firms, Honigman and Bodman, have penetrated the city’s market in 2017 with intentions for long-term growth. Honigman is located at 300 Ottawa Ave. NW, and Bodman’s office is temporarily located in Calder Plaza at 250 Monroe Ave. NW.
“The guys coming from Detroit are expanding their Michigan presence,” said Harrison West, research analyst for JLL. “Given Grand Rapids’ metro economic growth, they see it as an opportunity to expand their presence in the state.”
In addition to new players in the market, existing downtown law firms have moved or are in the process of moving into new and more efficient space. Warner Norcross and Judd announced it will move from its office at 111 Lyon St. NW into the new $63.5-million development at 150 Ottawa Ave., a year after Miller Johnson moved into the Arena Place development.
“As for the firms at home in Grand Rapids, they want to expand to maintain their presence and attract and retain talent,” West said. “We want to keep talent in the state and in our cities.”
Typical lease terms for 2017 have been 10-year terms for new development with an average of $28 base rent per square foot (psf), a five-year term for renewals with a base rent of $20 psf and 10 years for relocations with a base rent of $20 psf. No average for subleases was recorded, as the trend of law firms opting for new, higher-quality space has rendered sublease spaces obsolete for law firms.
Occupancy growth has steadily increased year-over-year, from a net absorption of over 150,000 square feet in 2014 to over 250,000 in 2016. JLL predicts net absorption to be even higher at the end of 2017. Steady occupancy will continue to push down vacancy, and rental rates are projected to increase.
For the future, JLL predicted law firm activity and absorption will slow, as many of the recently executed leases by law firms have been long-term commitments. Current construction also will lead to new space opportunities downtown.