Commercial real estate industry continues to flourish
Steady interest rates contribute to high demand in West Michigan.
Commercial real estate space in West Michigan is in high demand.
Michael Garrett, president of Pinnacle Construction Group, said the demand for land has been increasing over the last 30 years, but the industry’s demand for property has increased significantly over the last three years due to more people moving to Grand Rapids.
The increase is associated with the confidence developers now have in the commercial real estate market after years of pent-up fear caused by the Great Recession, according to Garrett. He also said the interest rates have been relatively steady for the last three years, which is contributing to the high demand.
“The economy is more diverse, so we are not depending on one industry,” Garrett said.
According to the Commercial Alliance of Realtors, from Jan. 1 to July 19 of this year, there were 631,788 total square feet in retail property listings in West Michigan, 118 retail properties were leased, equaling 352,801 square feet. Fifty-nine properties were sold, totaling 278,987 square feet. The sales amounted to $165 million.
During the same period last year, there were 1.1 million square feet of retail property space in West Michigan, 111 properties were leased, equaling 331,014 square feet. Ninety-three buildings were sold, totaling 800,497 square feet. The sales were $38.2 million.
So far in 2018, there has been a total of 42.6 million square feet of vacant land sales in West Michigan, totaling $41.7 million for 85 lots.
In the first seven months of 2017, there were 35.1 million square feet of vacant land sold in West Michigan, 65 lots of land were sold, totaling $27.9 million.
Despite the high demand for land and property space in West Michigan, Garrett said the supply of land is limited. As a result, he said commercial real estate developers are moving out from inside the core Grand Rapids area.
John Wheeler, director of business development at Orion Construction, said the average cost of buying land in the core of Grand Rapids is $50 per square foot, if available.
However, he said finding land in the city of Grand Rapids is not the problem.
“It is creating a development that fills a need,” Wheeler said. “The land in the city limits of Grand Rapids is under great demand, for certain. There are, however, several prime parcels that have surface parking lots on them, some other infill sites and possibly some old structures that could be demolished to make way for good developments.
“The most open land in the city for development is on the surface lots along the river adjacent to Grand Valley, some up on Ionia Avenue and Division Avenue and, of course, the land that is smaller in nature that would be infill sites around each section of the city.”
Wheeler said renovation opportunities in the city have diminished to the point of there being almost no inventory. For example, he said 25 years ago there were 3 million square feet of empty buildings. Today, it’s about 10 percent of that in the heart of downtown Grand Rapids.
“The Keeler Building is still one on Division and a few other smaller ones,” Wheeler said. “But we took Herpolsheimer’s, Steketee’s, and Cutler manufacturing facilities on Ionia Avenue and many others and rehabbed them already.”
With the growth of the population of Grand Rapids, Wheeler said most of the new leases are businesses growing in the city, relocating from other properties and some new neighbors venturing into the city for office, high-tech, entertainment and hospitality purposes.
“There are many reasons to do new construction development, to build new and exciting places to live, work and play,” Wheeler said.