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Region’s real estate activity remains strong
Industrial land is especially popular among investors, but inventory is diminishing.
Real estate activity across all sectors continued at a brisk pace at the end of 2019, according to the latest market reports from NAI Wisinski West Michigan. While leasing and vacancy continue to tighten, business leaders still are finding ways to grow in West Michigan.
Historically low vacancy continues to be the mantra of industrial real estate in West Michigan. Vacancy rates are 2.6% as of Q4 2019, driving up demand for new construction.
The most prominent area for new construction is the Walkerview Industrial Park, in Walker. Flexco announced it will build a 300,000-square-foot headquarters expected to be completed by the end of 2020.
“We are continuing to see investors hungry to invest in the strong West Michigan industrial market,” said Chris Prins, industrial specialist at NAIWWM. “This is occurring both through speculative construction, as well as purchasing existing investment properties.”
Another occupant of the Walkerview Industrial Park was Falk North America, a Netherlands-based roof panel manufacturer, who recently completed construction on a 100,000-square-foot manufacturing facility.
Pharmaceutical manufacturer Perrigo is investing $13.6 million to expand operations in West Michigan. The drug company is constructing a 66,000-square-foot warehousing facility at 13295 Reflections Drive in Holland. The project began in April 2019 with plans to be completed in May 2020. There is expected job growth with the expansion; however, long-term estimates still are unavailable.
Avflight, an Ann Arbor-based aviation support service company, is building a 5,000-square-foot facility and 30,000-square-foot hangar on a 5-acre leased parcel next to Gerald R. Ford International Airport. With this new location, the company plans to add at least 30 new jobs. The building is expected to be completed by spring of 2020.
The services Avflight will provide include fuel sales, hangar storage, aircraft ground handling services, de-icing, concierge services and all matters related to general and business aviation.
The total rentable building area as of Q4 was 169,786,800 square feet, according to NAIWWM, and West Michigan saw a total net absorption of 99,914 square feet. The average asking rental price was $4.18 per square foot.
Though still low, the highest total vacancy for industrial space was seen in the northwest quadrant of NAI Wisinski’s market coverage at 3.6%. The average rent in the area was $3.90 per square foot, and the total RBA was 19,444,058 square feet.
Even with milestone office achievements like the opening of Warner Tower at 150 Ottawa Ave. NW, the market in downtown Grand Rapids continues to tighten. Overall, vacancy rates were at 4.7% as of Q4 2019.
The average office lease rate increased from $15.74 per square foot to $15.92 per square foot in the past quarter. According to NAIWWM, one contributing factor to the active leasing market is there still is a limited supply of buildings available for purchase. In January, there were a total 15 true office buildings available for purchase in the 5,000-to-10,000-square-foot range.
Jason Makowski, partner and office specialist at NAIWWM, anticipated leasing activity will remain strong in 2020, as there likely will be a continued shortage of high quality office buildings available for purchase.
When Chemical Bank relocated its West Michigan headquarters to the new Warner Tower, the company’s former downtown building, south of Van Andel Arena, was sold to West Michigan Community Bank.
Advia Credit Union broke ground on a new headquarters located at 6400 West Main St., Kalamazoo, in Q4. The new headquarters is anticipated to begin operations in early 2021 with approximately 220 employees. There will be room to grow to over 500 employees in the future. There is a total of 6,000 square feet still available for lease in the building, which can be divided into different office or retail suites.
NGC, a developer of gift card technology based out of Illinois, is expanding operations to a new technology and development hub located in Holland. The new office located at 44 E. 8th St. will have nine new software engineers and will be led by NGC Senior Vice President of Development and Technology Dan Morrison.
On the horizon is the arrival of Caledonia-based Acrisure to downtown Grand Rapids. The global insurance brokerage plans to move its headquarters to the new Studio Park development. Construction is underway for a 105,000-square-foot, seven-story Class A office building fully occupied by the company.
West Michigan saw a total RBA of 29,855,132 square feet in Q4, with a total net absorption of 79,637 square feet. Most of this came from the northwest and southeast submarkets, representing 36,365 and 59,218 square feet, respectively.
Retail sales and leasing in West Michigan during Q4 2019 continued on a brisk pace. This was particularly true at Woodland Mall in Kentwood, where several new restaurants and retailers opened their first location or expanded their existing presence in West Michigan.
Black Rock and Cheesecake Factory both opened their first regional locations at Woodland Mall, and luxury retailer Von Maur also opened its first location, anchoring a $100 million expanded wing.
Chick-fil-A also purchased the former Macaroni Grill on 28th Street SE in Cascade, located in front of the Meijer store.
NAIWWM also is keeping track of the budding retail cannabis industry. According to earlier Business Journal reports, the Michigan Marijuana Regulatory Agency approved recreational marijuana licenses for four marijuana businesses in January: Park Place Provisionary, Bella Sol Wellness Centers of Michigan LLC, Battle Creek Provisioning and Battle Spring LLC.
“In 2020, we will begin to see the impact that the 20-plus medical marijuana dispensaries that have been approved by the city of Grand Rapids will have on their surrounding areas,” said Bob Lotzar, senior vice president and retail specialist at NAIWWM. “We will also track if the rapid growth of this business will impact the retail corridors nearby.”
Park Place and Bella Sol are the only medical marijuana retailers in Muskegon, and they began selling recreational marijuana products Jan. 17 and Jan. 18, respectively. Battle Spring and Battle Creek Provisioning are marijuana retailers in Battle Creek, according to the Marijuana Regulatory Agency.
The four retailers are among 63 businesses that have been issued adult-use licenses since the agency began issuing them in December 2019.
Downtown Grand Rapids also had a significant amount of activity in service-based businesses. Sparks BBQ from Traverse City will be opening later this spring in the former Lucky Luciano’s Pizza at 15 Ionia Ave. SW, Suite 140, and brunch spot Morning Belle is set to open in March at 434 Bridge St. NW.
Planet Fitness also recently signed a lease to occupy over 20,000 square feet at 234 Market Ave.
West Michigan had a total RBA of 169,786,800 square feet for retail, with a total net absorption of 99,914 square feet. Vacancy rates averaged 2.6% and the average rent was $4.18 per square foot.
NAIWWM market reports are based on real estate activity across five submarkets: northeast, northwest, southwest, southeast and the lakeshore region. Boundaries stretch as far north as Cedar Springs, as far south as Wayland, as far west as Allendale and as far east as Saranac.
The lakeshore region covers Saugatuck, Holland, Grand Haven, Norton Shores and Muskegon.
For the office report, the lakeshore region was excluded, but downtown Grand Rapids was included as its own submarket.