January 10th, 2017
Transaction velocity in the Retail market increased by 14.4% in 2016, showing that ‘brick-and-mortar’ retail stores are alive and well in West Michigan. “The recently reported closing of Sears in Woodland Mall offers an extremely positive opportunity for redevelopment of that portion of the mall”. We will see a lot of activity from national realtors vying for the new space,” said Rod Alderink, NAI Wisinski of West Michigan. “After many years of speculation, we can finally move toward additional available space in a highly desirable area.”
“The consumer activity at Tanger Outlet over its first full year has proven to the retailers that the outlet was needed in our market, also proving that brick-and-mortar locations are alive and well”, shared Mike Murray, Colliers International. “2016 has seen the successes of the ‘de-malling’ of West Shore Mall in Holland as well as the continuation of the redevelopment of Breton Village Mall and the addition of new retail space next to Fresh Thyme Market just across the street. We are going to continue to see the trend of developers modernizing tired projects to bring them up to today’s retail standards as retail evolves to meet the needs of its consumers.”
“With inventory levels low, finding the right location is a challenge, dealmakers are forced to get more and more creative. due to the low number of properties that are currently available,” said Victoria Mitchell, Ben Muller Realty. “We are seeing national retailers starting to considering opting for outlying areas or smaller municipalities, and local/regional retailers diverting their attention from “main and main” to developing the distinct neighborhoods like Creston Heights, Alger Heights, Fulton heights, Easttown, west side as a result. Being a millennial myself, I believe there is a misconception about our generation moving solely to online retail. I still prefer bricks over clicks.”
“The push for municipalities to use form-based architecture and planning makes it very difficult for large, national retailers,” stated Elliot Muller, Ben Muller Realty, “But this design structure can be very attractive to local and regional retailers.”
“The vacancy rates in the highly desired retail corridors continues to remain very low with B & C markets experiencing greater leasing opportunities in the past year. Retailers and restaurants/bars are also finding success in some of our great neighborhoods such as Alger Heights, Creston Heights, Bridge St., Wealthy St. and more,” said Alderink.
“Availability of space in the secondary retail corridors also decreased in 2016, due to the lack of vacancy in the primary corridors,” shared Bill Tyson, NAI Wisinski of West Michigan. “A good example is Plainfield Avenue, which saw much growth and revitalization this past year.”
“It has been great to see companies such as Rockford Development working in urban areas like the Lower West Side of Grand Rapids to bring new mixed use buildings into these urban communities providing retail, office and multi-family where there has been a void,” Murray stated.
“The hotel industry is alive and well in West Michigan. Multiple hotel operators have purchased locations around the new Switch Data Center, as well as in Grandville and another hotel to be built across from the Whitecaps Stadium,” shared Dave Denton, DAR Development.
The Office market in West Michigan remains steady, with comparable numbers of sale and lease transactions year to year. “There were a few large office buildings that changed hands in 2016, “ said Mary Anne Wisinski Rosely, NAI Wisinski of West Michigan, “The Arena Place opened in 2016, and that space was quickly absorbed.” Tom DeBoer, Colliers International, added “The downtown landscape continued to shift in 2016. After undergoing extensive renovations and subsequent lease-up, 25 Ottawa and 99 Monroe were both sold to new investors. Arena Place was completed and filled as well, showing that tenants are willing to put a premium on office space that attracts and retains talent.” A total of 1.5 million square feet of office property was leased or sold in 2016, up 7% from 2015.
Jason Makowski, NAI Wisinski of West Michigan reports that the Suburban office market continues to thrive. “2016 was a good year for the volume of suburban office sales and leases. We are experiencing a demand for independent doctor groups seeking medical office space, and both the southeast and northeast corridors of the Beltline continue to be active.”
The available inventory of office space continues to be low. New construction could alleviate some of the need, but costs to lease new space remain significantly higher than leasing existing space. “The average downtown lease rates range from $18 to $25 per square foot, and averages in the suburbs range from $12 to $20 per square foot. New construction likely starts at $24 per square foot, and goes up from there,” explained Makowski.
“Parking continues to be a hurdle to clear in order to continue to bring new businesses downtown; however new developments are including a parking component to aide in the relief,” stated DeBoer.
Switch has spent much of the year gearing up their campus in Gaines Twp. at the Pyramid, and it will be interesting to see see what clients of Switch decide to locate satellite offices in West Michigan to be near their data (which is housed with Switch).
Confidence in the future economy is resulting in the execution of longer lease terms. Landlords continue to offer some concessions, but trends show a decrease in upfront tenant improvements.
Nearly $140 million dollars of industrial property was sold in 2016, adding up to over 5 million square feet of space, which is an increase of 14.4% in sales volume compared 2015.
The number of sale and lease transactions in 2016 was consistent with the number of transactions in 2015, reflecting another positive year for the Industrial market. Statistically, the number of transactions is consistent year to year, but the dollar volume increased significantly in 2016.
“Average prices per deal and property values are rising,” according to John Kuiper, Colliers International. Kuiper continues, “ Overall, lease rates have increased as well, and there are fewer owner concessions. The market is progressing very well.”
“Both local and national investors are making an impact in the West Michigan area,” stated Steve Marcusse, Colliers International, “A combination of low inventory, optimistic users and a very active investment market have helped formulate much growth. The industrial market has been great in 2016.”
“The lack of inventory has prompted properties to transact before reaching the market,” Stu Kingma, NAI Wisinski of West Michigan said. “Brokers are finding the need to be creative, seeking out potential ‘for sale’ properties. This is a continuation of trends we saw in 2015.”
Steve Marcusse added, “Industrial property vacancy is the lowest our office has recorded in nearly twenty years. Because available industrial properties are at record low numbers, now is a good time for property owners to consider becoming part of the seller’s market.”
Thank you to the CARWM Members who contributed to this review.