MARKET HIGHLIGHTS – INDUSTRIAL
The number of industrial transactions that occurred in 2014 increased by 38% over 2013 and continued to make it a challenge to find high quality buildings to meet the needs of the industrial market “There continues to be a struggle to find quality properties that meet the needs of today’s manufacturing client. As a result, more are considering new construction as a viable option,” stated Stu Kingma, of NAI Wisinski of West Michigan. There is a resurgence of new build-to-suit construction starting to happen, given the inventory shortage in the market.
Sales dollar volume for 2014 was $67,829,735 compared to $59,337,030 in 2013, representing an increase of 33%. “Property values are very close to where they were prior to the recession, and in some cases, coming in higher,” according to Bob Horn, CBRE|Grand Rapids.
Lease rates continue to rise. Industrial properties lease rates have increased by 6%, something the market hasn’t seen for over ten years. Lease rates range from $1.50 – $5.50 per square foot, depending on building size, location, and other amenities. But it’s now become more of a landlord’s market, with the rents going up, terms becoming longer, and significantly less incentives needed to attract tenants. “Given the lack of good building options on the market for sale the leasing alternative is one that more and more companies are starting to consider,” stated Steve Marcusse, Colliers International.
Several notable transactions occurred in 2014. 5565 Broadmoor was a large, former Steelcase property that was sold to Franklin Partners and subsequently leased on a long term basis to a local food producing company. Also the last available suite at Avastar Park, located at 2150 Alpine, sold to a local high tech manufacturer. That sale of over 200,000 square feet completed the redevelopment of the former Lear plant that was vacated a number of years ago. The Dicastal deal (One/Two Solar Parkway)is the sale of 562,530 SF on 94 acres in the community of Greenville.
MARKET HIGHLIGHTS – OFFICE
The number of office space leases (closed in 2014) increased nearly 45% over 2013 ,with the number of sale transactions up 6%. “Many of the buildings that sold in 2013 have completed renovations and updates, and are now quickly being absorbed by tenants, indicated by the large increase in leasing activity,” said Jeff Karger, CWD Real Estate Investment. The market continues to steadily improve in both the downtown and suburban sectors. Average lease rates in the downtown market are $16 – $23 per square foot, depending on class of building.
The downtown office market is robust, with many new tenants. “Many clients are seeking downtown office space to attract younger talent interested in working and living in the city,” stated Mary Anne Wisinski Rosely, NAI Wisinski of West Michigan.
“Grand Rapids has grown in appeal, and many companies are opening satellite offices here,” added Hillary Taatjes Woznick, NAI Wisinski of West Michigan.
Chip Bowling, X Ventures, agrees. “So many cultural things are happening downtown, that businesses want to be downtown to meet the wants of their young talent pool.”
“The suburban office market is experiencing a consolidation of medical space, as more medical groups are becoming part of hospital groups,” according to Jason Makowski, NAI Wisinski of West Michigan. “ That being said, we are seeing new office development occurring in the suburbs, which hasn’t happened in quite a while.” Makowski sees a steady suburban lease rate average of $10 to $18 per square foot. Prices vary by corridor.
Commercial office specialists are seeing greater interest by clients to purchase buildings, especially in the fringe downtown areas and suburbs. Many purchasers are looking for increased parking options for their employees.
The office market is expected to continue its upward trajectory in 2015. “Investors are looking, and there is money on the sidelines,” said Chip Bowling. “The robust market has reduced the number of investment opportunities available.”
MARKET HIGHLIGHTS – RETAIL
“Retail property sales in 2014 were very robust, and all signs indicate that will continue into 2015,” according to Dave Denton, CCIM, DAR Development. The combined sale prices reported for retail properties for 2014 increased by 53% over 2013. Retail property sales, as reported to the Commercial Alliance of REALTORS, totaled $55,516,977 compared to $36,253,140 in 2013.
The number of retail sale transactions in 2014 increased by 34%, compared to 2013, and lease transaction numbers increased 49%. “Lower gas prices have fueled an increase in retail activity,” said Rod Alderink, NAI Wisinski of West Michigan. “The primary corridors [East Beltline, Rivertown/Grandville, and Alpine Avenue] are extremely desirable for new and expanding retail operations.”
High consumer confidence is driving both the sale and lease of retail properties. Holiday sales were up 4.1%, a rate that hasn’t been seen for several years. Lease rates continue to climb, and have been increasing for the past 14 months. Lease rates for existing structures can range from $8 – $20 per square foot, depending on location and building class. Newly constructed retail properties are commanding prices pushing upwards from $25 – $35 per square foot.
“Grand Rapids is a place that out-of-state investors see value,” shared Earl Clements, Colliers International. “The big boys, who could invest anywhere in the world, are choosing West Michigan. And it has been fun to show off this area.” Retail specialists have seen a flourish of activity in the shopping center sector, with several existing retail strips and centers changing ownership in 2014.
Retails Specialists anticipate greater growth in 2015, with numerous national chains making decisions to open storefronts in West Michigan. Many who are already doing business in the area are planning to open more stores, including Planet Fitness, 5 Guys Burgers and Fries, and Panda Express.
All information is deemed reliable but is not guaranteed and should be independently verified. This report is prepared by the Specialty Groups of the Commercial Alliance of REALTORS® [CAR], a REALTOR® association serving the commercial real estate community of West Michigan. Visit www.carwm.com to search available properties and to learn more about the organization.