(As seen on WZZM TV 13) A report from the Commercial Alliance of Realtors of West Michigan has revealed many properties changing hands.
The transactions covered in the report focused on the 2013 office, industrial and retail space in approximately 16 counties in the West Michigan area, including the cities of Grand Rapids, Holland, Kalamazoo, Grand Haven, Muskegon and parts of Lansing.
CAR members created the report, said Shari Veldman, executive director. The alliance, a local association connected to the National Association of Realtors and Michigan Association of Realtors, does an annual review of the previous year in January, she said, and will have a projection report out in July.
“The Commercial Alliance of Realtors operates a mandatory multiple listing service, which caters exclusively to commercial real estate in West Michigan,” she said. “We currently have over 6,000 listings on the site, including a variety of property types (industrial, office, retail, etc.). The numbers in this report come from the reported sales and leases on the MLS, along with other transactions that may have been unlisted but were sold or leased.”
The number of transactions increased significantly in 2013, Veldman said. More than50 percent of the large downtown office buildings changed ownership in 2012, meaning the 2013 office building sales were smaller footprint buildings, with the suburbs also showing activity, she said.
With regard to retail, the major corridors are still very appealing, she said, and space is limited. The secondary corridors also are seeing an uptick in activity as a result.
What surprised Veldman the most, however, were the numbers for the industrial market.
“There are few industrial buildings for sale that have been built within the past 15 years. Inventory of industrial property remains very low,” she said. “Industrial property values have rebounded from recession lows and some exceed where they were previously.”
Stu Kingma, an industrial specialist with NAI Wisinski of West Michigan, also said the availability of quality industrial properties has shrunk significantly in recent years.
“The continued expansion of the market, and the resulting lack of quality industrial properties for sale, has translated into higher demand for lease space,” he said. “As a consequence, lease rates have risen noticeably in various sectors, with landlords beginning to enjoy a much more favorable leasing market.”
Here are the report’s findings:
Office building sales continued to improve in 2013; the number of sale transactions was up 28 percent over 2012. More than 1.12 million square feet of office space was sold in 2013, with the majority of buildings sold having less than 20,000 square feet.
Sales dollar volume of office properties reflected the market trend of the sale of smaller-sized properties. In 2012, sales volume reached $117,255,092 for office space, but that number shrunk to $36,458,680 in 2013. The significant difference is attributed to the large turnover in downtown office building ownership in 2012. While the 2012 market represented several out-of-state investors, 2013 sales showed more local owner-user activity.
Office leasing activity is up in both downtown and the suburbs. Average gross rent rates for suburban office space range from $10 to $18 per square foot, while the average gross rent rates for downtown space is $15 to $22 for class A space. Large office construction projects such as the planned Arena Place, as well as several building renovations, show positive potential. The cost of parking is a consideration for owners or tenants, who are seeking buildings that can provide low- to no-cost parking options.
Buildings formerly considered office space are being converted to residential — apartments or condominiums — which has decreased the availability of downtown office space.
Market conditions continued to improve in 2013, with more than 2.74 million square feet of industrial space sold, compared to 2.5 million square feet sold in 2012. Available prime industrial space is scarce, as the inventory of quality industrial properties becomes smaller.
Sales dollar volume of industrial properties also increased substantially over 2012, with $56,337,030 in industrial sales reported in 2013 compared to $42,791,475 in 2012, representing an increase of nearly 32 percent.
Industrial property values have recovered much of their losses, and are approaching levels not seen since before the recession.
Lease rates vary greatly, depending on the type, size, location, quality and condition of the industrial property. Overall, however, lease rates are rising.
Market conditions improved significantly in 2013, particularly in the prime retail corridors (East Beltline, 28th Street SE, and Grandville/Rivertown area). The Grandville/Rivertown area is poised to add several new retailers planning to open in early 2014. Shoe Carnival, Art Van Pure Sleep and Gordmans soon will be operational. Planet Fitness has opened in the Rivertown/Grandville area and the 28th Street SE area, within recently renovated Centerpointe Mall. The completion of the Centerpointe project has resulted in a large volume of leasing activity in the area. Another retailer new to the West Michigan area, Garden Ridge, is renovating space in Jenison in the building formerly used by Target. A Walmart supercenter is under construction near 54th Street SW and U.S. 131, and expansions of the Grandville and 28th Street SE Walmart stores to supercenters is nearly complete. The Tanger Outlet in Byron Center is on track to open in 2015, capping a large volume of retail growth in the southern part of Kent County.
Sales volume of retail properties increased by 37 percent in 2013 over 2012 and prices stabilized due to increased demand and quality supply being absorbed in the main corridors. Landlords are starting to regain control and increase rents. As competition for space grows, consumer confidence slowly elevates and vacancy rates drop, according to the report.
The number of retail sales transactions increased 13 percent in 2013. The shrinking of the gap between list and sale price shows that values are rising and buyers are willing to pay more for properties than last year because greater opportunity is present in the market.
Retail leasing activity also is up. In the primary retail corridors, vacancy rates have fallen and Class A available space is limited. Lease rates are slowly increasing, and there are fewer landlord concessions being incorporated into lease transactions. Secondary and tertiary markets are improving, but the pressure on pricing and concessions continues.
A marked increase in new retail construction in the prime retail corridors shows continuing increased demand for business expansion and new business entering the West Michigan area.