MARKET HIGHLIGHTS – INDUSTRIAL
• There remains a lack of high quality inventory for sale, and market activity remains high as the buildings that remain available have good activity and are selling. “Existing building sale prices are inching toward the point where new construction may start to become an alternative consideration,” stated Stu Kingma, NAI Wisinski of West Michigan. The number of industrial transactions occurring the first half of 2014 increased by 44% over the first half of 2013. The unusually cold weather in the first quarter resulted in a slower market, which has more than recovered during the second quarter.
• Sales dollar volume for the first half of 2014 was $40,234,735, compared to $21,773,500 in 2013, representing an increase of nearly 85%. “Property values continue to improve, edging closer to replacement value,” according to Bob Horn, CBRE|Grand Rapids. The dollar amount includes one property that sold for over $18 million dollars.
• Lease rates are catching up to pre-recession numbers. Lease concessions are lessening, and landlords are requiring 3 to 5 year lease terms. West Michigan appears to be trending ahead of the rest of the country in its manufacturing growth and job creation potential.
• Several notable transactions occurred the first half of 2014, including two local manufacturers purchasing large buildings, which consolidates their businesses from multiple sites. “A developer purchased a 900,000 square foot former Steelcase manufacturing facility and leased it to a local user. This expansion will likely free up approximately 300,000 square feet of warehouse space in multiple locations on the southeast side, ”explained Steve Marcusse, Colliers International.
MARKET HIGHLIGHTS – OFFICE
• The number of office space leases (closed from January to July 2014) increased 11.5% over the same period in 2013, with the number of sale transactions up 45%. Similarly to 2013, smaller office buildings are being sold. The market continues to steadily improve in both the downtown and suburban sectors.
• The downtown office market lease rates are trending upward, and can be attributed to many recent renovations and improvements to existing buildings. Because of the strong investment, building owners have upgraded available space significantly, and tenants are quick to absorb high quality space.
• Office leasing activity in the suburbs varies by sector. Inventory is limited in both the northwest and southwest areas, but plans to renovate several buildings on the northwest side could open that market up to new tenants. The Cascade/Forest Hills area continues to be highly sought after. “The East Beltline corridor is directly impacted by the large scale medical development, with new construction consolidating many independent medical office tenants”, according to John Mundell, Bradley Company.
• “Buildings formerly considered office space continue to be converted to residential – apartments or condominiums – which have decreased the availability of downtown office space,” shared Chip Bowling, X Ventures.
• The greater Grand Rapids area may be prime for new office construction. “There is some new development starting, but there is still a lot of room for growth,” stated Mary Anne Wisinski Rosely, NAI Wisinski of West Michigan. Jason Makowski, NAI Wisinski of West Michigan, added, “Until we have more positive absorption in the suburban areas, we won’t see a great deal of new development.”
MARKET HIGHLIGHTS – RETAIL
• “Retail property sales are stabilizing and increasing from both the lease and sale sides, and values are definitely coming back,” according to Dave Denton, CCIM, DAR Development. Sale prices reported for retail properties from January 2014 to July 14 increased 20% over the same period of time in 2013. Retail property sales totaled $17, 822,250 for the first half of 2014, compared to $14, 860,800 in 2013.
• The number of retail sale transactions increased by 4.25% in the first half of 2014, and retail specialists anticipate the second half of 2014 to be very active.
• Market conditions continue to improve significantly in 2014, particularly in the prime retail corridors (East Beltline, 28th Street SE, and the Grandville/Rivertown area), with the vacancy rate continuing to decline. As fewer choices become available in the primary markets, activity begins to surge in the outlying areas.
• Downtown retail space continues to focus on entertainment, with the majority of space being occupied by restaurants and bars. There is limited retail space available in the downtown sector; however several small footprint grocery chains are investigating the possibility of opening in Grand Rapids.
• The retail market is being impacted by many new construction storefronts. Smaller retail buildings are appearing in large retailer out-lots, including new construction happening at the 28th St. and Kraft Meijer area. New construction pricing remains significantly higher than existing space pricing, with new construction leases averaging $20 – $25 per square foot, compared to $15 – $20 for existing space.
All information is deemed reliable but is not guaranteed and should be independently verified.
This report is prepared by the Market Specialty Groups of the Commercial Alliance of REALTORS®, 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.