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Real Estate Market Reports Show Slow, Positive Gains

Speculative industrial construction is on the horizon in western Michigan. Meanwhile, retailers are struggling to fill vacancies in the wake of the 2020 pandemic, and many large national businesses are still reluctant to send people back to the office.

The western Michigan industrial market continued to perform well despite the challenges of the past year. According to second quarter reports from NAI Wisinski of West Michigan, the overall vacancy rate stands at 3.3%, which has increased slightly since the end of 2020, which ended at 2.7%.

NAIWWM industry specialist Andrew Kapanowski said the slight increase in the vacancy rate appears to be coming from the southeast Grand Rapids and lake shores submarkets and is most likely due to available speculative construction.

Average rental rates for the second quarter are $ 4.76 per square foot, which is up from the average triple net rental rates of $ 4.28 in the first quarter.

“These numbers are signs of the record demand we are seeing in the western Michigan industrial market and testify to the lack of inventory available for lease,” said Kapanowski. “We expect these rates to remain high until 2021, but should start to stabilize as new construction becomes available and helps meet demand.”

New construction is expected to persist until 2021, as the continued shortage of inventory has kept demand at an all-time high. That said, skyrocketing construction costs are forcing some developers to wait for costs to drop again before launching new projects.

Kapanowski added that many transactions continue to take place off-market, and many of those off-market transactions occur before the signs are released and are based on relationships within the brokerage community. The quality buildings that find their way onto the market tend to disappear quickly, he said.

Notable market activity in the second quarter included the near completion by Mission Design & Automation of a new 50,000 square foot facility at 9898 Black River Court in Holland.

The industrial automation and robotics company has invested more than $ 5 million in the expansion and plans to add at least 109 high-tech jobs in western Michigan. The company receives financial support for vocational training from the Michigan Strategic Fund of the Michigan Economic Development Corporation and West Michigan Works !, as well as a 12-year tax exemption for industrial facilities from Holland Charter Township.

Additionally, Autocam Medical, a Kentwood-based global manufacturer of precision surgical and medical devices and components, is investing $ 60 million through 2024 to build a new headquarters and manufacturing facility in Kentwood. The new facility will be 100,000 square feet, located at Broadmoor Avenue and 36th Street, and will be ready for occupancy in January.

After much uncertainty, the second quarter of 2021 is starting to see how the effects of the pandemic and work restrictions have impacted the Grand Rapids office market. More immediate was the concern over the reaction of the office market to the lifting of said work restrictions, which took place during this quarter.

“The parking lots have seen more cars than in the last 15 months, but they are still not ‘full’. Some businesses are back to pre-COVID normalcy, while some are cautiously returning to work in person, and others are still working remotely, ”said Mary Anne Wisinski-Rosely, NAIWWM partner and office specialist. “The trend we’re seeing is that small local businesses are back to the new normal, while many large national / global businesses are still working remotely with limited in-person work.

“Some companies are committed to getting back to the office 100% while others find remote working is possible full time or on a hybrid model.”

Vacancy rates edged up as businesses decided how to proceed. Some gave up their space altogether and others reduced their current location or moved to a smaller space if their lease allowed. There are a few companies that have actually increased their space requirements to better distribute their employees.

In the second quarter, the overall vacancy rate was 6%, up from 5.5% in the first quarter, and the total average rate per square foot was $ 15.58, down slightly from 15.60 $ in the first trimester.

The only market segment that saw a slight decline in vacancy rates was the Southeastern Grand Rapids B&C class market – 6.3% vs. 6% in the first quarter. The suburban markets seem to be doing better than the downtown market in general. In addition, rental rates increased slightly in all sectors except the NW office market which saw rental rates decline slightly.

Vitreo-Retinal Associates, an ophthalmology practice providing eye care services in Grand Rapids, Kalamazoo, Muskegon and Ionia, in June announced plans to double its Kalamazoo space in 2022. Currently located in 4,800 square feet of space at 1080 N. 10th St., the new location will be a new single-tenant building at 1060 N. 10th St. in the West Pointe office park.

MCPc will also move to 1601 Madison Ave. SE in 2022. The Cleveland-based technology logistics and data security company will replace the building that has been vacant for decades and opened the new project in July. This move to the heart of Madison Square is expected to create around 100 new jobs in the local community.

By far the hardest hit industry during the 2020 pandemic, retail is now gaining momentum in the second quarter, but that momentum is hampered by a lack of employees. Retail businesses, in many cases, offer more than minimum wage and signing bonuses to attract much-needed help. Some restaurants still offer take-out or have very limited hours because they don’t have the staff to meet consumer demand.

“The good news is that rental activity in our market is on the rise,” said Bob Lotzar, senior vice president and retail specialist for NAIWWM. “The demand for smaller retail spaces has increased dramatically over the past month. Western Michigan is also seeing national retailers entering our market for the first time. “

The overall vacancy rate is 7.4% and the average demand rate is $ 10.52 per square foot. These numbers are virtually unchanged from the first quarter, when the overall vacancy rate was the same and the average demand rate was $ 10.46 per square foot.

Whole Foods is under construction on 28th Street SE across from Woodland Mall. Ross Dress for Less is currently reviewing sites in Grand Rapids for the first time. Other retailers, such as Tropical Smoothie Café and B2 Outlet Stores, are looking to expand into the local market.

Quality Class A space is hard to find in the most important retail corridors, Lotzar said. The spaces available are still at pre-COVID rental rates. Momentum in the western Michigan retail sector is likely to continue to build up through the end of the year, but will depend somewhat on the ability of business owners to fill vacancies. .

Grove, the gourmet farm-to-table restaurant of the Essence Restaurant group, will reopen this fall. Located at 919 Cherry St. SE, Grove has been closed due to COVID-19. During the closure it was converted to a temporary take-out chicken outlet and later a private food court. When it reopens, Grove will have a refreshed interior and a new menu with 13 to 15 daily seasonal dishes.

Sparrows Coffee, a Grand Rapids-based coffee shop, is opening a new location at Kingma’s Market in the Creston / Cheshire Village neighborhood (2225 Plainfield Ave. NE). The new store measures approximately 600 square feet and offers a large outdoor patio. Sparrows is open 7 a.m. to 4 p.m. daily. Sparrows will also partner with local suppliers such as Rise Bakery, Lively Up Kombucha and Atucún Chocolate.


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