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| The Grand Rapids market has 13.5 million square feet of office space distributed throughout the CBD/Downtown and the suburban markets. The CBD/Downtown submarket make up 34 percent of the entire market and has a vacancy rate of 16.2 percent. The remaining 66 percent of the market share is distributed across the suburban submarkets and have an overall vacancy rate of 17.8 percent. There are six main suburban corridors (Airport Area, Burton/Breton, Cascade, Centennial Park, East Beltline Avenue, and East Paris Avenue) that make up 64 percent of the total inventory in the suburban submarket. The Cascade submarket accounts for 20 percent of the total suburban market share and as a result has the highest vacancy rate of 26 percent. The four Miscellaneous submarkets make up the remaining 36 percent of the suburban market and have a combined vacancy rate of 15.1 percent. |
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The past month has shown an increase in activity in all aspects of the Grand Rapids office market: general, medical, downtown, and suburban. Tenants nearing lease expiration should seriously consider committing to their new locations or negotiating an early extension as soon as possible to avoid likely increase in rental rates for office properties. Great lease and purchase opportunities still exist, but are becoming increasingly rare. |
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The investment group continues to work with active investors in and out of the state. Sales levels are down from the 2007 highs and we have begun to see some lowering of pricing, however, our market has been relatively stable compared to the national picture. The main hurdle to overcome is the credit market, as many local lenders have cut their level of funding to real estate. This has slowed down sales velocity and contributed to some of the lower sales prices. Although investment sales are down from the highs of the last two years, the Investment Group continues to make progress with both in and out of state investors. In July the Investment Group closed on nearly $20,000,000 worth of product including an assisted living facility with a local company and a fully leased two tenant office building to an out of state investor from California. Interest from out of state and out of country investors remains, however investors are expected to remain cautious through the remainder of the year. |
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People keep asking me what is happening with the Lifestyle Center's that are proposed on the East Beltline between Knapp and 3 Mile. Well, here is the latest. Both projects are site plan approved (and have been for a while), both projects claim to have tenants they are finishing up deals with. The project at Knapp is being developed by Evergreen Properties, and they have announced a D & W Fresh Market that is soon to be under construction (per the company's president Steve Benner). Construction and other retailers to follow in the near future. The project at 3 Mile is being developed by BDR, Akins and CBL. We are told they have a deal with a department store that will be new to West Michigan, multiple "lifestyle" retailer's and restaurants in the works. They are planning on breaking ground this next year.
The changes in the economy have effected the retail world, deals are still coming together, they are just taking more time. Both of these sites are in a great area and Grand Rapids can still support more retail when compared to other communities in the Midwest that have more square feet of retail than we do here in GR with similar sized population. We are expecting both of these developments to bring new retailers and restaurants to our market in the next couple of years. |
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While credit remains tight and apprehension regarding the general business climate has delayed some decision making, well capitalized buyers and users are taking advantage of good opportunities to add space. This trend is reflected in the fact that for the first time in over 4 years, the Grand Rapids industrial market vacancy rates have fallen to the point where they are in line with the national average. This tightening of the supply of available property bodes well for the market in 2009.
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It’s almost “SNOW” time…
While everyone else is still enjoying their last bit of summer and thinking about sending the kids back to school, a property managers thoughts start to drift toward snow. That’s right, we are talking to contractors and collecting bids for the coming “snow season”. What we are anticipating is higher costs and fewer seasonal contracts. Last year’s record snow falls caught many of us offguard, including snowplow contractors. Most contractors who issued seasonal contracts took a serious hit and will not likely get “bit” again. Look for more contractors to bid only on a “per plow” basis and possibly add a fuel charge to help cover rising gas costs. To lower your cost, consider increasing the snow fall limits from ½” to 1”or 2” before requiring that your lot be cleared; this will help limit the number of trips or plows for the season. Oh and don’t forget the salt! Remember last year, we ran out. Expect to pay a premium for salt as well. Try to lock in a price or consider stocking up if you find a good deal. |
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Written By: Matt Abraham
West Michigan has historically been a region that has thrived on its ability to adapt and innovate for future trends. Starting off as a home furniture manufacturing center and a wood distributor, we have since diversified to accommodate a vast array of industries. This in turn, has made us more resilient to the economic fluctuations that many other manufacturing regions face. Although West Michigan is certainly not immune to the negative effects of the rapidly changing global market, we are well positioned to successfully compete in the world economy.
West Michigan’s economy is blessed with strong economic attributes essential to a healthy economy. Attributes such as a highly skilled labor force, lower than average living expenses, a well developed infrastructure, short commute times, and proximity to other major metropolitan areas and Lake Michigan make West Michigan economically well positioned.
The state government, MBT, and oil/commodity prices will all pose future challenges in both the short and long term. Now more then ever, companies have to make real estate decisions that take these factors into consideration. Neglecting to do so could prove to be tremendously expensive. Real estate is always one of the top expenses for a company, and as such it is extremely important to be aware of how the facility is working for the goals of the company. In today’s complex market, there are myriad options to sort through in dimensions such as tax incentives, location advantages, and building efficiencies. Often times there are unique solutions for industrial users looking to increase efficiencies, reduce expenses, or accommodate long term growth. It is important for any company looking to plan for the long term to consult a real estate advisor to see what options are available.
As industrial advisors, we have the unique privilege to speak with a diverse array of companies, both local and out of market, which gives us a strong understanding of what makes West Michigan succeed. We have found the entrepreneurial spirit, available low cost skilled-labor, and non unionized work forces to be the major factors contributing to the success of the region so far. Combining the previous factors and past economic performance with innovative solutions to market challenges provided by Grubb & Ellis| Paramount Commerce, we can become a strong contender for companies wanting to relocate or that need to expand into other markets. Despite an overall down state economy, this year we have seen multiple out of state companies expand into the area and there are more on the horizon. If we continue to hold on to the business values that have brought us this far, we will remain a contender in the global economy.
Matt Abraham is an Industrial Advisor with Grubb& Ellis|Paramount Commerce.
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Written By: Anne Ficeli, CPM
Climate change is in the news and on our minds pretty much on a daily basis. It has become a new fact of life and a term that is not going away anytime soon. You may ask, “What does that have to do with real estate”? Recent studies show that the commercial real estate industry currently produces 18% of the carbon emmisions in the US. Wow, who knew? Now that we know, what can we do? Someone once told me, “with awareness comes responsibility”. The commercial real estate industry has taken notice and, as a result, has been researching and promoting ways to reduce our collective “carbon footprint”. In addition to benefiting the environment, some of these solutions will reduce energy costs and increase values for commercial real estate owners.
As a result of all of the attention and new information available, alternative energy has become the new “buzz-word” in commercial real estate and facitities management. Alternative energy is an energy source other than fossile fuels such as coal, oil, natural gas or nuclear power. They are also called “renewables”.
Some reasons to consider the use of alternative energy sources are:
- Minimize environmental impact
- Cut Energy
- Enhance corporate image
- Increase property value/rent
- Secure LEED points
- Reduce U.S. dependence on oil
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There are basically two options for a transition to the use of renewable energy. One is an on-site green power system. This can be installed and owned by the consumer (real estate owner) or by a 3rd party. If the system is installed by a 3rd party, the “customer” and 3rd party will enter into a PPA, “power purchase agreement”. In this scenerio, there is little or no upfront cost for the consumer, but the PPA should be carefully reviewed by an independent consultant to ensure there is adequate protection for the consumer. On-site systems can also be installed directly by the real estate owner. There are various financial incentives and tax credits that help make this a more viable option. However, careful research and analysis is recommended to ensure the owner is aware of the initial upfront costs as well as the potential long term savings.
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An alternative to on-site power production is the purchase of RECs of “renewable energy credits”. These RECs pay for the net reductions in green house gases by feeding “green” energy into the power grids or to end users. It is not guaranteed that this “green power” is being used by the firm that purchased it, but the end result is that the green power is being fed into the pool so that less fossil fuel is required to meet the needs of the entire grid. The purchase of RECs will not reduce energy costs today, however purchasing them at today’s prices may provide an advantage over higher prices in the future. If new regulations require the purchase of RECs by utilities or governmental facilities, the cost is likely to rise considerably.
Carbon offsets are another option to consider. Unlike RECs, offsets may not result in usable energy; their purpose is to support projects that will reduce greenhouse gases. These would include recycling refrigerants, planting trees, producing gas from manure etc.
There are many factors to look at and options to consider when looking at green power choices. The bottom line is that this is a topic that is here to stay. As technology changes, so will our choices. It’s hard to know where to begin, but help is available. Here are some resources to get you started:
www.cleanair-coolplanet.org/ConsumersGuidetoCarbonOffsets.pdf
www.thegreenpowergroup.com/us.cfm
www.chicagoclimatex.com
www.green-e.org
www.epa.gov/grnpower
Good luck and GO GREEN!
Anne Ficeli is a Senior Property Manager for Grubb & Ellis|Paramount Commerce (G&E|PC). Anne offers over 15 years of property management experience throughout West Michigan., she holds a license in real estate and is a Certified Property Manager (CPM).
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Written By: Christopher Beckering
| West Michigan is guiding the nation in green building as a result of exemplary leadership, philanthropic support, and increasing local specialization and expertise. Innovative contractors (like Bazzani Associates, Rockford Construction, and Pioneer Construction) are incorporating sustainable building principles into all aspects of their construction delivery. Building on experience earned with the completion of each new LEED® project, the margin of additional initial investment required to complete high-performance buildings is narrowing. Further, educational institutions (like Grand Valley State and Cornerstone) are committing to LEED® certification on all new construction projects, furthering the availability of sustainable educational opportunities, and working to quantify and define the true economic benefit of Life Cycle Costing in high-performance buildings. |
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Non-profit groups like the West Michigan Environmental Action Council (WMEAC) and the West Michigan Sustainable Business Forum (WMSBF) are providing business people a forum to share best practices. Most importantly retailers, office users and manufacturers are recognizing the positive Triple Bottom Line (TBL) impacts of the economic, social and environmental aspects of green building, thereby driving the issue from the demand side. .
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| This is motivated largely by improving economics of green buildings and consumer driven market decisions associated with the rapidly expanding Lifestyles of Health and Sustainability (LOHAS) market niche |
| Chris Beckering is a certified EcoBroker®. He is the first and only commercial broker in Michigan to achieve this coveted designation as of February 2008. |
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