New sites like the Downtown Market, which has yet to sign an anchor tenant or brewery, are adding to the region’s available retail space. Courtesy Adam Bird
The retail real estate market continued its strong run through the year’s second quarter, as growth remained steady and activity stayed high.
Colliers International of West Michigan, in downtown Grand Rapids, reported 40 sales transactions were recorded from April through June at an average price of nearly $23 a square foot. The commercial real estate firm also reported 48 leases were signed over that 90-day period at an average rental rate of $10.24 per square foot.
“Economic stability in the main retail corridors continues to contract vacancy rates while rental rates inversely edged upwards. This trend has been occurring for the past 18 months and even though the changes aren’t drastic, each quarter has been proven better than the last,” read the Colliers report.
The report added that the market’s net absorption rate soared in the second quarter; it rose four times higher than the previous quarter when a fairly solid 22,159 square feet were taken.
“The 89,520 square feet of positive absorption can be attributed to two main factors. The first is the high velocity of transactions occurring in the market. The 48 leases and 40 sales outpaced the prior quarter’s numbers of 47 leases and 35 sales that were considered to be high at the time,” read the Colliers report.
Colliers concluded the second factor behind the increased activity was companies are simply doing better now than earlier and that means more space is being utilized.
The retail market’s overall occupancy rate in the second quarter topped 90 percent for the first time in the last three years, and the average asking rate rental rose above $10.70 a square foot. A year ago, the occupancy rate was about 87 percent, and the asking rate was $10.52.
The Commercial Alliance of Realtors added to the market’s good news by reporting the volume of sales of retail buildings was up by 63 percent from the second quarter of last year. CAR said sales prices have moved closer to the asking prices and the availability of investment properties, like strip malls, is lessening and not much product remains on the market.
The most active areas are the usual retail suspects, such as Rivertown Parkway, 28th Street SE, Alpine Avenue and the M-6 corridor. But, unusually, downtown Grand Rapids also made the list.
Colliers pointed out that the outdoor part of the new Downtown Market on Ionia Avenue SW opened, and its indoor marketplace was 73 percent leased but still hasn’t signed an anchor restaurant or brewery. The firm also noted a new restaurant, McKay’s Downtown, is leasing 150,000 square feet at 25 Ottawa Ave. NW across from Van Andel Arena in the location previously occupied by 25 Kitchen & Bar.
Ferris Coffee & Nut is adding a 10,000-square-foot addition to its production facility and retail shop at 227 Winter Ave. NW. The company also decided to drop the “Coffee & Nut” from its name and will simply go by Ferris.
Colliers also reported that Menna’s Joint, a casual restaurant popular with college students, will open this fall at 44 Ionia Ave. SW. Also, Goodwill bought the former Walgreens location at Michigan Street and Diamond Avenue for $950,000.
CAR reported two national fitness centers are actively shopping the area, looking for spaces with 20,000 to 40,000 square feet, while Starbucks, Tim Horton, Family Dollar and O’Reilly’s Auto Parts are searching for additional locations.
“Retail specialists expect that within the next year, the Grand Rapids area will see many new additions to the retail arena,” read the CAR report.
The metro retail market has 18 million square feet of space with a vacancy rate of 9.5 percent. Another 37,000 square feet of space are under construction on 28th Street SE, Alpine Avenue and Rivertown Parkway.