Sale-leasebacks emerged as a popular option for sellers with an abundance of capital, according to Colliers International West Michigan’s 2019 Q3 Market Reports.
“Despite signs of a global economic slowdown, West Michigan continues to be on a path of slow and steady growth. It’s still too early to tell when the next recession will happen,” said Tim Van Noord, Colliers International West Michigan associate vice president. “Even as manufacturing in the U.S. slows down, West Michigan’s manufacturing industry remains steady, and there continues to be growing demand for high-quality industrial commercial real estate across the region. This demand has resulted in a number of off-market deals in Q3.”
High demand for industrial space in West Michigan continues, and it’s absorbed quickly as soon as space becomes vacant. In Q3, industrial vacancy rates were 2.3%, and buyers generated the most activity. Colliers also noticed an increase in sale-leasebacks, where a firm sells its building and then signs a lease to occupy the space, freeing up capital.
Comparatively, the Q3 reports issued by NAI Wisinski of West Michigan noted an overall industrial vacancy of 1.9% and an average rental rate of $4.12 per square foot. The largest vacancies were in the northwest of the West Michigan region at 3.2% and $4.02 per square foot, and the least amount of vacancy was in the southwest at 1.1% and $4.44 per square foot.
NAIWWM market reports separate market data into four quadrants of the West Michigan region, as well as the lakeshore region.
Most third-quarter retail activity was driven by shopping centers like Woodland Mall, Shops at CenterPoint and Knapp’s Crossing, according to Colliers. New major brands to the region included Carhartt, Lands’ End and Amazing Lash Studio. Von Maur and Urban Outfitters also opened locations at Woodland Mall.
Retail vacancy rates are 3.17% and rental rates are at $13.37 per square foot, according to Colliers.
“The West Michigan retail market looks a lot different than it did even just five years ago with the revival of shopping centers and new concepts entering the market every quarter,” said Mark Ansara, Colliers International West Michigan vice president. “In downtown Grand Rapids, we now have Studio Park activating the Arena District and Heartside with new entertainment options, restaurants, housing and jobs.”
NAIWWM market reports noted a higher overall retail vacancy across five sectors. The average vacancy was 6.4% and average rent was $10.84 per square foot. The highest vacancy was in the northeast sector at 9.7% and $10.75 per square foot, and the lowest vacancy was in the northwest sector at 3.4% and $16.27 per square foot.
The West Michigan office market showed continued to show signs of strength in Q3 with many companies relocating or expanding their headquarters in the region, the largest move being Acrisure at Studio Park, Colliers said.
While buyers continue to generate the most activity in the market, leasing activity also picked up, causing vacancy rates to decline even further. The vacancy rate for downtown office space is now 9.59%, and 7.45% for suburban office space, according to Colliers. The exchanging of space in the market caused rental rates to fluctuate in Q3, totaling $17.76 per square foot.
“Office space continues to be used for talent attraction and retention,” said Kristen Moore, Colliers International West Michigan associate. “Employers often are looking for space that not only engages their employees but also acts as a marketing tool for the company. We’re seeing more employers look for space that offers plenty of natural light, various amenities, open areas for collaboration and accessible parking.”
The NAIWWM office market report noted 5.1% vacancy and $15.74 per square foot rental rates overall. The tightest vacancy continued to be seen in downtown Grand Rapids at 3.4% and $18.09 per square foot. The southeast had an average 6.9% vacancy and an average asking rate of $14.25.