This proposed build-to-suit site at 4778 Broadmoor Ave. SE could ease some of the strain on the industrial market. Rendering courtesy Signature Associates
Depending on what you are looking for, the commercial real estate market in West Michigan may not be so favorable.
According to some commercial real estate experts in the area, more properties are available for leasing, but fewer properties are available for sale.
Jason Makowski, a partner and an office specialist at NAI Wisinski of West Michigan, said there is a decent number of office real estate locations and that is, in part, because a lot of tenants are coming to the end of their lease, and also, they are looking for smaller or larger office space.
“Tenants are contracting and expanding,” he said. “So, they are moving around from one building to another or within the same building. There have been some new businesses that have moved in from outside of the area in the office arena, but that has been somewhat limited.”
Makowski, who also is president of Commercial Alliance of Realtors in West Michigan, said there is not a lot of construction of office buildings because there is plenty of office space available in the area. He said a dense number of available office spaces are along the East Paris corridor, from 28th Street to Cascade Road in southeast Grand Rapids.
Though there are not a lot of office buildings being built, Makowski said the East Paris corridor is where most offices are being constructed.
“There have been several new buildings popping up out of the ground, primarily for medical (offices),” he said. “Various medical groups are predominately moving from buildings they are currently leasing into some of these new buildings where they have an opportunity to have an ownership stake in the buildings. So, we have quite a bit of that. East Paris has been a pretty active corridor; Cascade Road has been pretty active. From a growth perspective, I would say there is more going on East Paris. That is where I kind of see new construction growth going on in the office arena.”
While office spaces are available for lease, there is a lack of inventory for other property types.
Glen Gerwatowski, a research analyst at Colliers International West Michigan, said his firm is seeing a decline in lease and sale transactions.
In 2017, Colliers completed 675 sale transactions. In 2018, there were 503 sale transactions, which included office, retail and industrial spaces. The first quarter of 2019, Colliers made 112 sale transactions — a decline from 156 transactions made in the first quarter of 2018.
In 2017, Colliers entered into 832 lease transactions, including office, retail and industrial spaces. In 2018, 743 lease transactions were completed, and the first quarter of this year, Collier brokered 141 lease transactions. That is a decline from 217 transactions made in the first quarter of 2018.
Gerwatowski said he believes the decline in both sale and lease transactions at Colliers is “probably attributed to the market tightening up, as overall vacancy rates have been dropping with fewer available options for both tenants and buyers.”
Chip Hurley, vice president and associate broker at Grand Rapids-based Signature Associates, also said there are more vacancies at the leasing end of the spectrum as opposed to the sale side. He said tenants have an easier time finding spaces they like to lease than buyers because there is a lack of inventory for sale.
The lack of inventory is, in part, because labor and construction materials are expensive. Hurley said there are not a lot of modern buildings that meet the specificity of some buyers. So, buyers who’d like to have high ceilings for their buildings are finding cranes and other construction materials and equipment needed are expensive.
“The perception for the general public is, ‘Hey, I see real estate signs everywhere, it can’t be that bad,’ but when you look and drill down into specific property types or specific sizes within a property type, you quickly learn that there is not a lot of inventory for buyers to acquire,” Hurley said. “So, that is going to be our struggle for a little while.”
If there is a property available on the market for sale, Hurley said he advises his clients to purchase the property as quickly as possible because most likely there is more than one potential buyer who is looking to purchase the property.
He said industrial buildings such as warehouses are easier to purchase because most likely buyers are not looking for specific amenities.
“If landlords or sellers have space that they want to lease or sell, then (now) is a good time for them because they would get top dollar for the lease and sale transactions,” he said. “The challenge is if they need to replace those properties, they’ll find out that is much more difficult to find replacement sites or properties just based on a lack of inventory. This is something that everyone is coming to understand.”