West Michigan retail continues to run steady in the second quarter of 2019 with new restaurants being the biggest source of activity real estate experts have recently observed.
Colliers International West Michigan observed a continued strong retail demand in main retail corridors across West Michigan. Many retailers desire to be in popular corridors such as 28th Street near The Shops at Centerpoint, Knapp Street, Rivertown Corridor, East Beltline Avenue, and Alpine Avenue between I-96 and 4 Mile Road.
Space still is limited, causing frustration for retailers looking to enter the market. Deals are taking longer to complete and there are no vacant big-box locations available. Construction costs remain high for those looking to build new. With a tight retail market and specific needs for each user, many retailers are willing to wait for the right opportunity, the report stated.
The restaurant industry is the driving force in West Michigan’s retail success, according to Colliers. Many restaurants have confidence in West Michigan, which has resulted in major brands entering the market like The Cheesecake Factory, joining Woodland Mall in October 2019.
Additionally, seven restaurants are moving or have already moved to 28th Street, including City Barbeque, Buddy’s Pizza, MOD Pizza and Cooper’s Hawk Winery.
According to Colliers’ Q2 retail market statistics, the 28th Street SE corridor has a vacancy rate of 3.7% and an average asking rate of $14.20 per square foot. 28th Street SW has an overall vacancy of 1.32% and an average asking rate of $10.60 per square feet. The market totals for these statistics — including 28th, Alpine, East Beltline, Plainfield and Rivertown Parkway — equals an overall retail vacancy of 3.05% and an average asking rate of $12.68 per square foot.
The market reports released by NAI Wisinski of West Michigan tell a similar story. Accounting for the entire Grand Rapids metro and lakeshore region, the overall vacancy rate is now at 6%, and the southeast and northwest quadrants of the market are even lower at 5.7% and 3.1%, respectively. The lakeshore market had a slightly higher vacancy rate of 6.2%.
The average asking rate according to NAIWWM was $10.70 per square foot for the second quarter.
Vacant restaurant space is filling up, as well, according to NAIWWM. A local restaurant that closed last fall is reopening under a new concept to appeal to a wider demographic.
Owner Rachel Lee reopened her restaurant at 2115 Plainfield Ave. NE in the Creston neighborhood under the new family-friendly River North Public House. Lee first opened the restaurant as a tiki bar called Citizen. River North’s menu will feature shareables, salads, burgers, sandwiches, main plates and desserts.
Wing Stop at 3923 28th St. SE and Cookie Cutters at 5121 28th St. SE were some other notable leases in Q2, as well.
On a national scale, the economy may be heading down a path of slower growth in the second half of 2019, Colliers researchers said. While the U.S. economy grew at a rate of 3.1% in the first quarter of 2019, signs are pointing to a slowdown due in part to trade tensions between the United States, China and Mexico. Economists predict growth will slow to about 2% in the second quarter.
Consumer spending nationwide increased slightly in May by 0.4%, and prices rose slightly, according to the Associated Press. More Americans made large purchases, including vehicles, and spent more at restaurants. Restaurant sales are picking up with the industry expecting to reach a record high of $836 billion in 2019, according to the National Restaurant Association. Department and clothing stores may lose momentum, however, as additional stores announce closures.
Downtown shopping districts across the country are betting on a retail revival and looking for ways to bring more retailers to downtown shopping districts, including Chicago’s Magnificent Mile, which is 29% vacant. The world’s largest Starbucks — a 43,000-square-foot roastery — will occupy the former four-story Crate and Barrel in downtown Chicago. Cities, both large and small, will have to continue to find creative solutions that support retail in downtown shopping districts, the Colliers report said.
Meanwhile, in downtown Grand Rapids, Colliers found retailers are hesitant to enter the market because of high costs and there isn’t a defined downtown retail corridor, which creates uncertainty.
Colliers’ market experts claim the downtown population isn’t big enough to meet the needs of large retail chains. All of these reasons have resulted in vacant ground-floor retail space in downtown Grand Rapids.
Despite uncertainty, some noteworthy restaurant and entertainment projects are underway in downtown Grand Rapids. Studio Park in July announced it is looking to fill more than 120 jobs as the project is slated to wrap up its first phase of development by the end of the summer.
The Rutledge, a new banquet hall, is slated to open this September across from Studio Park at 120 Ionia Ave. SW.
As the Waldron Public House is now being converted into a three-story tiki-themed lounge, the Rutledge likely will fulfill the need for a larger gathering space in the immediate downtown area.
According to an earlier Business Journal report, the tiki bar, dubbed Max’s South Seas Hideaway, expects to create more than 100 jobs.