Don Shoemaker stumbled into purchasing a Grand Rapids industrial property in 1996 and found a market his firm, Chicago-based Franklin Partners, has called a second home for more than 20 years.

Calling it dumb luck, Shoemaker didn’t research Grand Rapids real estate, nor did he think it was a different city than others in Michigan not named Detroit, but what he found was a city with a diversified economy and great value. Franklin Partners has since become a significant player in the West Michigan office and industrial markets as primary and secondary markets, such as Chicago, have tightened.

“Grand Rapids hasn’t felt that pressure,” Shoemaker said. “We’ve typically been able to buy a little better there, and there’s no surprise with the press that comes out seemingly every month with something good with Grand Rapids, it’s easy to see why others would want to come to the market.”

Grand Rapids has become an attractive market for real estate investors from outside West Michigan, most recently showcased by responses to the city’s request for qualifications for its 16-acre 201 Market Ave. property.

Four of the five respondents come from other regions, including REDICO and The Velmeir Companies from the Detroit area, Indianapolis-based Flaherty & Collins Properties and Zimmer Development Group from North Carolina. Rockford Construction was the lone homegrown developer to respond to the RFQ.

A committee of Grand Rapids stakeholders and real estate firm JLL will evaluate the responses and invite finalists to submit proposals for the site, but the group evaluators choose could have an effect on outside investors looking to Grand Rapids in the future, said Brian Prince, who would be the lead developer with the Indianapolis-based Flaherty & Collins. The firm has dozens of developments in cities across the Midwest.

Prince said Grand Rapids is a hot market on the firm’s map, and he heard from locals it would be nice to have outside developers, so there’s an opportunity to make a statement.

“We’ve looked at Grand Rapids and started looking for some opportunities two years ago,” Prince said. “We thought this site was a great opportunity to do a mixed-use development that has a number of uses, not just residential, but retail, maybe office, maybe hotel, public space that reactivates the rapids and the river.

“When you have a big site and a prime opportunity, what the city does will make a big statement. For the most part, things have been homegrown. If the city chooses to go with another local developer, that may be an opportunity when outside guys don’t take a look anymore.”

The exception, Prince said, would be if the local developer, in this case Rockford, comes to the table with a proposal head-and-shoulders better than those submitted by the out-of-towners.

West Michigan has long been a safe haven for industrial property investors from across the nation because of the region’s economic background, said Mike Visser, a senior associate with Colliers West Michigan. Visser, who works closely with investors from outside the area, said there has been a noticeable uptick in inquiries regarding opportunities in multifamily and single-tenant buildings.

NAI Wisinski of West Michigan Multifamily Advisor Scott Nurski said 75 percent of deals involving 100 units or more in the past four years have sold to out-of-state investors, and the investor demand now outweighs the supply.

Real estate investment from outside West Michigan will be important to the growth of the city, as internal investment can only push so much, said Jeff Hainer, senior research analyst with Colliers. Similar to Prince, Hainer said Grand Rapids is at a defining period.

“If we want to grow and become more than a low to middle-market city, we need that outside investment,” Hainer said. “Our growth isn’t sustainable if we just foster what we have here. So, the question is, ‘Are we OK with where we are?’”

Outside investment injects cash into the region, drives new construction and attracts more companies to the area, Visser said. New companies also bring creativity and ideas to the city, with Hainer citing Franklin Partners’ work at 99 Monroe and 25 Ottawa.

Along with major markets being filled with institutional money, the returns in West Michigan likely are much larger, and with positive job growth numbers and economic fundamentals and diversity, investors see it as a place with potential.

Nurski said investors are seeking properties in the Midwest, as they aren’t overpriced and, particularly in Grand Rapids, fueled by an economy with strong growth drivers, such as medical services, research and technology.

“You get a lot of people looking to tertiary markets, like Grand Rapids, chasing yield,” Visser said. “The people who have done that say its risk adverse and superior to other markets.”

Said Shoemaker, “I’ll tell you for us, we buy empty buildings, and being in a market with real job growth, the success we have in West Michigan is much better than what’s going on in metro Chicago.”

While he acknowledges the benefits outsiders bring to the community, CWD Real Estate Investment Managing Partner Sam Cummings said generally those not native to a market are often holding a more transactional view to buy and flip properties. He welcomes outside capital, so long as it brings net absorption and doesn’t simply move tenants around downtown properties.

“If we’re talking about hollowing out a building just to build shiny new ones, the city is not winning,” Cummings said. “If it’s a net gain with a new function, new use on the river, bring it.

“There’s no question Grand Rapids has been noticed. There are a lot of folks investing in downtown or near neighborhoods that weren’t around or weren’t investing 10 years ago. That’s a positive trend.”

One of the major struggles for attracting investors to West Michigan was getting them here, Hainer said. Many believed it was a dying Rust Belt city with an economy based on auto manufacturing, much like Shoemaker did prior to his first visit in 1996. Once a person sees the city, they fall in love, Hainer said.

Whether or not Flaherty & Collins wins the right to develop 201 Market, Prince said the firm will seek to do business in Grand Rapids.

“We haven’t gotten the feeling locals are favored, and we’re very excited and see that as an opportunity to be a catalyst,” Prince said. “We like Grand Rapids as a whole, so even if we’re not selected, we’d like to find other opportunities.”

Flaherty & Collins is not alone in developers itching to enter Grand Rapids; Franklin Partners currently is looking at a residential project at 1340 Monroe Ave., but not having experience in the sector, Shoemaker said they’ve engaged with multiple out-of-state investors, all of which have yet to work in Grand Rapids but now are eager.

Shoemaker also recently sold several assets to New York City-based investment firm Ladder Capital Finance, which was seeking the higher yields many are now seeking from the area. To be an active participant in the community, however, is a challenge.

“It’s not the easiest market to establish yourself in when you’re not from the market, but some of our success has been because we’ve been there for 20 years,” Shoemaker said. “I don’t feel like an outsider. The locals will always have their edge, but I’m glad more people are wanting in. It’s good for the market.”