Advantage Commercial Real Estate Services LLC released its first quarterly market report since opening at the beginning of 2021.
Advantage announced the opening of its commercial real estate firm and office location at 1575 Arboretum Drive SE, Suite 402, in Grand Rapids this past January. The newly formed group is made up of former Colliers West Michigan advisers who wanted a locally owned and locally focused real estate firm.
“We understand that to better serve the community, we must be able to make quick, calculated, and local decisions,” said Managing Principal Mark Ansara. “Our decision to structure the company around our clients, the true trailblazers, supports those that are actively seeking growth throughout Michigan and beyond.”
The industrial commercial real estate was marked by a robust demand for warehousing space caused by a need for quick and efficient distribution of goods in Q1, according to the Advantage report. The pandemic further accelerated an already flourishing e-commerce industry, with nearly 35% of industrial leasing activity in 2020 being directly related to it.
Supply chain safeguards such as reshoring of manufacturing and the desire to build and store safety stock of product has kept industrial vacancy rates at historic lows. In West Michigan, vacancy rates are currently hovering around 3%, according to the report. Nationally, square footage demand for big-box warehouses (200,000+ square feet) grew by 24.75% in 2020.
Due to these growth factors, workers are in high demand; yet employment growth continues a muted gradual recovery. Because of this, automation implementation has been accelerated as companies utilize relatively cheap and easy access to funds for capital expenditures, the report said.
Advantage is generally seeing physical expansion in the way of renovations and additions; however, new construction likely will begin to rebound this year as well. Steel prices are at their highest levels in over a decade, yet experts say this often is a harbinger of an economic recovery to come.
The findings are supported by NAI Wisinski West Michigan’s recently released Q1 market reports. Notable activity included Pinnacle Construction building a 15,750-square-foot industrial development project at 2189 Avastar Pkwy. in Walker. The project will be anchored by German Auto Service with available suites ranging from 3,000 to 6,000 square feet. Pinnacle plans to complete the construction this summer.
NAIWWM reported an overall vacancy of 3%, with an average rate of $4.28 per square foot.
Additionally, Pfizer recently broke ground on its $465 million pharmaceutical production facility located at 7171 Portage Road, Portage. The 420,000-square-foot facility plans to be operational by 2025 and will add roughly 450 new jobs in the Kalamazoo area. Pfizer received a 50% property tax abatement from Portage in order to construct the new facility there.
Conveyor Concepts of Michigan, a maker of structural steel and material handling equipment, is spending $1,303,837 to add 30,000 square feet to its existing facility in Coopersville. The building is located in the Midway Industrial Park off Main Street. With this expansion, Conveyor Concepts expects to create four to six new jobs over the next two years.
The office real estate was marked by fewer long-term leases and expansions. As employees choose to either continue working from home, or not work at all, Advantage saw hesitancy to sign long-term leases or to expand, specifically in the office market.
In West Michigan, the number of office leases signed dropped 24% year-over-year, according to the Commercial Alliance of Realtors. Total market activity across all property types declined by 11%.
As some workers eventually start returning to their offices, Advantage expects to see employee density per square foot decrease and a slight reversal of the collaborative work environment trend that has characterized the office space market over the past five years.
Grand River Bank recently opened its second branch at 50 Crahen Ave. NE in Grand Rapids Township, NAIWWM highlighted in its Q1 report. The branch offers a full range of services and will employ retail bankers, commercial and mortgage lenders, operations personnel and administrative staff. The bank planned to open back in the summer of 2020 but had been delayed due to COVID-19.
Additionally, KinetaCare Physiotherapy, an outpatient physical therapy clinic in Colorado, moved to Byron Center in 2014 and relocated to 4675 32nd Ave. in Hudsonville earlier this year. The clinic has access to regional care for clients from Grand Rapids, Traverse City, Detroit, Chicago and Indianapolis.
Office vacancy was 5.5%, according to NAIWWM, and the average asking rate was $15.60 per square foot.
Retail in West Michigan is back on course after being thrashed by the pandemic. Retailers, specifically food concepts, continue to face the reality of adjusting to the delivery and take-out model relative to dine-in, but Advantage saw many of those establishments weather the storms better than expected.
Additionally, landlords are starting to offer more free rent as an incentive, instead of tenant improvement allowances, in order to preserve cash.
Activity in the West Michigan retail market has stayed consistent in Q1, with a 1.9% uptick in leases signed, and there are few permanent closures. As adjustments are solidified, Advantage expects the retail market in West Michigan to maintain a steady course.
NAIWWM saw a total retail vacancy of 7.4% in Q1 and an average rental rate of $10.46 per square foot.