Leasing prices set to rise

Colliers report indicates costs are expected to increase in all sectors.
221

According to the most recent report from Colliers West Michigan, the retail real estate market is recovering nicely from COVID-19 setbacks and is heading into the next quarter with a positive outlook.

Several new storefronts and restaurants have opened in the first quarter, with more planned throughout the year. Despite a rise in vacancy rates from the fourth quarter of last year to this year’s first quarter — 5.85% vs. 6.2% — Colliers expects that percentage to dip again as researchers forecast continued retail growth in the next quarter.

New retail highlights from Q1 include lifestyle boutique Courage & Soar, pastry shop Le Macaron and Gazelle Sports, all of which are located on Monroe Center Street NW in downtown Grand Rapids.

Overall, trends indicate a continued rise in asking rent rates as demand for space increases. Asking lease rates have risen from $13.44/square foot last quarter to $13.91 this time around.

According to Colliers’ report, retailers are looking for smaller spaces in the 1,000- to 2,500-square-foot range. Vacant spaces of that size are in high demand, with many spaces on the market seeing multiple offers, which is a new trend in retail real estate.

Currently, 172,194 square feet of retail space is under construction. This is a significant increase from last year, which closed its final quarter with 105,938 square feet under construction and the previous quarter with just 13,325 square feet underway.

In the office market, companies are focused on returning safely to the workplace, according to Colliers.

Similar to the retail report, the office overview forecasts an increase in leasing rates as demand for quality spaces continues to bring West Michigan’s office market back to pre-pandemic levels. Current asking rates stand at $17.88 per square foot, as opposed to the previous quarter’s $17.06, and numbers are only expected to rise heading into the next quarter.

Growth in the office market was reported across all business types, from law firms to medical offices, with leasing and buying on an uptick and expected to continue throughout the year.

Colliers’ report indicated that while key COVID-19 factors, such as increased square footage in office space to accommodate social distancing, continue to drive trends in the office market, companies also are making real estate decisions based on traditional factors such as company growth and the current state of the market.

Another key factor is employee flexibility as offices continue to adapt to the challenges posed by the hybrid work schedule that many workers are adopting.

The industrial market is strong going into 2022 and is forecasted to remain that way as the year progresses.

Vacancy rates are at an extreme low, currently sitting at 2.83%. This continued scarcity is down even from last year’s final quarter, which ended with 2.94% vacancy.

As a result, demand for space is high.

Asking lease rates rose from last quarter’s $5.17 to $5.29 per square foot.

Due to low availability, transactions are occurring much more rapidly than in previous years, with advisers recommending prospective tenants make offers as soon as possible. Likewise, sellers and landlords are closing deals with much less negotiation over price than in previous quarters.

The report indicated clients are looking for locations with access to major highways and spaces with high ceilings, clear span, docks and easy accessibility.

In response to high demand for space, investors are continuing to build speculative projects in anticipation of leasing the space quickly for solid returns. This trend is expected to continue throughout the year as the industrial sector struggles to accommodate demand.

Facebook Comments