Report indicates Q1 industrial, office vacancy trends differ

Industrial space is hard to come by, but office space isn’t.
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Construction of the 430 Monroe Ave. NW building for Perrigo’s new headquarters still is underway. The health care manufacturer will occupy half of the new building, while the other half will be available for leasing once the structure is completed at the end of the year. Courtesy Perrigo

JLL, a commercial real estate service company, released its 2022 first-quarter West Michigan industrial and office reports, and the differences are striking.

The industrial report revealed that 921,392 square feet of industrial space in West Michigan was absorbed, decreasing the vacancy rate in the region to 3.2%. The average asking rent price increased to $4.06 per square-foot, up 1.8% from the fourth quarter of 2021.

There is 2,512,720 square feet of industrial space in West Michigan under construction with additional projects set to break ground this year.

LG Energy Solutions plans to invest $1.7 billion to expand its lithium-ion battery manufacturing plant in Holland, and the project is likely to bring additional automotive suppliers to the area.

PADNOS, a scrap management and recycling company with locations throughout West Michigan, is undergoing a $6.6 million expansion. Roll & Hill, a lighting manufacturer, is investing $1.5 million to expand both in Wyoming and Holland. Art Mulder & Sons Trucking, a Holland-based refrigerated LIT logistics, brokerage services and truck leasing company, will invest more than $31 million to build a new 147,000-square-foot facility to improve its cold-storage capabilities.

“Over the past 18 months, we’ve also seen substantial activity in the Four Mile to Interstate 96/Fruit Ridge to Walker Avenue corridor in Walker,” said JLL Executive Vice President Bob Horn. “Some of these developments, which total more than 2 million square feet, include two Amazon facilities, a Lowe’s distribution center, an ACME Marine, a Speedrack and new construction on speculative buildings, along with Lee Contracting’s purchase of the Grand Rapids Press Building. We expect this demand to continue into the second quarter — and through the remainder of the year.”

In March, Franklin Partners purchased the 74-acre former General Motors stamping plant site at 36th Street and Buchanan Avenue in Wyoming with plans to build a manufacturing campus. No further details have been provided about the plans yet.

Northwest Grand Rapids continues its trend of new construction activity, which accounts for 27% of the construction pipeline. There was 419,000 square feet of completed construction of manufacturing, warehouse and distribution spaces in northwest Grand Rapids and 678,742 square feet of manufacturing, warehouse and distribution space currently under construction in that area.

There were no completed construction projects for manufacturing, warehouse and distribution spaces in northeast Grand Rapids; however, there is 261,250 square feet of manufacturing, warehouse and distribution space currently under construction.

Construction of 250,000 square feet of manufacturing, warehouse and distribution spaces in southeast Grand Rapids was completed, and 385,618 square feet of similar spaces still are under construction.

In southwest Grand Rapids, another 27,194 square feet of new industrial construction was completed with another 386,390 square feet still under construction.

Flight to quality

The leasing activity for office space in Grand Rapids has remained unchanged compared to late 2021, according to the JLL office report.

“Not unlike many recessionary periods in the office market, we are seeing a flight to quality,” said JLL Senior Vice President Jeff Karger. “Class A buildings with good amenities, strong management and flexibility are seeing increases in occupancy. Though overall vacancy has remained relatively flat going into the second quarter of 2022, showing activity in the first quarter of 2022 was the strongest since the onset of the pandemic. There will be an increase of office products hitting the market this year and next, which most likely will offset any increase in occupancy. A significant bright spot, however, is the sales activity in the office market has dramatically increased across all geographic regions of the office market.”

The total vacancy rate in the area is 12.8% and the average asking rent price is $20.61 per square foot.

Downtown, Ghafari and Deloitte are expected to take occupancy of the 37 Ottawa Ave. NW building once the buildout is completed this year.

Acrisure has plans to hire more than 200 new employees, but its need for a second building at the new Studio Park development is uncertain as hybrid and remote work schedule options still are available.

Construction of the 430 Monroe Ave. NW building for Perrigo’s new headquarters still is underway. The health care manufacturer will occupy half of the new building, while the other half will be available for leasing once the structure is completed at the end of the year.

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