The past few months have been good for the CB Richard Ellis Group.
First, Chain Store Age, a retail-industry publication, named the firm the world’s fastest-growing retail property manager. Then, less than a month later, the state of Michigan named CBRE its exclusive commercial real estate provider.
The state contract emerged from a competitive bid CBRE won, and winning means the firm will handle all leasing services, including administration, tracking and auditing, and will assist Lansing with its real estate marketing. CBRE will also acquire and sell properties for the state. The state owns and leases more than 14 million square feet of properties. The agreement is for three years.
“It’s a significant win across a collaboration between our three Michigan offices, and we will be their selected and dedicated service provider,” said Drew Miller, managing director of CBRE/Grand Rapids. “It’s kind of a broad brush, but it’s a great long-term assignment.”
In addition to the local office, CBRE has offices in Lansing and Detroit. The company’s account management team for the state contract is based in the Capital City and led by Van Martin, Eric Rosekrans and Tricia Foster. Miller will head the Grand Rapids team, while Michael Gerard and John Latessa Jr. will do the same in Detroit.
With tax revenue way down and the state facing major deficits for the general operating budget, CQ asked Miller if he felt that Gov. Jennifer Granholm and lawmakers are looking to sell some holdings in order to raise much needed cash.
“It’s too early to comment on that,” he answered. “We will be working with them on a strategic plan as we go forward that will have a five-year window. So we may have better insight as we get into that.”
The plan is to review all the properties the state owns and leases, and then make decisions as to which properties should be kept or sold and which leases should be renewed, altered or dropped.
“Yes, we will be working very closely with them in all the decisions that have to do with leased and owned properties,” said Miller.
As for the Chain Store Age designation, the publication reported that CBRE added 18.7 million square feet of new global retail property management assignments last year — a figure that was 35 percent higher than the No. 2 broker in the annual ranking. While rising to the top was a significant achievement for the firm, it wasn’t the first time CBRE was ranked among the world’s elite retail real estate managers.
“It’s an honor that I think we’ve had for a number of years. Where we’ve sat in the top 10 has fluctuated over the years, but this is obviously a nice feather in our cap,” said Robert Lotzar, vice president and retail adviser for CBRE/Grand Rapids.
“It kind of shows you the breadth and depth of our company and that people recognize us in the different categories — whether it’s industrial, office, retail or the state’s business that we won, which is a multitude of different types of properties. That’s certainly a publication that developers, retailers and other brokerage houses read and recognize as an authority, so it’s great,” he added.
Lotzar told CQ he expects more space will become vacant in West Michigan due to the ongoing recession and its resulting job loss. He felt people will likely continue to cut back on their spending, at least for the foreseeable future, meaning retail sales will remain stagnant. But Lotzar also said the strongest retailers will survive.
“As an example, Best Buy is still standing, whereas Circuit City is not. Bed, Bath and Beyond is standing, while Linens and Things is not. The order of things in the first place was Best Buy was always outperforming Circuit City, just like Bed, Bath and Beyond was also outperforming Linens and Things,” he said.
A decade ago, the industry consensus was the region didn’t have enough retail to serve the growing metro area. Since then, new outlets were built and enough retailers — possibly too many — came into the region to fill the void. Now some are exiting, and with the housing situation the way it is, the amount of retail here today may be the right size for the times.
“The reason why we were under-retailed before was because of the growth rate we were experiencing from the housing standpoint. If all the projected housing starts that were called for along M-6 in previous years would have continued, as would have other housing starts in other quadrants, then we would have been on the same path of being under-retailed,” said Lotzar.
But about six months after housing starts stopped and foreclosure filings rose, retailers reassessed their position and began to put the brakes on in the market.
According to CBRE, the retail vacancy rate was 19 percent at the end of the first quarter this year, with 2.2 million empty square feet in the metro area. Those figures were up from a 12 percent vacancy rate and 1.5 million vacant square feet at the end of 2008.
Still, Lotzar felt the bad numbers make for good opportunities, especially with rental rates falling.
“Right now, some of the opportunities are for retailers like the Dollar Generals and the Family Dollars, etc., to maybe secure better locations than they normally would be able to afford or get into. They can get a higher-profile location,” he said.
For instance, Lotzar said a strong rumor has a discount hobby-and-home accessories retailer on the southwest side relocating to the Grandville Martkeplace and taking over the 65,000 square feet that Circuit City and Linens and Things occupied.
“Previously, they would not have been able to afford it or the landlord might not have even extended an invitation, mainly because of the rental rate they were asking. Rates are coming down in the big-box spaces and folks need to fill it as best they can. In the current climate, there aren’t many big-box stores seeking new locations at the moment,” he said.
Even though relocations might dominate the retail setting for the near future, Lotzar said new deals are still getting done. CBRE recently brought Sola Salon to Cascade East, and Elite Sports and Family Chiropractic to the Rogers Plaza Town Center. The firm also brokered the sale of the Holland Outlet Mall to a new buyer, and was in the final stage of leasing a fairly large chunk of space at Rogers Plaza.
“It’s obviously a challenging market for real estate,” said Miller. “But we feel fortunate that CB Richard Ellis has been able to win contracts like the state of Michigan’s, get recognized by Chain Store Age for our property management, and we’ve just now increased to 88th of the Fortune 100 companies that are real-estate providers. So we’re continuing to gain market share in a challenging market, which is positive.”