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Real estate deals vary by sector – grbj.com

The Grand Rapids real estate market continues to evolve as different sectors show signs of progress.

The market assessment is based on a report from Colliers West Michigan, a commercial real estate brokerage services and investment management company, outlining the third quarter retail, industrial and office market overviews. 

The retail market report shows several new stores and restaurants were announced during the third quarter and the upcoming holiday season spurs continued “optimism” for the sector.

“Heading into the holiday season, we’re seeing optimism from retailers based on their activity throughout this year,” said Earl Clements, senior vice president with Colliers. “While there are some concerns going forward about staffing shortages and supply chain issues, retailers and restaurants had an active third quarter and continue to innovate.”

The restaurants and food establishments that were under construction in the third quarter include a Chick-fil-A at the intersection of Lake Michigan Drive and Wilson Avenue in Walker and a Whole Foods store across from Woodland Mall. Detroit Cookie Co. is planning to open its third location in Cascade Township. 

Along with new restaurants and food establishments, there was strong activity in the third quarter among retail stores, including hair and nail salons, physical therapy, dental and quick service options. According to Colliers, tenants in West Michigan were looking for new and different locations. Vacant land, freestanding buildings and inline strip centers all were in demand in the third quarter.

Shawn O’Brien is the vice president for retail services at Colliers. He said the prime locations for retailers continue to shift from regional mall destination sites to more interchange locations with robust traffic counts, convenient access and strong demographics.

“Access to good schools and job growth, primarily in high-tech, medical professional services, will drive the growth in rooftops for the future,” he said.

The prime locations in Grand Rapids, specifically, are fluctuating. Activity at some malls is increasing. Clements said Woodland Mall is “well on the rebound versus RiverTown (Crossings).”

Traditional retail corridors also are picking up momentum.

“28th Street SE is on fire, and I don’t see a slowdown other than the effects of finding people that want to work and the effects of the supply chain, which is going to get worse and probably not improve until late next year, if even then,” he said.

The level of activity in the industrial sector remained steady, according to Colliers’ market overview. Julie O’Brien, vice president of industrial services, said the activity level at the beginning of the third quarter is traditionally slower, but that was not the case this year.

“It is usually a slower beginning to the third quarter because so many people are on vacation during the month of July,” she said. “Historically, if there was a slow time for activity or being able to reach people, that’s when it is. With COVID and so many people working remotely now, I didn’t see a slowdown at all this year.”

The high demand for industrial space in a limited market contributed to strong activity. There was more leasing activity in the third quarter because the available space to purchase was minimal, even though the demand for sale opportunities was “immense.” The vacancy’s rate in Grand Rapids’ industrial sector is 3.28%, per Colliers.

“As with all industrial markets nationwide, Michigan’s industrial markets are thriving,” said Steve Poole, vice president of industrial services at Colliers. “Cost and availability of materials, a limited labor pool, and a long timeframe for building deliveries have accounted for the low vacancies. Building functionality and efficiency are key. Industrial buildings that are poor in the areas of efficient power, lighting, clear height, loading and access continue to sit. Companies do seek buildings with state-of-the-art features, and will enter other markets to find them, as long as there is labor.”

O’Brien said warehouse facilities, especially in the e-commerce segment, accounted for more space needs. Amazon plans to add its first mid-Michigan fulfillment center. Flex spaces also were in demand. Companies that focus on distribution of consumable products, and companies and contractors related to building and home improvement, were emerging in the market in the third quarter. 

Advanced Architectural Products, designer and manufacturer of insulation systems and thermal bridging, was one company that expanded. It added a $1.1 million expansion to its Allegan facility.

While some office users have started coming back to work in person, the office 2021 third quarter market overview revealed “employees are not flocking back to the office as those in commercial office real estate had hoped.”

With fears of the delta variant of COVID-19 and changes in safety protocols, Colliers said many employers are declining to sign new leases or buy office properties; however, medical offices continued to lead activity in the office market.

While slower overall, there were some office transactions that occurred during the third quarter. D.A. Blodgett-St. John’s sold its Leonard Street campus to Hope Network, which will allow nonprofit services to continue at the property as D.A. Blodgett constructs its new headquarters. A two-story building at Eaglecrest Office Park in northeast Grand Rapids was sold to an owner-occupant medical practice.

“It’s certainly been very challenging in the office sector, but companies that were making moves were able to find space that is high quality and ready for employees to begin work immediately,” said Scott Morgan, senior vice president with Colliers. “The next few months may tell us more about what the office sector will look like going forward as more employers finalize plans about returning to work or keeping parts of their business remote.”

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