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MARKET INDICATORSRELATIVE TO PRIOR PERIOD
CBD/Downtown Q2 2017
CBD/ DowntownQ3 2017*
Suburban Q2 2017
Suburban Q3 2017*
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE
Note: Construction is the change in Under Construction. *Projected
Tenants Moving Around in Market, Positioning for Future
Research & Forecast Report
WEST MICHIGAN | OFFICEQ2 2017
KEY TAKEAWAYS » The Grand Rapids-Wyoming MSA now has an
unemployment rate under 3.0% (was 2.8% at the end of May). This is signifi cantly lower than the 4.4% unemployment rate for the nation and 4.2% for the state.
» The Grand Rapids offi ce market continued its streak of positive net space absorption, reaching its 26th consecutive quarter.
» Total market asking rates increased approximately 16 basis points, however Downtown rates seem to have hit a ceiling for now.
» We have seen a number of small and medium-sized offi ce tenants in the suburbs downsize or close, as the remote working trend continues to take hold.
» Tenant lease activity has dropped some, as many users are increasingly interested in owning their real estate rather than renting. However, those who are renting are jockeying for position in an increasingly tight and competitive market.
ECONOMIC OVERVIEWNationally, the economy continued to add jobs in the second quarter, with an unexpectedly high June net total of 220,000. This represented the 81st consecutive month of growth. Wages grew 2.5% in June compared to a year ago, however this was below the 3.5% goal of the Federal Reserve. Wages, especially in West Michigan, have been one
of the last indicators to pick up momentum since the recession ended in 2009.
Locally, the Grand Rapids metropolitan area ranked as the number one
region in the country for job growth in 2016, according to data collected and recently released by the U.S. Bureau of Labor Statistics. Grand Rapids’ 4.4% growth was more than double the national average of 1.7%. So far in 2017, the region has averaged 2.56% year-over-year growth, showing the trend is still positive, but slowing.
Jeff Hainer Senior Research AnalystGlen Gerwatowski Assistant Research AnalystThe information contained herein is collected and analyzed by the Colliers International | West Michigan Research Department.
CONSTRUCTION TRACKER
275,115SQUARE FEET
10PROJECTS
OFFICE SPACE UNDER CONSTRUCTION
2 West Michigan Research & Forecast Report | Q2 2017 | Offi ce | Colliers International
80
4Q16 1Q17 2Q17
70
60
50
40
30
20
10
0
60%
50%
40%
30%
20%
10%
0%
LEASES SALES % OF TOTAL MARKET ACTIVITY
300 OTTAWA
8 Floors
131,000 Total SF
35,099 Available SF
200 OTTAWA
10 Floors
178,700 Total SF
18,555 Available SF
25 OTTAWA
5 Floors
81,041 Total SF
0 Available SF
45 OTTAWA
11 Floors
111,423 Total SF
0 Available SF 38 COMMERCE
7 Floors
44,900 Total SF
15,787 Available SF
333 BRIDGE ST
17 Floors
353,252 Total SF
53,322 Available SF
Parking
Parking
99 MONROE
12 Floors
186,957 Total SF
3,641 Available SF 250 MONROE
9 Floors
171,000 Total SF
87,380 Available SF
171 MONROE
10 Floors
166,244 Total SF
2,998 Available SF
169 MONROE
3 Floors
23,388 Total SF
9,581 Available SF
Parking
161 OTTAWA
6 Floors
131,953 Total SF
43,338 Available SF
Residential
2
3
4
5
6
78
9
10
11
= Available SpaceUnder Renovation
1
A key metric used to analyze the health of the local offi ce market is the MADA Offi ce Furniture Index; a measure of orders, shipments, investment, and costs as provided by local offi ce furniture manufacturers. April’s survey returned an index rating of 55.41, which is above the historical average of 54.89. A rating above 50 represents positive sentiment. This generally equates to companies expanding or refreshing their offi ce space.
MARKET ACTIVITYAfter more than 100,000 square feet of net positive absorption in the fi rst quarter, the Grand Rapids offi ce market saw another 108,574 square feet absorbed in the second quarter, bringing the mid-year total to 210,265 square feet. The downtown vacancy rate continues to hover around 10% and the suburban total is now 16%.
Of the market’s 12 submarkets, all but three saw an increase in average asking rates. We predicted the downtown market would reach a resistance point around $20 per square foot (Modifi ed Gross), and we have seen that come to fruition so far this year. Many tenants
have decided to exercise renewal options rather than relocate, due
to recent increases in market rates. With the cost of construction still high and demand for modern spaces pent-up, we expect rental rates to remain fi rm in the near-term.
Several companies moved or announced plans to move from downtown out to the suburbs. Compass Insurance Agency moved to 280 Ann Street NW from 525 Ottawa Avenue NW, tripling their footprint to 15,000 square feet. Additionally, Management Business Solutions moved to 2935 Buchanan Ave SW from 77 Monroe Center downtown, increasing their footprint from 1,200 square feet to 8,200 square feet. Desire to expand as well as lack of convenient parking downtown was cited as factors in the decisions.
Conversely, Integrated Architecture announced plans to move its offi ces from 4090 Lake Drive SE in Kentwood to 840 Ottawa Avenue NW, downtown. The new headquarters will be 13,600 square feet and the fi rm will make a small addition to the building. The fi rm is planning on investing nearly $1.5 million into the property, and is seeking an Obsolete Property Rehabilitation Exemption from the city to help off set some of those costs.
Moving within the downtown area was Legal Aid of Western Michigan, moving out of 89 Ionia NW to 25 Division Avenue S.
- Continued on page 4
VACANCY RATES
DOWNTOWN SKYLINE
OFFICE MARKET ACTIVITY
WEIGHTED AVERAGE ASKING RATE
29%
25%
21%
17%
13%
9%
5%2Q14
CBD SUBURBAN COMBINED
4Q14 2Q15 4Q15 2Q16 4Q16 2Q17
Q2 2014 - Q2 2017
AS OF 7/1/17
KENT COUNTY
PER CORRIDOR
SOURCE: RESEARCH DEPARTMENT, COLLIERS INTERNATIONAL | WEST MICHIGAN
$0
$5
$10
$15
$20
$25
CBD
Airp
ort A
rea
Burt
on/B
reto
n
Casc
ade
Cent
enia
l Par
k
East
Bel
tline
East
Par
is
Nort
heas
t
Nort
hwes
t
Sout
heas
t
Sout
hwes
t
Dow
ntow
n
3 West Michigan Research & Forecast Report | Q2 2017 | Offi ce | Colliers International
GREATER DOWNTOWNCBD* 60 3,725,015 422,350 11.34% 3,302,665 7,587 $20.59 $20.50
Downtown 38 1,892,419 155,700 8.23% 1,736,719 19,262 $19.61 $19.61
DOWNTOWN TOTAL 98 5,617,434 578,050 10.29% 4,949,899 26,849 $20.25 $20.17
SUBURBANAirport Area 22 805,096 260,897 32.41% 544,199 -9,797 $11.06 $11.81
Burton/Breton 32 682,008 155,794 22.84% 526,214 44,775 $14.66 $14.14
Cascade 95 2,066,780 223,608 10.82% 1,843,172 -3,421 $12.40 $13.36
Centennial Park 33 1,034,555 133,644 12.92% 900,911 -2,980 $15.26 $15.20
E Beltline Corridor 61 1,388,002 199,889 14.40% 1,188,113 11,908 $14.76 $15.24
E Paris Corridor 61 1,664,183 154,005 9.25% 1,510,178 -2,334 $16.91 $17.15
Northeast 46 616,391 99,683 16.17% 516,708 7,140 $14.62 $15.26
Northwest 60 779,788 192,645 24.70% 587,143 12,919 $13.74 $14.43
Southeast 98 2,259,808 434,805 19.24% 1,825,003 2,227 $13.04 $13.53
Southwest 99 1,897,967 256,047 13.49% 1,641,920 21,288 $13.15 $13.50
SUBURBAN TOTAL 607 13,194,578 2,111,017 16.00% 11,083,561 81,725 $13.71 $14.13
MARKET TOTALS 705 18,812,012 2,689,067 14.29% 16,122,945 108,574 $15.26 $15.50 Past statistics are subject to quarterly adjustments to improve accuracy going forward. All rates calculated on a Modifi ed Gross basis.
* Vacancy correction has been made to 161 Ottawa Avenue NW
LEASING ACTIVITYPROPERTY NAME SIZE (SF) TENANT CITY
1345 Monroe Avenue NWSuite 320 2,069
Forensic Analytical
Consulting Services
Grand Rapids
99 Monroe Avenue NW (Expansion) 1,891
Custer Workplace
InteriorsGrand Rapids
551 36th Street SE 6,050 Hope Network Grand Rapids
1525 East Beltline Avenue SE 4,115
ClearWater Counseling & Wellness, LLC
Grand Rapids
32 Market Avenue SW 2,769 Securitas Security
Grand Rapids
829 Forest Hill Avenue SE
32 Market Avenue SW
SALE ACTIVITYPROPERTY NAME SIZE (SF) SALE PRICE CITY
3330 Claystone Street SE 7,428 $700,000 Grand Rapids
829 Forest Hill Avenue SE 17,630 $1,550,000 Grand
Rapids
1111 40th Street SE 16,732 $412,000 Grand Rapids
851 Leonard Street NW & 850/860 Courtney Street NW 11,742 $685,000 Grand
Rapids
570 E. Division Avenue NE 7,243 $815,000 Rockford
OFFICE MARKET STATISTICS
SUBMARKETNUMBER OF BUILDINGS
EXISTING INVENTORY
(SF)VACANCY
(SF) VACANCY RATEOCCUPIED
SPACE (SF)
NET ABSORPTION Q2 2017 (SF)
Q1 2017 WEIGHTED AVG ASKING RATE
Q2 2017 WEIGHTED AVG ASKING RATE
CONSTRUCTIONThe downtown market continues to see new offi ce space added to the inventory. During the second quarter, Adtegrity moved into just under 20,000 square feet of offi ce space that was recently built above New Holland Brewing’s The Knickerbocker. Rockford Construction also has broken ground on a mixed-use development just down the road at Bridge Street and Stocking Avenue that will include 56,000 square feet of offi ce space. Approximately 20,000 of that is already committed-to by the West Michigan Center for Arts + Technology (WMCAT). Additionally, Orion Construction broker ground in June on their mixed-use development project located at 150 Ottawa Ave NW, which will include 120,000 square feet of offi ce space.
Orion Construction offi cially broke ground on the new mixed-use development at 150 Ottawa Ave NW downtown, which will contain 120,000 square feet of offi ce space. The building will house law fi rm Warner Norcross & Judd, as they relocate from 111 Lyon St NW. The building is expected to be ready for occupancy in 2019.
In addition to new construction, many buildings have gone through
or are planned for renovation. The 171,000-square-foot Calder Plaza Building at 250 Monroe Avenue NW has undergone signifi cant upgrades, which resulted in the commitment of Bank of America to consolidate a number of offi ces into the building. Additionally, 330,000-square-foot 111 Lyon Street NW is slated to undergo a similar transformation, and the currently-vacant 50 Monroe building will be re-split and converted into an AC Hotel and renovated offi ce building. 50 Monroe was one of four properties recently green-lit for Brownfi eld tax credits.
In the suburbs, the Atrium Building at 3351 Claystone Street SE underwent a major renovation and saw SalesPad expand into a new 30,000-square-foot space after taking an ownership interest in the building. They moved out of approximately 17,000 square feet on the East Beltline. Additionally, First Companies announced the purchase of four acres to continue to expand their Heritage Pointe offi ce campus on East Paris Avenue near Cascade Road.
Copyright © 2017 Colliers International.The information contained herein has been obtained from sources deemed reliable. While every reasonable eff ort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.
Colliers International | West Michigan333 Bridge Street NW, Suite 1200Grand Rapids, MI 49504+1 616 774 3500
colliers.com/westmichiganmedium.com/@collierswestmichigan
Colliers International | Holland44 E. 8th Street, Suite 510Holland, MI 49423+1 616 394 4500
Colliers International | Lansing246 E. Saginaw Street, Lansing, MI 48823+1 517 512 7400
WEST MICHIGAN OFFICE TEAMFOR MORE INFORMATION
Jeff Hainer
Senior Research AnalystDIR +1 616 988 5811jeff [email protected]
Glen Gerwatowski
Assistant Research AnalystDIR +1 616 988 [email protected]
Gary Albrecht
Senior AssociateDIR 616 242 [email protected]
Gabe Audu
AssociateDIR 616 242 [email protected]
Tom DeBoer SIOR, CCIM
Senior Vice PresidentDIR 616 988 [email protected]
Kris DePree
President | HollandDIR 616 355 [email protected]
Deb Middleton
Executive AssistantDIR 616 988 [email protected]
Scott Morgan JD
Senior Vice PresidentDIR 616 988 [email protected]
Jason Webb CCIM
Associate Vice PresidentDIR 616 988 [email protected]
David Wiener
Senior Vice PresidentDIR 616 988 [email protected]
Offi ces located in
68 countries on
6 continents with
15,000 professionals.$2.6* billion in annual brokerage revenue
2 billion square feet under management
72,000 sale & lease transactions
with a total transaction value of
$105 billion.*All statistics are for 2016, are in
U.S. dollars and include affi liates.
