Office, Industrial & Retail Greater Grand Rapids Market Report Q3 2023
Grand Rapids | Holland www.cbcworldwide.com
about our company At Coldwell Banker Commercial® Schmidt Family of Companies, we are a commercial leader in real estate and property management in Michigan, Florida, Ohio, and the U.S. Virgin Islands. Schmidt Family of Companies is the #1 Coldwell Banker Commercial franchisee and the #2 overall Coldwell Banker franchisee nationally. Schmidt Family of Companies has a fully committed national Commercial support staff providing market leading resources, education, and marketing materials. Schmidt Family of Companies is a fifth generation real estate firm and is one of the largest and most successful real estate firms in the country.
Office, Industrial & Retail Greater Grand Rapids
Grand Rapids | Holland Region
3Q 2023
greater grand rapids area | snapshot of counties covered
*Information in this report gathered from Costar.
Grand Rapids | Holland Region
INDUSTRIAL REPORT
3Q 2023 VACANCY VS. ABSORPTION Net Absorption
Vacancy
$6.61 Market Rent/SF/YR
2.4% Vacancy Rate
MARKET RENTS
93,453 Net Absorption in SF
Noted Lease Transactions Tenant
Building
Size
County
Comfort Research
2925 Walkent Ct
63,250 SF
Kent
Helios
5333 33rd St SE
45,975 SF
Kent
Dicastal Logistics Group
4440 44th St SE
45,000 SF
Kent
Noted Sale Transactions Buyer
Building
Sale Price
County
Grand Valley State University
620 Watson St SW
$9,282,000
Kent
Grand Valley State University
520 Watson St SW
$7,007,000
Kent
Kamar Partners
2530 Kamar Dr
$6,050,000
Ottawa
Industrial Update The industrial sector in the greater Grand Rapids market continues to perform well. The Q3 overall vacancy rate of 2.4% is down from 2.9% as of Q3 of 2022 and is well below the current national average of 4.7%. Over the last 12 months, approximately 2.6 million SF has been absorbed within the market although Q3 showed a significant decrease in net absorption compared to the prior quarter. The largest new lease signed over the last year happened in December 2022 when Brasswater signed for 739,000 SF at 1040 40 th St SE in the S Grand Rapids/Kentwood submarket. The Grand Rapids market annual rent growth has been increasing for the last several years, reaching an alltime high of 9.1% during Q4 of 2022. Since then, the annualized rent growth has been slowly decreasing and sits at 6.7% as of Q3, slightly below the US average of 7.7%. The Grand Rapids market though remains a very affordable industrial market with average rents of $6.61/SF, below the Detroit average rent of $8.40/SF and the national average of $11.60/SF. Approximately 1.6 million SF of construction continues across the Grand Rapids market. The W Grand Rapids/Walker submarket has just over 580,000 SF underway across four properties and the Southeast Kent County/Caledonia submarket (just south of the Gerald Ford International Airport) has 500,000 Sf underway across five projects. Sales over the past 12 months totaled just over $300 million. Specialized property sales (including manufacturing) accounted for $231 million of the total and logistics properties accounted for the remaining $70.5 million. The current cap rate of around 8.7% comes below Detroit’s 9.6% which will continue to attract investors looking for lower-risk yields within Michigan.
Grand Rapids | Holland Region
OFFICE REPORT
3Q 2023 VACANCY VS. ABSORPTION Net Absorption
Vacancy
$20.07 Market Rent/SF/YR
7.1% Vacancy Rate
MARKET RENTS
42,925 Net Absorption in SF
Noted Lease Transactions Tenant
Building
Size
County
West Michigan Transport
5222-5230 33rd St SE
10,000 SF
Kent
Northwestern Mutual
Bridgewater Place
8,963 SF
Kent
Certe Drive
Campau Square Plaza
8,947 SF
Kent
Noted Sale Transactions Buyer
Building
Sale Price
County
Galactic Toys
5070 Cascade Rd SE
$2,600,000 SF
Kent
Monarch Holdings
6 Sherman
$2,200,000 SF
Ottawa
Unknown
Huntington Bank
$975,000 SF
Kent
Office Update The office sector in the greater Grand Rapids market has stabilized after moving between negative and weak demand over the last few years. The vacancy rate of 7.1% is just up 30 basis points over the rate a year ago. There has been a net absorption of approximately 320,000 SF over the last 12 months but is important to note that tenant demand varies by property quality. 4&5 Star properties accounted for 170,000 SF of this total and 3 star properties accounted for 270,000 SF of net absorption. However, 1&2 Star quality space experienced 120,000 SF being returned to the market with move-outs. Rent growth has been affected by the gradual increase in vacancies and stands at 1.8% as of Q3. As recently as Q4 2022, annualized rent growth reached 3.5%. However, the Grand Rapids office market still is outperforming the national average annual rent growth of 0.8%. There have been 19 office properties delivered in the Grand Rapids market since the beginning of 2022. 70% of this space (approximately 569,000 SF) has been delivered within the Central Grand Rapids submarket and is mainly composed of the MSU Medical Innovation Building and the Doug Meijer Medical Innovation Building. Construction is still occurring but at a slower pace. In Q3, around 270,000 SF was under construction. Over the last year, $81.7 million in office properties have been sold. 3 Star properties accounted for $46.1 million and 1&2 Star properties accounted for $35.6 million of the total. The market cap rate has been moving upward and is now above 10%.
Grand Rapids | Holland Region
RETAIL REPORT
3Q 2023 VACANCY VS. ABSORPTION Net Absorption
Vacancy
$14.65 Market Rent/SF/YR
3.2% Vacancy Rate
MARKET RENTS
71,632 Net Absorption in SF
Noted Lease Transactions Tenant
Building
Size
County
Ross Dress For Less
Rogers Plaza Town Center
25,000 SF
Kent
Unknown
The Village at Knapp’s Crossing
7,344 SF
Kent
The Hangout
Center Town Mall
3,951 SF
Kent
Noted Sale Transactions Buyer
Building
Sale Price
County
Alrig USA
6333 Kalamazoo Ave
$5,470,000
Kent
JRA Associates
Walgreens
$4,800,000
Kent
Zeigler Auto Group
Elhart
$3,576,000
Ottawa
Retail Update Retail in the greater Grand Rapids area remains strong despite continued headwinds. According to CoStar, the vacancy rate ticked up in Q3 for retail settling at 3.2% which is 100 basis points below the national average. The vacancy rate increase is a step in the right direction for the local retail market with a healthy rate being between 5% and 10%. Most recently, discount retailers such as TJ Maxx and Dollar General dominated the charts with the largest retail leases signed in 2023. Following the national deceleration of inflation, the annual rent increase is sitting right at 3.4%, just below the national average of 3.5%. This increase is closely aligned with long-term trends for the area and a welcomed change from the 6.3% all-time high of 22Q3. Average rental rates for the larger Grand Rapids area are at $14.65/SF which is 50% lower than the national average. New development for commercial space continues to press onward despite high interest rates and construction costs. New projects over the past year totaled 190,000 SF of retail of which 47,000 SF is still underway. 71,438 SF of retail and office space located at 8381 Westway Park in Zeeland was the largest completed project this year and is already fully leased. After a strong 2021 and record breaking 2022, retail sales is starting to see a bit of a slowdown. Macroeconomic issues such as interest rate uncertainty and drying liquidity are finally starting to challenge inflated asking prices on properties. That being said, Grand Rapids still saw $185 million change hands as of 23Q3 which is a result of the long-term fundamentals and economic growth in the area.
kent mueller 616.888.5868 kent.mueller@cbsrcommercial.com
caleb driesenga 616.283.8205 caleb.driesenga@cbgreatlakes.com