Commercial real estate market showing signs of recovery in West Michigan
Retail has been hardest hit by COVID-19 restrictions and circuits, but West Michigan’s commercial real estate sector is showing signs of recovery and is causing optimism among experts.
“Retailers are cautiously optimistic for the months ahead as we see signs of recovery,” Earl Clements, senior vice president of the Colliers International West Michigan office, said in a statement. “Retailers and restaurants have worked hard to adapt during COVID-19 and they continue to do so, resulting in processes and practices that are likely to persist after the pandemic.”
According to a recent Colliers market trend report, the first quarter of 2021 had a vacancy rate of 5.1 percent for retail space in Grand Rapids, a slight decrease from the previous quarter. The vacancy rate could easily rise again as landlords try to recoup the previously lower rents, according to the report.
Colliers’ consultants saw tenants who worked in many segments including groceries, housewares, furniture and home improvement. More activity is associated with medical tenants, fitness, and restaurants with and without drive-thrus.
Some malls are also seeing more activity than they did before the pandemic, said Jeff Tucker, senior managing director for brokerage and principal at Bradley Co. While retailers have seen some job relocation during the pandemic, the sector is returning, Tucker said, also with some small box retail expansions.
“Restaurant activity is growing significantly, especially those less affected by COVID-19 because they were able to benefit from take-out operations or drive-thrus,” Tucker said.
Despite a recent spike in COVID-19 cases, Governor Gretchen Whitmer has not issued any new lockdown restrictions comparable to 2020 orders. Some restaurants have decided to voluntarily close as Michigan leads the way in rates of new COVID-19 cases.
The industry continues to thrive
The industrial sector remains a ray of hope for the real estate market both during the pandemic and in the first quarter of 2021. According to Colliers’ market report, the vacancy rate is 1.68 percent nationwide with high demand and scarce supply. Construction costs remain high and interest rates low.
“Industrial supply continues to lag behind demand and there has been almost no speculative building,” said Julie O’Brien, vice president of Colliers International’s West Michigan offices. “We have companies that want to grow but remain cautious in the current market. We’ll continue to see a drop in vacancy rates, which means more competition for growing businesses like e-commerce. ”
Optimistic about the office
The Grand Rapids office market remains on hold with a vacancy rate of nearly 9.59 percent, which is expected to increase based on Colliers’ market forecast.
“The office area has certainly been challenging throughout the COVID-19 pandemic, but we are optimistic that vaccine delivery and the listing of restrictions on personal work will affect office attendance,” said Scott Morgan, senior Vice President at Colliers’ West Michigan office. “While it’s uncertain whether big strides will be made in the office space this year, we know companies will be looking for new and different spaces to enable social distancing.”
While personal office work is ongoing, “the future for the Grand Rapids office market is bright,” said Chip Bowling, senior adviser and principal at Bradley Co.
“For the West Michigan office market in particular, consumer morale has risen,” said Bowling. “Consumer confidence has increased, the brokerage of offices has increased, the execution of leases has increased. Some companies are finding employee convenience in home offices, but other companies are finding that they need their employees in the office more than ever. ”