The West Michigan State of the Market Report
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West Michigan is not only the birthplace of the nationally known Founders Brewing Company, it is also home to more than 130 international companies and well-known corporations such as: Amway, Bissell, Pfizer, Stryker Corporation, Steelcase, Herman Miller, Bell’s Brewery, Arcadia Brewing, Meijer, and Kellogg’s. Primarily made up of the cities of Grand Rapids, Holland, Kalamazoo, and Muskegon, West Michigan was formerly known as a furniture manufacturing mecca but is now one of the most diverse regions in the state.
With the median age of 37.8 years old, West Michigan residents are younger than the state (40.2 years old), and the nation (38.3years old)1. Residents here are also well-educated and well-compensated with over a third of the population having an associate degree or higher. Because of a 2.7% increase in population over the past five years2, multifamily developers have delivered approximately 3,800 new apartment units into the market since 2016 with an additional 800+ apartment units expected to be completed in 2019. Looking forward, with an expected population growth rate of approximately 3.3% over the next five years3, growth in demand for additional multifamily options will likely continue.
The manufacturing, information technology (IT), life sciences, aerospace and defense, and food processing industries are the main sectors driving the growth of West Michigan. Of particular note, manufacturing companies make up roughly 15% of all jobs in the region and have been heavily investing capital into new equipment and technology to help propel their organizations into the future.
Industrial Real Estate Highlights
As it relates to West Michigan’s industrial real estate market, this sector continues to thrive as numerous companies have begun or are planning to begin expansion projects. In 2018, the positive business climate resulted in the expansion of more than ten companies, increasing the region’s industrial footprint by approximately 1 million square feet. With continued demand and declining supply, asking rates have increased, a trend that we expect to continue at least through the first half of 2019
Commercial Office Market Highlights
The rise in new office construction and renovation projects through West Michigan has been a key driver for the increase in lease rates within this region. Since 2016, more than 1.6 million square feet of office space has been added to the market, with 9.84% of that occurring in 2018. In downtown Grand Rapids, as several projects that are under construction will soon be completed, additional supply is expected to lower lease rates. On a positive note, 2018 brought a handful of sublease options offering a number of opportunities in the downtown area. We anticipate the absorption of sublease space in the market to continue grow in 2019 as existing tenants move to newer buildings.
Commercial Retail Property Highlights
Across the nation, the commercial retail sector has experienced significant change forcing shopping malls to change and upgrade. In line with this trend, the West Michigan region is experiencing heightened investments at shopping malls and grocery-anchored developments. For neighborhoods that link to the Central Business Districts, the availability of parking combined with a walkable environment has been a key driver of growth and asking rates have increased as a result.
Multifamily Market Highlights
With the changing housing preferences of the growing Millennial population, construction of new apartment units has exploded in the West Michigan market over the past several years. From 2015 to 2018, more than 4,400 new units have come online and more impressive, 50% of those new units were constructed in 2018 alone. At the end of 2018, more than 1,200 apartment units were under construction that are expected to be completed in 2019, a healthy indication of unit absorption for the market. As the market is expected to see a 3.0%+ increase in population over the next five years, we anticipate this trend to continue into 2019.