new construction allowing companies and market to expand · 2 west michigan research forecast...
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New Construction Allowing Companies and Market To Expand
Research & Forecast Report
WEST MICHIGAN | INDUSTRIALQ1 2017
REGIONAL SUMMARYWest Michigan’s industrial market has grown back steadily since the recession, as companies within the region continue to benefit from the tailwinds created by the national economy entering its 94th straight month of expansion. Consumer confidence is strong, the housing market has fully recovered, and the stock market has seen record highs.
Some headwinds do exist, however. Across the region and country, labor markets are relatively tight and employers are having difficulty finding skilled workers. As a result, employers will likely face higher costs in attracting new workers, as well as maintaining existing ones. Forecasts for car and light truck sales are lower for 2017 and 2018 than the 18 million–plus mark they hit in 2016, posing a potentially negative effect on these automakers’ supply chains. At the beginning of the year, forecasters at the Research Seminar in Quantitative Economics at the University of Michigan predicted a reduction in manufacturing employment in the state over the next two years; however, since then both Ford and Fiat Chrysler have made commitments to auto manufacturing in the state. Additionally, the strong dollar is affecting exports by driving up the cost of U.S. goods compared to those of foreign competitors; and the office furniture industry, which has a strong local presence in West Michigan, is seeing a plateauing of sales and index readings.
Legislation out of Washington that is affecting local manufacturers includes a proposed $54 billion hike in defense spending, which is good news for local
aerospace suppliers across West Michigan. These companies include JedCo, Inc. in Grand Rapids, and Woodward, Inc. and Plascore, Inc. in Zeeland.
MARKET SUMMARYOverall occupancy in the West Michigan industrial market now sits at 94.74%, even after nearly 1.3 million square feet of new space was built and added to the market inventory in the first quarter. This translated into net quarterly absorption of 1,588,459 square
MARKET INDICATORSRELATIVE TO PRIOR PERIOD Q1 2017 Q2 2017*
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE Note: Construction is the change in Under Construction. *Projected
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
1,351,105 SQUARE FEET
17PROJECTS
INDUSTRIAL SPACE UNDER CONSTRUCTION
2 West Michigan Research & Forecast Report | Q1 2017 | Industrial | Colliers International
1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17
95%
94%
93%
92%
91%
$5.00
$4.50
$4.00
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
45
40
35
30
25
20
15
10
5
01Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17
WEIGHTED AVG LISTING RATE
OCCUPANCY RATE
-200 0 200 400 600 800 1000 1200 1400 1600
2Q 143Q 144Q 141Q 152Q 153Q 154Q 151Q 162Q 163Q 164Q 16 1Q 17
QUARTERLY ABSORPTIONfeet. Average weighted asking rental rates showed little overall movement from a quarter ago, however the Northwest industrial submarket saw a nearly 12% increase, largely due to a number of new development opportunities listed for lease.
Completed transactions in the region increased from a quarter ago, with a 56% increase in sales and a 36% increase in leases. The 34 on-market leases completed is 11.5% higher than the quarterly average of 30.5 since 2013
The market continues to see companies expand and move within it, and we saw a number of new companies come to the market as well in the first quarter. With limited options, creative solutions and off-market deals continue to drive activity – a theme we have seen over the past number of quarters.
MARKET ACTIVITYA number of companies have alleviated space constraints by adding additional square footage or building entirely new buildings. Many of these moves happened recently in the historically active Southeast industrial submarket. Lacks Enterprises delivered approximately 500,000 square feet of warehouse/distribution space on Kraft Avenue SE, while Gourmet International delivered its new 125,000 square foot building on Patterson Avenue SE. ETO Magnetic moved out of its space at 4323 Patterson Avenue SE, and into its newly constructed building down the street at 5925 Patterson Avenue SE. In addition, Grooters Development broke ground on Phase II of Area 52 on 52nd Street SE, with plans to speculatively construct 210,000 additional square feet to the project. Phase I has seen success in leasing, and is now fully occupied.
New to the market is California Closets, which chose the region due to its pedigree of designers and skilled craftsmen, even though those workers are currently in short supply. The Berkeley-based company leased and moved into nearly 140,000 square feet at 4930 Kraft Avenue SE. Additionally, Italy-based Siliconature Corporations announced it will establish the company’s first North American manufacturing facility at 4495 68th Street SE in Kentwood, creating at least 26 high tech manufacturing jobs, and 61 jobs overall. The company is investing approximately $5.7 million to develop the facility, with help from a $335,000 Michigan Business Development Program performance-based grant from the MEDC. Finally, Denmark-based Gabriel North America announced its plans to open its first North American office, investing $30 million into a 30,000 square foot facility at 560 5th Street NW, creating 56 new jobs.
Additional market activity included:
» Amerhart, a regional distributor of building materials, opened a warehouse at 1655 Steele Avenue SW.
» Bemis Manufacturing Co., a Wisconsin-based manufacturer of plastic extrusion components for health care and automotive industries, who was acquired by Custom Profile Inc., announced plans to relocate to West Michigan, investing $2.3 million in expanding its facility at 2535 Waldorf Court NW in Walker.
» Ferris Coffee & Nut Company will consolidate its operations under one roof in Grand Rapids after purchasing the former American Seating building at 601 7th Street NW at the end of 2016.
INDUSTRIAL TRANSACTIONS AND WEIGHTED AVERAGE
SOURCE: RESEARCH DEPARTMENT, COLLIERS INTERNATIONAL | WEST MICHIGAN
ASKING RATES
SUBMARKETQ4 2016
WEIGHTED AVG ASKING RATE
Q1 2017 WEIGHTED AVG
ASKING RATEDowntown $3.41 $3.48
Northeast $5.59 $5.51
Northwest $4.70 $5.26
Southeast $3.52 $3.64
Southwest $4.76 $4.74
Outside Metro Area $2.75 $2.58
TOTALS $4.38 $4.39
*INCLUDES LISTED PROPOSED BUILDINGS
3 West Michigan Research & Forecast Report | Q1 2017 | Industrial | Colliers International
LEASING ACTIVITY PROPERTY NAME SIZE (SF) TENANT CITY
2547 3 Mile Road NW 80,000 Foremost Graphics Group
Grand Rapids
4950 Kraft Avenue SE 58,500 ColorHub Grand Rapids
3111 N. Wilson Court NWSuite C 50,750 Plasan North
AmericaGrand Rapids
3637 Sysco Court SE 18,300 Undisclosed Grand Rapids
2640 West River Drive NE 62,805 Comfort Resource Walker
Concept Industries
3030 Corporate Grove DriveSALE ACTIVITY PROPERTY NAME SIZE (SF) SALE PRICE CITY
2756 Hillside Drive NW 13,100 $519,000 Grand Rapids
10451 Northland Drive NE 36,000 $1,325,000 Rockford
5466 36th Street SE 5,600 $490,000 Grand Rapids
3939 N. Greenbrooke Drive SE 28,860 $1,625,000 Kentwood
3030 Corporate Grove Drive 68,571 $2,360,000 Hudsonville
Downtown 273 15,085,174 664,615 4.41% 14,420,559 19,395
Northeast 110 5,129,009 103,706 2.02% 5,025,303 --
Northwest 262 16,338,526 1,342,324 8.22% 14,996,202 326,136
Southeast 663 48,851,984 2,115,551 4.33% 46,736,433 916,794
Southwest 485 26,649,780 1,623,804 6.09% 25,025,976 147,334
Outside Metro Area 93 4,264,501 266,591 6.25% 3,997,910 178,800
TOTALS 1,886 116,318,974 6,116,591 5.26% 110,202,383 1,588,459
Flex Space 104 3,354,327 263,577 7.86% 3,090,750 32,625
Food/Freezer 21 3,215,625 -- -- 3,215,625 --
General 1,271 39,190,984 2,748,337 7.01% 36,442,647 (54,325)
Manufacturing 338 45,705,917 1,551,555 3.39% 44,154,362 446,061
Mini Warehousing 19 1,224,678 129,584 10.58% 1,095,094 221,416
Truck Terminal/Cross Dock 133 23,627,443 1,423,538 6.02% 22,203,905 942,682
Warehouse/Storage 1,886 116,318,974 6,116,591 5.26% 110,202,383 1,588,459
TOTALS 1,887 115,019,042 6,440,690 5.60% 108,578,352 457,025
INDUSTRIAL MARKET STATISTICS
SUBMARKET
PROPERTY SUBTYPE
NUMBER OF BUILDINGS
NUMBER OF BUILDINGS
EXISTING INVENTORY (SF)
EXISTING INVENTORY (SF)
VACANCY (SF)
VACANCY (SF)
VACANCY RATE
VACANCY RATE
OCCUPIED SPACE (SF)
OCCUPIED SPACE (SF)
NET ABSORPTION Q1 2017 (SF)
NET ABSORPTION Q1 2017 (SF)
» Sigma Machine Inc. plans to invest $27.8 million in expansion into Midlink Business Park in Comstock Township. The company serves as a Tier 1 supplier to Tesla Motors and companies in medical device and food processing industries.
» Foremost Graphics moved out of 1340 Monroe Avenue NW as Franklin Partners moves forward with redevelopment plans. The company expanded and moved into 80,000 square feet at 2547 3 Mile Road NW.
» FedEx, and general contractor AJ Veneklasen, completed their new 351,000 square foot distribution terminal in Walker.
» MC Sports, which filed for Chapter 11 bankruptcy in the first quarter, has vacated its warehouse space at 5001 Kendrick Street SE.
» Family Christian Bookstores also filed for bankruptcy and vacated warehouse space at 4480 44th Street SE.
FINAL THOUGHTSkilled labor continues to be a topic of conversation going forward, however a development that continues to change the landscape of manufacturing is automation. As manufacturers increase the use of robotics in their business processes, particularly in the monotonous areas like using 2-D and 3-D laser inspections on parts, jobs for robotics programing and maintenance will continue to grow. Analytical and management positions will grow in value as a result, as processes become intricate. As operations become more streamlined and efficient, we will look to see how real estate needs of companies associated with this trend continue to evolve.
WEST MICHIGAN INDUSTRIAL TEAMFOR MORE INFORMATION
Jeff HainerSenior Research AnalystDIR +1 616 988 [email protected]
Glen GerwatowskiAssistant Research AnalystDIR +1 616 988 [email protected]
Matt Abraham CCIMSenior Vice PresidentDIR 616 988 [email protected]
Jason DewittAssociate | HollandDIR 616 355 [email protected]
John Kuiper SIOR, CCIMExecutive Vice President & Designated BrokerDIR 616 988 [email protected]
Cheryl LindgrenExecutive AssistantDIR 616 988 [email protected]
Steve Marcusse SIOR, CCIMSenior Vice PresidentDIR 616 988 [email protected]
Tom Postma SIORPrincipal | HollandDIR 616 355 [email protected]
Tim Van NoordAssociateDIR 616 988 [email protected]
Matt WickstraAssociate | HollandDIR 616 355 [email protected]
Trent WieringaSenior AssociateDIR 616 988 [email protected]
Offices located in 68 countries on
6 continents with15,000 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 affiliates.
Copyright © 2017 Colliers International.The information contained herein has been obtained from sources deemed reliable. While every reasonable effort 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.
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