Tenants moving around in market, positioning for future
» The Grand Rapids-Wyoming MSA now has an unemployment rate under 3.0% (was 2.8% at the end of May). This is significantly lower than the 4.4% unemployment rate for the nation and 4.2% for the state.
» The Grand Rapids office 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 office 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.
Nationally, 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.
A key metric used to analyze the health of the local office market is the MADA Office Furniture Index; a measure of orders, shipments, investment, and costs as provided by local office 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 office space.
Click here for the full Q2 2017 West Michigan Office Market Report