2020 Q1 Office Market Report

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Steady start in Q1 for West Michigan office market ends in uncertainties 

After a slow end of the fourth quarter in 2019, the start of the first quarter of the new year saw an increase in tenant activity in the West Michigan office market.
The national unemployment rate beginning the quarter was 3.6 percent, and locally also remained low at 3.1 percent. In March, the quarter took a sharp turn due to the COVID-19 pandemic. By the end of Q1, eight percent of Michigan residents had filed unemployment claims due to an executive order closing nonessential business during the coronavirus pandemic. Many office workers began working from home by the end of the quarter. This led to many companies hitting pause on their assessment of office space requirements. The uncertainty arose whether or not the situation will lead to companies needing smaller spaces to operate. Alternatively, some companies might reconfigure their workplace making it less dense for people going forward, which in turn leads to larger space requirements.

The new year was off to a steady start, with buyers driving activity to expand or open new headquarters. The vacancy rate for downtown office space is 9.41% and 6.17% for the suburban market. Rental rates increased downtown in the first quarter, totaling $21.68 per square foot, while decreasing slightly in the suburban market at $15.88 per square foot. There was significant activity in downtown Grand Rapids and several large transactions in the office market in Q1. In a joint acquisition, Gun Lake Investments and Waseyabek Development Co. acquired the iconic McKay Tower in downtown Grand Rapids for $17.5 million. Spectrum Health continued to acquire property in Grand Rapids’ North Monroe district after announcing last year it would build a new office building on the northwest side that will serve as the Center for Transformation and Innovation and house 1,200 employees. Several companies made the move to locate downtown Grand Rapids, offering their employees many of the quality of life amenities associated with being downtown. Red Cedar Investment Management opened a 4,000-square-foot office in Bridgewater Place downtown. Data company ZoomInfo is also planning to move into a 10,000-square-foot space downtown and will have about 100 sales and account management employees in the space. Calder Capital, a local M&A firm, acquired a 3,385-square-foot office space at 25 S Division Avenue in the Heartside district.

Elsewhere in West Michigan, Cascade Township officials settled on a new 12,930-square-foot space on 1.23 acres at 5920 Tahoe Drive SE in Centennial Park. The township paid $1.4 million for the space, which will allow it to house all departments in the same building and was formerly occupied by ADAC Automotive. In Wyoming, Rivertown Dental paid $1 million for a new office space on Wilson Avenue. Grand Rapids Area Black Businesses is planning to move into its new 4,500-square-foot headquarters in southeast Grand Rapids by fall 2020.

Companies are mostly interested in new, modern spaces with good visibility and access to parking and other amenities. This quarter also saw a growing demand for standalone suburban office space. Four new freestanding banks have been constructed in Cascade. Those new bank branches being Grand River Bank at 50 Crahen Avenue NE; West Michigan Community Bank at 4797 Cascade Road SE; First Community Bank at 4455 Cascade Road SE; and a new Mercantile Bank branch at 4737 Cascade Road SE that the company had acquired last quarter. A new 17,500 square-foot building for Morgan Stanley is expected to open in the fall at 5122 Cascade Road SE. 

 
 

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2020 Q1 Office Market Report

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Related Experts

Gary Albrecht

Senior Associate

Grand Rapids

I joined Colliers International | West Michigan as an associate on the office team. Before working as an office associate, I worked for Colliers as a research analyst. This gave me an extensive knowledge of the West Michigan commercial real estate market, and furthered my ability to acquire the most current, complete, and accurate data in the marketplace.

I have a research-based approach that allows me to provide clients with the facts they need to make the most suitable and cost-efficient solutions. I am especially knowledgeable about landlord and tenant negotiations in the Grand Rapids suburban market, specifically in the southeast corridor.

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Every year since moving to West Michigan in 2012, I have been recognized as an Office Leasing Power Broker and have worked with a diverse array of clients such as Metro Health, Franklin Partners, Fusion Education, and Network 180.

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David Wiener

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I recently took over the leasing of Bridgewater Place at 333 Bridge St. and in less than 24 months the building has seen over 100,000 square feet of space leased.

 

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Kristen Moore

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As a natural communicator, I intend to bring my commercial real estate savvy and expansive network to my new role at Colliers International | West Michigan.

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Scott Morgan

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Throughout my career as a real estate professional, I have maintained my strong client base and reputation for focus on suburban office properties because of the strong relationships I have developed with landlords whom I continue to represent in leasing and sale transactions.

I pride myself on being extremely up-to-date on significant suburban office developments and trends in the West Michigan market.

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Q1 Office Market Trends Update