Colliers International | West Michigan: The Worst is Behind the Commercial Real Estate Market, Improvements Ahead in 2012

FOR IMMEDIATE RELEASE
Grand Rapids, Michigan, United States of America (Free-Press-Release.com) January 18, 2012 -- Grand Rapids, Michigan, January 18, 2012 – The worst is finally behind West Michigan’s commercial real estate market, which can expect to see continued improvement in 2012, according to an industry forecast released today by Colliers International | West Michigan.

The largest commercial rest estate firm in West Michigan sees 2012 as a year of increased demand, improved confidence and greater activity for the office, industrial, retail and investment sectors. With the “worst of the downturn in our rearview mirrors,” Colliers anticipates continued growth – albeit slow in some markets – for commercial real estate in Grand Rapids, Holland and Kalamazoo.

This morning, Colliers released its 2012 West Michigan Commercial Real Estate Forecast Report, a 16-page proprietary, locally generated, detailed analysis of the region during its annual breakfast meeting. Now in its 10th year, the event attracted more than 500 business, government and community leaders who gathered to hear a comprehensive review of the 2011 commercial real estate market, as well as a forecast of market conditions for 2012.

“West Michigan had a lot going for it in 2011: Growth in population, drop in unemployment and improved consumer confidence,” said Derek Hunderman, vice president and managing partner of Colliers International | West Michigan. “We were also named the second best place to live by RelocateAmerica. Our side of the state has led the recovery of Michigan – and that has continued to be good news for the commercial real estate market.

“We have definitely turned a significant economic and real estate corner and finally have begun our recovery. This will be a long and potentially drawn-out process, but our region’s fundamentals are strong and trending in the right direction.”

Highlights of the report, which is available in its entirety to the media, include:

Industrial: 2012 is a year to rebuild reputation and perception. Building owners will choose to be creative with what they have rather than look to build or buy new space.

• The just-completed year was a time when market perception trailed reality
• Users and investors were cautious in 2011, causing an “under-rated recovery” for the industrial segment
• Three quarters of 2011 saw positive absorption of more than 500,000 square feet, including deals involving Lumberman’s, ATEK Medical, Lacks Enterprises, Lighthouse Foods and R.L. Plastics
• That trend has likely ended – at least temporarily – as Amway vacates a large facility in Grand Rapids
• The demolition of the former General Motors Plant on 36th Street will make way for approximately 2 million square feet of new, advanced manufacturing space

• “Trophy” Class A properties will continue to trade at a premium, while “train wreck” Class C properties will get much less attention

Office: Panic is over, but 2012 will look a lot like 2011: Continued flight to quality properties, more interested in downtown and little new construction.
• Market is more predictable today than in the last few years
• Tenants have flocked to newer, better spaces at less expensive rates than in previous years
• Noteworthy leases in 2011 included BDO Seidman, Smith Haughey and Deloitte in downtown Grand Rapids, with new ground-up construction projects for Farmer’s Insurance and Gordon Food Service

• The third quarter of 2011 saw the best absorption rate in four years
• The suburban office market should continue to see a slow but steady decrease in vacancy rates with improved absorption and slightly increased rental rates.
• While rental rates are below historic highs in downtown Grand Rapids, vacancies continue to decrease and rates have stabilized
• New office development projects will break ground in 2012, but will be fairly limited

Retail: The future is brighter in 2012: Retailers may be done sitting on the sidelines and ready to jump into Grand Rapids.

• Historically active markets on 28th Street and Alpine Avenue were continued success stories in 2011
• Landlords are giving fewer incentives due to their economic struggles, which will keep rates stable and low
• New retailers and restaurants in 2011 included PF Changs, Smash Burger and Anthropologie
• In 2012, CenterPointe Mall will begin a two-year “de-malling” process to trim excess space, consolidate current tenants and add new ones

• The former X-Rite headquarters in Grandville will be transformed into a mixed-use retail and office center anchored by Target

• Look for new legislation that will make it difficult for online retailers to avoid paying sales tax

Investment: Healthier transaction volumes in 2012, with fewer distressed sales and a return to the more traditional arm’s length relationship between buyer and seller
• In 2011, West Michigan saw a higher percentage of distressed and bank-owned transactions than in previous years
• Overall, the market was brighter due to financing availability, seller confidence and investor interest
• But prices remained below the average of five years ago due to the higher percentage of distressed assets on the market

• Recovery in this sector will continue in 2012, spurred by historically low interest rates
• Multi-family housing will continue to be the most active property type in 2012 as consumers show continued interest in renting – particularly in urban environments
• The industrial segment of this market will continue to strengthen next year, even though office investments remain solidly focused on value-added transactions
• We anticipate a handful of high-quality, high-profile, lender-owned pieces of real estate will trade hands during 2012.

About Colliers International | West Michigan

With offices in Grand Rapids, Holland and Kalamazoo, we are the leading commercial real estate services firm in West Michigan. The Company provides a full range of services, including brokerage, valuation, consulting, project management, disposition and acquisition, site selection and development, property management and other financial and strategic services. For more information, visit www.colliers.com.

About Colliers International

Colliers International is the third largest commercial real estate services company in the world with over 15,000 professionals operating out of more than 512 offices in 61 countries. Colliers focuses on accelerating their clients’ success by seamlessly providing a full range of services to real estate users, owners and investors worldwide, including corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, mortgage banking and research. The latest annual survey by the Lipsey Company ranked Colliers International as the second most recognized commercial real estate firm in the world.

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