HEARTLAND SNAPSHOT, FEBRUARY 2005

Grand Rapids, Michigan Industrial Market

Stuart Kingma, Vice President, S.J. Wisinski & Company

During the past 3 years, there has been a significant slowdown in speculative development in Grand Rapids, according to Stuart Kingma, vice president of S.J. Wisinski & Company. “This is a result of the economic slowdown, which gripped the nation and impacted our local office furniture manufacturing suppliers,” he says. “We are beginning to see some limited speculative development re-enter the market in anticipation of a turn-around in the economic conditions.”

The most significant industrial developments are actually redevelopments. A large number of manufacturers have downsized, opening up large blocks of space. These spaces are in the process of being re-utilized as incubator-type buildings. “One million-square-foot plants are being subdivided into spaces of 50,000 to 100,000 square feet or larger to provide a low-cost alternative to free-standing buildings,” he says.

The industrial redevelopment of these types of buildings in the Grand Rapids market is taking place in locations that are near corporate headquarters for some of the area’s larger companies. “This is a direct result of their downsizing and moving out of locations that are close to their corporate headquarters,” Kingma says.

Indianapolis-based Pinnacle Properties and Oakbrook, Ill.-based Franklin Partners are new to Grand Rapids. Both have purchased existing large, high square-footage facilities and are in the process of redeveloping them into smaller incubator-type buildings. Pinnacle Properties has purchased a facility at 3800 Eastern, which was formerly the Steelcase file plant. The more than 900,000-square-foot Franklin Partners facility, which was the former Bosch plant, is located at 4300 44th Street.

Some trends in the Grand Rapids industrial market are that landlords continue to woo both manufacturers and warehousing tenants with aggressive lease rates, as well as tenant improvement dollars and free rent incentives. Most of the city’s industrial space that has been receiving the highest level of activity has been driven by smaller users that are not dominant forces within the marketplace. The larger spaces are commanding rental rates in the $2.50 to $3.50 per square foot range, while the vacancy rates region-wide are in the 8 percent to 12 percent area. The higher end of the vacancy rate lies in the big high-cube warehousing space, while the smaller, free-standing buildings enjoy a lower vacancy rate.

Some major recent leases include an 80,000-square-foot lease from BP Outsourcing and a 125,000-square-foot lease from Shoreline Container.

In the near future increased activity will be in the South Beltline area, which is a new bypass that opened in November of 2004 and has already begun to spur additional retail development and industrial land sales.

“In the first portion of 2004, the Grand Rapids industrial market remained somewhat quiet,” Kingma says. “During late summer and early fall, there was an increase in activity, which we expect to carry through the first half of 2005 and beyond.”

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