HEARTLAND SNAPSHOT, JULY 2008

Grand Rapids, Michigan, Industrial Market

In the face of a national slowdown, the Grand Rapids, Michigan, industrial market is currently seeing a slight increase in activity, particularly in the sale of larger buildings. Although the activity has been sporadic, it continues to move forward at a pace that is expected to remain constant going into the future.

Primarily due to the availability of properly zoned industrial land, the majority of development taking place remains in the southeast quadrant of Grand Rapids; nevertheless, the most recent industrial development of significance was a redevelopment of a 700,000-square-foot former Lear (GM) plant in Walker, Michigan, in the northwest submarket. This property was put into a Renaissance Zone by the state of Michigan, freeing it from most local and state taxes.

The project currently has one tenant and two prospective buyers that will occupy the majority of the building and put it back to reproductive use. For the most part, this redevelopment has not resulted in additional square footage being vacated elsewhere that was not already part of an existing company’s growth plans.

High-tech, manufacturing and warehousing are all tenant types that are currently being sought by existing landlords. The activity base seems to be spread evenly between all three areas. Amstore has been one of the major tenants absorbing a significant amount of space, with a portfolio approaching 1 million square feet in size. Another major tenant absorbing a majority of space is Diversified Distribution Services, which recently completed a lease/option transaction on one of the former Steelcase facilities that also measures approximately 1 million square feet.

Rental rates in Grand Rapids range from $2.25 to $3.75 per square foot triple net. Industrial vacancy rates range from 8 to 12 percent depending on product type.

In addition to the industrial sector, there is also extensive life sciences development taking place. The Michigan Street hill area has experienced hundreds of millions of dollars in investments used for various projects, including the new Michigan State Medical School, additions to the existing Van Andel Institute and significant expansion of medical office space. This continues to be a hotbed of economic development in the greater Grand Rapids area and is expected to provide for future opportunities.

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