HEARTLAND SNAPSHOT, JULY 2004

GRAND RAPIDS OFFICE MARKET

Healthcare, research and education projects are driving construction in the Grand Rapids, Michigan, office market in spectacular fashion, according to Ray Kisor, principal with Grand Rapids-based Commerce Realty and Management Company. These projects will be significant because of their high-level architectural integrity and proximity to each other.

A number of major projects are in various stages of development in the area, especially in or near the central business district (CBD). T.E. Beckering is developing American Seating Park, a 360,000-square-foot mixed-use residential/office rehabilitation on Sixth Avenue and Broadway near the CBD. The $30 million project is under construction and will have 165,000 square feet of office space with American Seating occupying 100,000 square feet this month.

Boardwalk is a recently completed 525,000-square-foot mixed-use residential/office rehabilitation located in the CBD. The $45 million project, developed by T.E. Beckering, has 200,000 square feet of office space. The project’s lead tenants are Medical Education and Research with 110,000 square feet of space and Mica, Meyers, Beckett & Jones with 40,000 square feet of space.

Cherry Street Landing is a collaborative effort, headed by Rockford Development Group, to restore and convert a six-block area of the CBD into an entertainment, office and residential venue. The recently completed 70,000-square-foot Western Michigan University Graduate School currently anchors the southern portion of Cherry Street, and Cooley Law School will occupy 98,000 square feet of space this fall. “In doing so, Cooley will join many existing tenants that have selected the Cherry Street Landing loft environment as their preferred office style,” Kisor says.

New construction is also occurring in Cherry Street Landing. Rockford Development Group is building the first new office building to be constructed in more than 10 years in the CBD at 70 Ionia. Beta Design Group will be the lead tenant occupying 20,000 square feet of space in the 40,000-square-foot building. The project is scheduled for completion in late fall. Across Ionia Street, the Bank of Holland has committed to a new 20,000-square-foot, free-standing building scheduled for completion early next year. “This district could well exceed $100 million in investment,” Kisor says.

Blue Cross Blue Shield of Michigan has signed a 10-year lease that prompted the renovation of the former Steketee Department Store in downtown by Rockford Development Group. This 85,000-square-foot tenant will occupy all but a portion of the first floor, which will be retail space.

The Blue Cross Project is across from the new Grand Rapids Art Museum that is under construction. This $60 million facility is international in design and state of the art. “It truly adds to the cultural assets of the CBD,” Kisor says.

Grand Valley State University’s opening of the $53 million Cook/DeVos Center for Health Sciences, a 215,000-square-foot facility, represents a new direction in education collaboration with healthcare.

This facility is in proximity to the 330,000-square-foot, $100 million Spectrum Health Heart Center. The center is being developed on the Butterworth Hospital campus, which is adjacent to the CBD and the Van Andel Institute — a renowned cancer research center.

The DeVos Convention Center, which opened early this year, is the CBD’s masterpiece on the Grand River. “The $220 million project is state of the art and will offer site amenities to meet the requirements of a majority of convention coordinators for years to come,” Kisor says. “It will also stimulate hospitality growth and support retail, restaurant and entertainment venues.”

But the CBD isn’t the only submarket seeing activity. “The southeast suburban office sector is in fairly good shape with the new high end medical offices being finished by MMPC (Michigan Medical Practice Corporation),” Kisor says. MMPC will complete a 250,000-square-foot medical office complex when construction is finished on a $27 million, 120,000-square-foot facility later this year. In the same corridor along East Paris Avenue, True North is completing a new 30,000-square-foot medical office, which currently is 90 percent pre-leased.

In the northeast area, The West Michigan Heart Group broke ground on an 80,000-square-foot medical building near Leonard Street and the Beltline last week.

Metropolitan Hospital is relocating from the city to a new 170-acre campus in the southwest suburbs. The 450,000-square-foot, $150 million hospital is under construction. During the next few years, the area will see the impact of this state-of-the-art facility unfold with 300,000 square feet of medical office space and 100,000 square feet of medical fitness and rehabilitation space planned. The project also will include 200,000 square feet of village-style retail and 100,000 square feet of general office space.

“All of the activity mentioned is the result of Grand Rapids-based builders, developers, philanthropic foundations and hard work from the private and public sectors,” Kisor says. “John Wheeler, head of Rockford Development Group, and Tom Beckering of Pioneer Construction have both played a significant role in this growth and development.”

The Board of Regents for Michigan State University recently approved to relocate the majority of MSU’s medical school to Grand Rapids.

“This is anticipated to take the medical community to a new level by expanding opportunities to those businesses that thrive on being in proximity to research education and medical sciences,” Kisor says. The estimated cost associated with the project is in excess of $300 million.

“Landlords are completing many RFPs for existing tenants looking for a better rate than their 5-year-old escalated rents,” Kisor says. Class A office rates have remained fairly constant with vacancy running around 13 percent. Outside of 70 Ionia, Class A office space is not being constructed, and no significant leases have been signed from firms new to the market.

“By mid-summer 2005, the new M-6 Outerbelt will be open, and the impact will be immeasurable,” Kisor says. “Special attention should be given to the southeast, southwest and CBD as all the primary corridors and highways will be connected for the first time.”

As MSU Medical School heats up, the research businesses should start looking for space. The financial institutions are all present in the CBD. Some have repositioned themselves with new or renovated facilities, and all are actively investing in the community.

“With the area’s proximity to the lakeshore, the growth in education, research and entertainment, and a fairly stable manufacturing base, Grand Rapids will have no problem attracting businesses looking for a quality workforce and an affordable life style,” Kisor says.

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