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MIDDLE MARKET HIGHLIGHT, SEPTEMBER 2006
KALAMAZOO
Dan Marcec
The commercial real estate market in downtown Kalamazoo is experiencing significant development, particularly in the restaurant/entertainment sector, which is due in part to a healthy amount of residential construction. Office tenants are not staying in one location; rather, the current climate sees businesses moving not only to other areas of the downtown sector, but also in and out of the suburban markets.
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In downtown Kalamazoo, Meyer C. Weinser Co. has completed a 14-screen Rave Motion Pictures multi-plex in partnership with the city of Kalamazoo, the state of Michigan and Rave Cinemas.
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Downtown Kalamazoo Inc. is an organization that specifically focuses on attracting development to engender positive economic growth to the downtown sector of the city. “Picture the manager of a regional mall — we manage a marketing system, acquire property, assemble land and recruit business to keep a level playing field with the suburbs,” says Kenneth Nacci, president of Downtown Kalamazoo. “You have to create an environment in which people want to invest. Twenty years ago, all the development that took place downtown Kalamazoo was philanthropic — local homegrown institutions like Western Michigan University or the community college would invest in the community. However, now companies are beginning to invest in the market due to a higher rate of return than they would see in the suburban market.”
Several major projects are underway that are supporting the resurgence of the downtown market. Meyer C. Weiner Co., in partnership with the city, the state of Michigan and Rave Cinemas, is nearly complete on a 14-screen multiplex cinema. In addition to the theater, the project includes 17 to 20 residential units and 27,000 square feet of ground-floor retail space. Total cost of the project is approximately $35 million to $40 million, and completion is expected presently.
On the office side, though activity generally has been slow, a local developer called Greenleaf Holdings has purchased several properties in order to construct an 80,000-square-foot office building. With the office market vacancy hovering around 27 percent, this project is very unique because it is not market driven. The building already has a major tenant, law firm Miller Canfield, which is taking 35,000 square feet of the space.
Further, Metro Properties Group, led by Ryan Reedy, is developing several entertainment venues in the downtown market. Wild Bull, a country-themed project, is underway in a renovated building that sits next to a piano bar previously developed by the company. In addition, Metro is planning a sports bar and an Oriental restaurant, staking a significant claim in the downtown entertainment sector.
The retail vacancy rate in downtown Kalamazoo is approximately 14 percent, with the residential vacancy sitting significantly lower at 5 percent. Aside from the flourishing entertainment industry, biomedical healthcare is a growing sector, spinning off from activity at Malcolm Baldrige hospital, the city’s largest employer. Also, with the Pfizer pharmaceutical company located downtown, the biomedical industry has plenty of room to grow.
In the future, keeping with its entertainment and civic interests, Kalamazoo is seeking cultural amenities such as a performing arts center or a sports arena. “We’ve been pursuing these kinds of cultural projects in terms of feasibility studies, and financial terms from a land use/land availability and fundraising perspective,” says Nacci. “In general, we have a clean, well-maintained downtown with unique specialty retail, all the local entertainment as well as the new cinema complex, and we foresee all this development as a springboard for things to come.”
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