HEARTLAND SNAPSHOT, SEPTEMBER 2012

Grand Traverse Rebound: Northern Michigan Successfully Retools Economy

Kevin Endres

If you were waiting for the market to hit bottom and you blinked, you might have missed it. At least that’s the case for the industrial manufacturing market in Northern Michigan’s Grand Traverse area. The worst of the downturn appears to be behind us and we are climbing our way back.

In the first half of this year, we saw a rapid absorption of inventory in the industrial manufacturing sector. Seven big-box industrial buildings were sold, resulting in the absorption of 360,937 square feet of space. To put that figure in perspective, only 131,726 square feet of inventory was absorbed during all of 2011 in this same property sector. Additionally, two industrial buildings are under contract that total a combined 100,000 square feet.

When you think of Michigan, the first thought that comes to your mind probably isn’t that the state is a hot commercial real estate market. If you are familiar with Northern Michigan, images of sandy beaches, cherries and vacation are probably top of mind.

This area is listed in several Top 10 categories by an assortment of media outlets, including best beach town (National Geographic and AOL Travel News); best places to retire (Money Magazine and USA Weekend); best wine destinations (TripAdvisor.com as well as USA Today); and best foodie towns (Bon Appetit and Livability.com).

The retail and accommodations industries are in the top five employment sectors locally. Perhaps surprisingly, though, two of the other top five biggest employment sectors are health care — thanks to the success of Munson Medical Center (named a Top 100 hospital 14 times by Thomson Reuters out of 2,886 eligible hospitals nationally) — and manufacturing.

Art of Reinvention

The Grand Traverse area had its share of small and medium-sized automotive suppliers. When the automotive industry took a nosedive a few years ago, so did our local companies. The sharp economic downturn left an abundance of inventory of large vacant buildings with seemingly no one to take their place.

Many of the local tool and die shops, stamping plants and injection molding companies simply went out of business, but some have survived. Those companies that have survived became leaner and had the foresight to find other markets and products. Those companies are not only thriving, but also expanding.

An example is Grand Traverse Industries, a local non-profit manufacturer that hires persons with disabilities. The company recently received a contract to manufacture trash can liners for the State of Michigan and needed to expand its operations. Consequently, it purchased a vacant 20,000-square-foot building across the street that was previously home to an injection molding company.

When Tower Automotive left town in early 2009, it left a 200,000-square-foot manufacturing building empty. The fear among local residents and the business community is that the facility would be vacant for years to come. The good news is that American Waste, a local trash and recycling hauler, purchased the property in April 2010. American Waste installed an indoor state-of-the-art recycling system in the building, eliminating 70 percent of the household garbage from going to the landfill. It has become one of the most efficient garbage recycling plants in the country.

National Vacuum Equipment Inc., a manufacturer of vacuum pumps for the oil and gas industry, recently expanded its building in Traverse City by 40,000 square feet.

Other companies in our area have gone high-tech and landed large aerospace contracts and alternative energy contracts. One of the fastest growing manufacturers in town is National Vacuum Equipment Inc., a manufacturer of vacuum pumps for the oil and gas industry.

The company recently acquired a 48,000-square-foot building and then built an additional 40,000 square feet. National Vacuum is currently running three shifts seven days a week.

The companies that are expanding have a pool of skilled workers from which to draw. That’s because many workers became unemployed during the Great Recession. For those workers needing to retool their skills or education, they have a resource available to them in Northwestern Michigan College’s University Center.

The college provides 267 bachelor’s degrees and 141 master’s degrees from nine partner universities throughout the state as well as technical and occupational training through NMC’s M-Tech Center.

These valuable resources are key to controlling the area’s unemployment rate, which bottomed out below 4 percent in 2000 and peaked just above 12 percent in 2009. We have experienced significant job growth over the past few years.

As of May 2012, the unemployment rate registered 7.6 percent for Grand Traverse County. The northwest corner of Lower Michigan has always exhibited traits of a microeconomy. Our region tends to outpace the state in general on the employment front.

What’s Ahead?

We expect businesses in this area to make the necessary adjustments to stay competitive, not only locally but also on a global stage. The Michigan Economic Development Corp. has launched an initiative to open up new markets for Michigan companies in South America.

These opportunities will be key to the steady growth of our economy and creating diversity in our manufacturing base that will allow for a sustainable business culture in the years to come.

This steady growth will have an impact on commercial real estate demand. We will see less emphasis on leasing and more emphasis on sales as long as the Small Business Administration continues its 504 Loan Program, which enables a qualified owner-occupier to receive a 20-year, fixed-rate loan of less than 4.5 percent with a 10 percent down payment.

Another factor leading to a strong commercial market will be Munson Medical Center, which plans to build a $45 million cancer center. Such a project will undoubtedly spur other spin-off markets and services.

Meanwhile, it’s a sure bet that the beaches, restaurants, stores and hotels will continue to service the influx of tourists to the greater Traverse City area.

— Kevin Endres is the founder and co-owner of Three West LLC, a commercial real estate brokerage company based in Traverse City, Michigan.


©2012 France Media, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 553-9037.



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