What area is your expertise?
Greater Lansing
What trends do you see presently in multifamily development in your area?
Over the past several years, most new development in the metro area occurred in and around East Lansing, and much of it was University related, either student rentals or condos marketed to recent grads or retirees. Much of this growth occurred along the northern tier, near Lake Lansing Road and Chandler. More recently, much attention has been drawn downtown where new apartments have been delivered and condos are slated to be built.
Who are the active multifamily developers in your area?
- Condos — Robert Grooters Development, Gene Townsend, Gillespie Group, and Biersbach Development
- Apartments — Gillespie Group, DTN Management, Atlantis Development, and Strathmore Development.
Please name one or two significant multifamily developments in your area. What impact will these projects have on the market?
- Capitol Club Tower Condominiums — Robert Grooters Development – 175 units, Downtown. Planning stages, 50 percent reserved. First high-rise tower in Lansing.
- Kalamazoo Gateway — Gene Townsend – 120 units, Downtown. Planning stages. Mixed-use retail/apartments/condos.
- The Stadium District — Gillespie Group – 50 units, Downtown. Project completed, currently leasing/selling. Mixed-use retail/apartments/condos.
Where is the majority of development taking place? Why is this area doing well?
Downtown. Most developers are attracted to downtown Lansing because it has largely been ignored and they believe there is pent-up demand for residential downtown. Additionally, economic development incentives are available that help make downtown projects work. Developers believe in the viability of downtown Lansing largely because of the three stabilizing forces of State Government, Michigan State University (MSU), General Motors, and the growth of the insurance industry.
A flurry of condominium and apartment construction is also taking place in in-fill locations near MSU to cater to students and recent grads. These are typically smaller projects that involve adaptive re-use or the razing of existing structures to make room for better-use developments.
What area do you expect to be the next big development market? Why?
I think East Lansing will continue to evolve and will be the center of some market changing projects. Traffic patterns may even change as a result of better land use. Obsolete retail will get razed or converted to office or residential. Old housing or apartments will get razed in favor of retail or office. Old office will be gutted or razed and converted to residential or retail. There is tremendous market potential in East Lansing and a lot of underutilized properties – this will create opportunities for some developers.
What areas are doing well in terms of apartment leasing? Which areas are struggling with leasing?
East Lansing student apartments have held constant but have yet to fully digest the delivery of some 4,000 units between 2001 and 2004. Older stock that competes on price seems to perform better than newer lease by-the-bed properties.
Lansing market properties have struggled in recent years. Northern (DeWitt) and southern (Mason) suburban areas are performing well. Rentals in Okemos/Meridian Township have struggled recently.
Please give a measure of apartment vacancy rates.
Greater Lansing market averages:
Student market — 90 to 95 percent
Conventional market — 85 to 90 percent
Please give a measure of condo sales activity in the area.
Sales velocity for condo projects averages is hard to gather, but seems pretty slow. According to developers, Capitol Club Tower is 50 percent reserved after 10 months of marketing.
What impact do current interest rates have on the apartment and condo markets? What predictions do you have for interest rates and their effect on the multifamily market in the next year?
The issue for apartment owners and condo developers will likely be capital availability rather than interest rates. Since the lending environment for homeowners has gotten considerably more difficult, I would expect apartment occupancies to improve and that condo developers would have a harder time selling units. However, dramatic improvement in the apartment sector will likely be held back by shadow rentals (unsold condos being rented), slowing job growth, and younger people opting to reside with parents for a longer period of time.
What is the status of job growth/(un)employment rates and what bearing will it have on the multifamily market?
The unemployment rate for the Lansing MSA stands at 6.1 percent as of first quarter 2008. This is better than the State of Michigan overall (7.2 percent), but worse than the U.S. average of 5.1 percent for the same time period. Job growth has remained stymied, but the region has retained employment due to the three-prong nature of its economic base.
Submitted by Edward Mikolay, senior associate with CBRE | Grand Rapids. Posted Online 05-21-08.