What area is your expertise?
Greater Grand Rapids, Michigan.
What trends do you see presently in multifamily development in your area?
From 2002 to 2007, we had a tremendous amount of condo construction. Those projects are finishing up and a few new projects are being announced. Several condo projects that were announced have been pulled due to insufficient sales. Apartment construction has been moderate over the past few years. A few new projects have broken ground this year. Student driven markets like Allendale (Grand Valley University) have seen consistent deliveries of new units the past several years — and more units will be added to the market in 2008. Condo conversion projects started in 2006 are still selling out.
Who are the active multifamily developers in your area?
- Condos: Second Story Properties, Parkland Properties, McKay Tower Partners LLC, Moch International, Kegle Construction, Robert Grooters Development, Eastbrook Homes, Redstone, and Epcon Communities.
- Apartments: Miller Valentine Group, Hof Investment Group, IPA, Copper Beech, and Fusion Properties.
Please name one or two significant multifamily developments in your area. What impact will these projects have on the market?
- River House Condominiums — Robert Grooters Development: 207 units, Downtown. Under construction, estimated completion date 4/2009. High-rise tower on the west side of downtown with views of skyline.
- Icon on Bond Condominiums — Moch International: 108 units, Downtown. Finished construction, marketing units. Nine-story mid-rise in Monroe North area. Now also renting units.
- Park Row Condos — Kegle Construction: 34 units, Medical Mile. Finished construction, 60 percent sold.
Where is the majority of development taking place? Why is this area doing well?
Downtown. Most developers are attracted to downtown because of the growth in the medical industry. More than $1 billion in medically related development is occurring in Grand Rapids’ Medical Mile.
What area do you expect to be the next big development market? Why?
The west side of downtown. Grand Valley State University has a large presence on downtown’s west side. The west side has numerous historic buildings, nightspots and restaurants. Growth from the Medical Mile, along with the completion of RiverHouse, will translate into growth on the west side.
What areas are doing well in terms of apartment leasing? Which areas are struggling with leasing?
Apartment leasing across the market has improved. Concessions, though still largely present, are being burned off. Some owners, especially at the bottom end of the market (Class B-/C properties) have even begun to report rent increases. Rent for Class A projects struggles to maintain rent premium over Class B properties.
Please give a measure of apartment vacancy rates.
Market wide occupancy averages approximately 90 percent for Grand Rapids.
Please give a measure of condo sales activity in the area.
Sales velocity for condo projects averages 2 to 4 units per month in the downtown area, suburban projects are slower.
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?
Job growth has remained stable during 2007 and first half 2008, but as is true in any market, growth in apartment demand will be determined by the number of jobs the local economy can generate. Grand Rapids is well positioned to generate positive job growth in the future.
Submitted by Edward Mikolay, senior associate with CBRE | Grand Rapids. Posted 09-08-08.