A blistering cold winter lingered into the late spring and left the commercial real estate market in the Grand Traverse region frozen. Businesses waited for the market and the temperatures to thaw, and a third-quarter surge has activity back on track.
From Jan. 1 through Sept. 30, property sales totaled $10.3 million and 221,136 square feet, including 118,515 square feet of industrial/warehouse buildings, 79,463 square feet of professional/medical office space, and 23,158 square feet of retail/restaurant space.
That‘s slightly ahead of last year’s pace. During the first three quarters of 2013, property sales totaled $9.9 million and 207,845 square feet, including 121,469 square feet of industrial/warehouse buildings, 44,160 square feet of professional/medical office space, and 42,216 square feet of retail/restaurant space.
The office sector posted about a 9 percent increase in the average sales per square foot during the first three quarters of 2014, while the industrial warehouse market recorded an increase of approximately 5 percent.
The retail/ restaurant sector saw a 9 percent drop in the average sales per square foot The reduction in the average sales price in the retail/restaurant market sector is mostly due to the lack of quality inventory. This lack of inventory in our market is spurring a new growth of development and construction as users and investors fail to find existing properties that meet their needs.
Active Construction Market
Development projects are underway across the region. We are seeing new construction of owner-occupied buildings, big-box and strip retail buildings, mixed-use residential and commercial buildings, hotel, and medical facilities that will total about 750,000 square feet when completed.
The recently completed TBA Credit Union headquarters added approximately 20,000 square feet in a three-story building as one of the anchors on the east end of Traverse City’s central business district. Also recently completed is a state-of-the-art Dance Arts Academy building with a total of 10,000 square feet on two floors.
A new 4,896-square-foot headquarters for Credit Union One is under construction. Soon to be built is a 42,000-square-foot satellite location for Preston Feather Building Centers, a building material wholesale company, on a five-acre parcel.
The long anticipated Meijer superstore is under construction on the northeast side of the Grand Traverse area. The combination grocery and department store will include 194,950 square feet.
The store is located in The Village at Grand Traverse, a master-planned development in Acme Township that includes 1.5 million square feet of commercial buildings and 650 residential units on 182 acres.
This development has also spurred the construction of a new 19,097-square-foot Tractor Supply store. The west side of the region has a new 9,000-square-foot strip center anchored by Panera Bread. The east side will feature a new 4,500-square-foot strip center located in the East Bay Plaza project that will be home to Biggby Coffee and a Sprint store.
Demand for Urban Lifestyle
Traverse City’s downtown has evolved into a bustling retail and nightlife district thanks to revitalization efforts over the past 15 years. This transformation has led to a growing number of residents downtown. Up until recently, the housing options downtown have been few and far between and highly priced. The demand has spurred the development of projects geared toward the mid-priced option for condominium living downtown in the $250,000 to $350,000 range ($250 to $300 per square foot).
Traverse City still lacks options for apartment living downtown. A developer is currently evaluating a possible project at the west end of the central business district that would include more than 200 units in a nine-story building. This development would require Traverse City to construct an additional parking structure, which would in turn help fuel further development on the west end of the city.
There are three projects in either the planning or development stage that will add about 267,873 square feet of new construction. That includes 30,000 square feet of commercial space. Those three projects include:
• Washington Place, a five-story, 75,700-square-foot building with 23 residential condos on the upper four floors with commercial space on the street level;
• Old Towne Corner, a three-story, 18,000-square-foot building developed by Socks Construction with two floors of commercial space and six residential units;
• A five-story, 174,173-square-foot retail and residential building, a development of Federated Properties, with first-floor commercial space and 47 residential units at 124 W. Front St.
Additional Projects
Munson Medical Center recently broke ground on its 86,000-square-foot, state-of-the-art, $45 million cancer center. The Indigo Hotel, a boutique hotel located across from West Grand Traverse Bay, will be completed in 2015. The 76,219-square-foot hotel will include 70 guest rooms.
We expect to see new construction continue across the Grand Traverse region as general contractors have enough backlog of work to keep the labor force busy through the 2015 construction season. We also expect more tenant demand from retail and restaurant franchises as they take notice of the growing list of national accolades that makes this region the spotlight of the “Pure Michigan” ad campaign.
— By Kevin Endres, principal, Three West LLC. This article first appeared in the November 2014 issue of Heartland Real Estate Business magazine.