It’s no secret that Grand Rapids is one of the fastest growing cities in the United States. Grand Rapids and its surrounding suburbs led much of Michigan’s population growth last year and have been continuously recognized by national surveys. Two studies conducted by WalletHub in late 2018 and early 2019 ranked Grand Rapids in the top 10 percent of cities analyzed as having one of the fastest growing economies and also ranked it in the top 30 percent of markets studied as being one of the best places to find a job.
While it’s obvious that this growth in population and availability of jobs has been the key driver behind the increase in new multifamily developments, it has also had a major influence on the retail sector. From national restaurant chains and retailers to new local food and beverage concepts, key performance indicators such as low vacancy rates and increased rental rates are moving in a positive direction for the Grand Rapids commercial retail market.
What retail apocalypse?
These days, news articles related to retail properties across the nation may lead to a state of depression due to closings of big box and chain stores that have been unable to compete with the continued rise of online shopping. But take a closer look at what is happening among retail properties in Grand Rapids within the past year and the news is significantly brighter.
In fact, a review of public announcements about retailer openings and closings since January 2019 shows that only 18 percent of the announcements were about store closings. But what might be even more positive is that for all of the retailer opening announcements made, 48 percent of all new openings were for brand new retail concepts or national chains entering the West Michigan market for the first time. Some examples include REI, Carhartt, Club Pilates, The Cheesecake Factory and Cooper’s Hawk Winery and Restaurants.
What’s hot, what’s not
When it comes to the types of retailers that are entering the Grand Rapids market, there isn’t much difference from what is happening on a national scale. Given the ability to purchase anything and everything on Amazon, the need to find the right blend of complimentary tenants for small boutiques and merchandisers within budget is more important than ever as they lease space in mixed-use developments.
But whether it is a local restaurant owner creating a new dining experience for residents, an existing restaurant chain looking to tap into a growing market or a new brewery offering a new twist on beer, food and beverage retailers have accounted for over 70 percent of all openings announced since January 2019. The traffic these restaurants draw is one of the main reasons why the market has seen a decline in vacancy rates from 19.2 percent in January 2019 for downtown Grand Rapids and the surrounding markets to 17.6 percent by August 2019, according to Reis.
It’s all about location
As for any business, not just retail, the key to success is finding a location where the ideal customer lives, works and plays. In Grand Rapids, there is a clear trend on where retailers have been choosing to lease space. For the new retailer announcements that have been made since the beginning of the year, roughly 32 percent are located in or near the East Beltline area. With rents ranging from $18 to $27 per square foot and close proximity to several colleges in the area, the expectation is that this area will continue to draw additional retailers.
While approximately 13 percent are situated within the downtown area, The Knapps Corner area along East Beltline is also one of the most desirable areas within the Grand Rapids market. With a 2.5 percent vacancy rate, The Village at Knapp’s Crossing, which was built in 2016, continues to draw in well-known retailers such as Old Navy, TJ Maxx, P.F. Chang’s, Orangetheory Fitness and Hop Cat. With new projects such as the New Holland Brewery and Bridge Street Market recently opening along the Bridge Street corridor, the west side of downtown Grand Rapids is expected to see more new construction and renovation projects through the end of 2019 and into 2020.
The increase in local jobs combined with new multifamily supply, which is attracting new talent to this market, will continue to support the retail sector’s growth. All of this seems to indicate that the growth in Grand Rapids is far from over, especially for retail.
— By Jeffrey Tucker, Vice President, Brokerage, Bradley Co. This article originally appeared in the November 2019 issue of Heartland Real Estate Business magazine.