Like many cities across the Midwest, Grand Rapids, Michigan, is enjoying a downtown boom. Residents want to live in the center of this city, close to its museums, restaurants and businesses. This is helping to fuel a solid rise in commercial real estate activity in Grand Rapids. Cathy Bronkema, a partner with Cohen Financial and the managing director of the company’s Grand Rapids office, spoke to Midwest Real Estate News about the factors behind Grand Rapids’ economic rise.
The lure of downtown: The downtown market has continued to grow during the past four or five years, as long as I’ve worked in this market. As with a lot of cities, the downtown is being revitalized. People want to live in that urban environment. That is what is happening now in Grand Rapids. Young professionals who went to school downtown are more frequently choosing to stay here. They are not automatically moving off to Chicago or Atlanta. And that is bring more energy and growth to downtown Grand Rapids.
A boot in multifamily, office: This is helping the two major sectors of multifamily and office. Several of the large corporations either have a satellite office in downtown or have moved downtown to attract workers. That is happening in other cities across the country, of course, and we have been experiencing it for the last four years. And, yes, we are getting a lot of young professionals who want that urban experience. But we are also getting empty nesters and retirees who want to live downtown. They don’t want the work or maintenance involved in owning a home.
Rejuvenating older building stock: Multifamily has really boomed here. We have all of these older buildings that were more or less abandoned. They are now being re-positioned into multifamily buildings. We also have some new multifamily construction going on. A building at 601 Bond will bring 202 multifamily units. The new Arena Place development will bring new office space but also 100 market-rate apartments and ground-floor retail. The Medical Mile district will also see another 100 new apartment units.
A tight office market downtown: The downtown office market is active today, too. The vacancy in the CBD for downtown office is somewhere around 5 percent to 7 percent. There are a lot of employers moving to the downtown because they want to get the best talent. Many of the best workers want to work downtown. So more businesses are creating a presence in the downtown to attract these workers.
A solid retail market: Our downtown retail market is solid right now. The new retail we are seeing is mostly in the bottoms of your office buildings or apartment buildings. It’s not like Michigan Avenue in Chicago. There is no real destination retail downtown yet, and there is nothing that major slated for the near future. We’re not sure, yet, if the downtown Grand Rapids market is big enough, say, for grocers. But it is big enough so that we are starting to see some independent restaurants coming in. That is creating some excitement downtown. These restaurants are just starting to open because so many people are coming to downtown. The city is committed to growing the downtown CBD. We have all of these little communities that are starting to revitalize around the downtown, too. That is another positive for the area.
Rental growth: For people who want to own and develop real estate, the Grand Rapids market is a good choice. You still have healthy rental growth. You are still able to make your construction costs work. From an investment standpoint, investors can still come in and make a solid return. Cap rates do continue to compress ere, but this is not as competitive as market as Atlanta, Chicago or Minneapolis. There is still somewhat of a solid yield here. It’s not like it used to be. The cap rates are starting to compress. But they are still not like you’d see in Chicago or other bigger markets. There are also incentives out there. We have the brownfield TIFs, the Neighborhood Enterprise Zones, different credits offered by the city or state. They are doing their job, encouraging new businesses to come into the city and create jobs.