A flight to quality. That’s the defining trait of the West Michigan office market today, according to a new report from Colliers International.
In its first quarter West Michigan office report, Colliers said that speculative office construction in Grand Rapids and its surrounding communities remains extremely limited. The big reason? Construction costs. They’re simply too high today for developers to justify building new office space in the West Michigan region.
As a result of the limited new construction, those office users seeing a change are searching for higher-quality, Class-A space. At the same time, office property sales in the area have risen because a growing number of companies want to gain more control of their space by owning their own office buildings.
Colliers reported that overall, the downtown office vacancy rate in the greater Grand Rapids market stood at 10.18 percent during the first quarter. That rate was 16.47 percent in the suburban market, for a total overall vacancy rate of 14.61 percent.
The average asking rent for office space in the Grand Rapids market was $17.96 a square foot, Colliers said. Average rents were $16.17 a square foot in the suburban market and $23.39 in the downtown market.
As Colliers said, new construction in this sector is limited. In the first quarter, 17 new office projects for a total of 1.46 million square feet were under construction.
Grand Rapids has seen a rise in jobs in many top office-using professions since 2007, Colliers reported. Total employment here has risen by 10.5 percent since that time. Employment in education and health services, though, has jumped 27.5 percent, in professional and business services by 12.2 percent and in financial activities by 12.1 percent.
The rise in jobs in these sectors, then, have helped contribute to 29 consecutive quarters of positive office space absorption in the Grand Rapids region.
Colliers officials expect the office market here to remain strong. The population in the Grand Rapids area has increased 4 percent since 2013, representing more than 40,500 new residents. That trend doesn’t seem to be slowing, and bodes well for the future of the region’s office market.