The Holland/Zeeland/lakeshore market remained robust in 2015, with steady growth and activity in all segments of commercial real estate.
Our area continues to be attractive to companies seeking a well-positioned Midwest location with access to Detroit and Chicago. An additional advantage of our area is the recreation and enjoyment of life that the coastline of Lake Michigan offers. Holland continues to collect accolades, being named the No. 2 “Happiest and Healthiest Place to Live in America” by the Gallup-Healthways Well-Being Index, and No. 3 on the “Top Ten Best Places to Live for Families” by the publication, Livability.
Due in part to these positive trends, Ottawa County has grown in employment each year since 2010. In 2015, economic growth was fueled by manufacturing and construction, which grew 2.1% and 2.0% respectively, according to the W.E. Upjohn Institute. We see 2016 as a positive year on the new construction front as land sales have picked up. Existing buildings are becoming scarce and manufacturers are seeking new construction options that meet their needs in regard to pricing, function and quality.
Our biggest challenge, perhaps, is a shortage of skilled employees in the marketplace. Colliers International | Holland broker Jason DeWitt believes this will continue to drive recruitment incentives in 2016, specifically in the industrial segment: “Employers are vibrant and healthy, unlike a few years past where they were attempting to ride out the financial storm. They now struggle to fill growth with quality talent. What a difference five years makes!”
In summary, we expect 2016 to be a dynamic year across the board, notwithstanding various challenges in the marketplace.
Employers are vibrant and healthy, unlike a few years past where they were attempting to ride out the financial storm. They now struggle to fill growth with quality talent. What a difference five years makes!
2015 saw more retail construction than we have seen in any year in the last decade with the primary tenants being national brands. Over the past 5 years we have seen over 700,000 SF trade hands and go through an extensive repositioning. Demand for NNN investment properties is high and several properties traded hands including out of area investors purchasing retail investment real estate.
Vacancy rates, currently at 7.5%, continue to decline, and most vacancies are in older centers. Few tenants are relocating meaning much of the activity is new retail coming to the market. Rents have gone up on existing properties and start significantly higher on the new projects.
The major redevelopment of The Shops at Westshore this year and the ancillary activity that has been created surrounding the site should push the vacancy rate even lower. We look forward to seeing how this will further transform the retail market as national retailers locate in Holland and a long-challenged property is reborn. The owners of The Shops at Westshore hired Colliers International to advise on repositioning the center by “de-malling” it, similar to the Shops at CenterPoint in Grand Rapids, and have multiple tenants committed who will be moving in this year. New out-lots have been created and most are already spoken for. The national trend of adding consumer amenities and creating a place where people enjoy spending time is being utilized.
2015 saw more retail construction than we have seen in any year in the last decade with the primary tenants being national brands.
Multiple restaurants opened or were announced for 2016, and we expect just as many if not more to come to market this year. We foresee multiple restaurant and other concepts from local, regional and national operators, including: Anna’s House; Home Goods; On the Border; West Michigan Community Bank; Christian Brothers Automotive; The Black Sheep; Flagstar Bank; Meineke; Subway; etc.
The office market in Holland has continued to be soft but not as soft as the last several years. Office vacancy rates continue to decline but are still in double digits. Rents remained flat in 2015.
Some 2015 office transactions of note include:
|Address||SQ. FT.||Trans Type|
|844 S. Washington||44,772||Sale|
|750 E. 40th St||50,000||Sale|
|49 W 3rd St||27,787||Sale|
|99 E. 8th St. Ste 300||5,786||Lease|
|854 S. Washington||4,854||Lease|
|854 S. Washington||7,030||Lease|
We are seeing fewer office tenants use the ongoing weak market as an opportunity to upgrade space. It also appears tenants have pretty much stopped renegotiating their leases through “Blend and Extend” deals which we were seeing a lot of in previous years. While we have seen some increased activity in 2015 in the office market, it continues to be a tenant’s market and we feel it will continue to be a tenant’s market through 2016. As the supply continues to decrease, it will drive up rates.
While we have seen some increased activity in 2015 in the office market, it continues to be a tenant’s market and we feel it will continue to be a tenant’s market through 2016.
The trend globally of fewer square feet per employee is also being seen in our area. Office users are reconfiguring their spaces and making them more efficient, alleviating the need for additional space. We have seen the average square foot per employee drop from 250-300 sq ft to 175-200 sq ft.
The Holland office market is weaker than Grand Rapids which tracks the national office market more closely. Nationally, in 2016, the office market should be fairly strong following up on a strong 2015.
A new mixed-use development in downtown Holland has been announced on West 8th Street, between River Avenue and Pine Avenue across from the Courthouse and Police Station. The multiple-parcel site was assembled for a mixed-use project of street level retail with office and residential on the upper floors. Previously, four homes as well as four older antiquated office buildings were located on the properties. Construction is expected to commence in spring 2016. Additionally, a 45,000-square-foot medical building at 844 S. Washington sold and the new owner is considering demolishing part of the building and constructing a new multi-story medical office facility.
In 2016, we believe the office market will experience growth in absorption and rental rates, even if modestly so.
2015 was one of the most interesting years we’ve had in the Industrial market for over two decades.
The once-ample inventory of vacant space/buildings has sold and is now fully leased. Overall vacancy rate is now below 5%. We are aware of only one spec building new to the market since 2010, and it’s also leased. Older industrial facilities sold quickly, with the buyer in many cases having to spend a considerable amount on modifications to meet its needs.
Manufacturing companies looking to locate or expand in the area are having a hard time finding efficient and functional space. Consequently, as existing supply becomes ever more limited, construction is becoming imminent, notwithstanding concerns over the associated costs. This has led to more industrial land sold last year than the two previous years combined, on a transaction basis.
Manufacturing companies looking to locate or expand in the area are having a hard time finding efficient and functional space. Consequently, as existing supply becomes ever more limited, construction is becoming imminent, notwithstanding concerns over the associated costs. This has led to more industrial land sold last year than the two previous years combined, on a transaction basis. A few examples of corporate growth include the following:
Furniture manufacturer OMT-Veyhl announced a 98,000-square-foot expansion on James Street in Holland. The $8.8-million investment is expected to create more than 200 jobs.
Kenco, a Mead Johnson Nutrition distributor, announced plans to build a 230,000-square-foot building in Zeeland. The facility will replace an existing facility nearby that the company has outgrown.
Zeeland Township approved an industrial development for metal stamping company Davon Manufacturing. The company plans to construct the facility in two phases on more than 5 acres of land, with 30,000-square-feet being built in 2016 and another addition in 2017.
Gentex Corp. in Zeeland has reignited its construction project on the new campus north of Riley Street.
The following charts* illustrate these trends:
We believe we will see further increases in rental rates and selling prices in 2016 because of the continuing lack of supply in the industrial market.
Multiple other industrial users in the Holland/Zeeland area bought land and constructed buildings, plan to build a building, or just want to protect their expansion opportunities by owning adjacent property.
*Please hover over each chart for more detailed information.
In the complementary disciplines of property management, lease administration and facilities maintenance, Holland/Zeeland commercial property owners in 2015 increasingly turned to professional service providers such as Colliers Holland. With Collier’s eye for detail and proactive upkeep of the property’s grounds and facility, owners are more likely to fetch higher prices, sell more quickly, and attract and retain higher quality tenants.
In 2016, property owners are placing greater emphasis on energy management. By conserving energy, owners and tenants alike reduce utility costs, and possibly qualify for federal tax credits. Colliers Holland is leading the effort by comprehensively assessing property and facility lighting, and in some instances transitioning to energy efficiency LEDs. We’re also analyzing HVAC usage and efficiency and overall operating costs. And, wherever possible, we’re grouping properties in order to negotiate the most competitive service offerings and prices.
The following pie chart reflects our primary efforts in 2015.
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