The retail sector of the West Michigan commercial real estate market is experiencing strong activity despite many business owners struggling to stay full.
Local real estate brokers attribute the high level of activity in part to pent-up consumer demand and transactions suspended in 2020 due to the pandemic, as well as the high cost of new construction, increasing demand for existing spaces.
The overall retail vacancy rate in the Grand Rapids area at the end of the second quarter was 5.21 percent, according to a second quarter market trends report from Necklaces International Western Michigan Office. Vacancy rates along major corridors ranged from less than 1% along East Beltline Avenue to 5.5% along South East 28th Street, with rates along South 28th Street. west, Alpine Avenue, Plainfield / Northland Drive and Rivertown Parkway lying in between.
The recent multi-million dollar real estate sales of two shopping malls – Alpine Summit Shopping Center in Walker, as well as 4901 28th St. SE, home to Total Wine & More and Bed Bath & Beyond – are examples of the importance of have a good location as well as quality, national tenants, said Mark Ansara, senior manager of Commercial Real Estate Advantage.
“A lot of the money coming in comes from buyers looking for full or near full and well-positioned malls,” Ansara said. “Even if they pay a higher price for it, in the long run it’s usually worth it if they have long term leases with high quality retailers.”
“Stable all summer”
The 136,942 square foot Alpine Summit Mall located at 3165 Alpine Ave. at Walker was bought this month for almost $ 17.9 million by Asia Automotive America Inc., which is registered in the name of Myeoung Hyun Lee under a Pontiac address. The sale was represented by NAI Wisinski of West Michigan. The mall is fully occupied by tenants which include Ulta, HomeGoods, Marshalls, Petco, Party City, CATO, Sola Salons, America’s Bride and ABC Warehouse.
The south end of the Alpine Summit Mall has room for an addition, the current tenants have long-term leases, and all but one of the tenants are a national company, said Bill Tyson, partner at NAI Wisinski of West Michigan.
“Typically, retailing slows down in July and August and picks up in September before slowing down for the holidays, but it has been stable all summer,” Tyson said. “It’s pent-up demand and people are ready to move forward with in-person activities. I think this trend will continue, but it depends on what is happening with the pandemic and if there are any additional restrictions. “
Edmark IV LLC sold the mall located at 4901 28th St. SE in Cascade Township for $ 10 million on August 12 at Bell Road Lodge LLC. Along with national retailer Total Wine & More as well as Bed Bath & Beyond, the mall had successful retail tenants in a high traffic area, Tyson said.
Requested rates increase
The weighted average asking rate for retail space in the Grand Rapids area was on an upward trajectory in the second quarter of 2021, with overall Class A asking rental rates at $ 14.82 per square foot. Most of the region’s major retail corridors have seen their asking rates increase, with the exception of the Alpine Avenue and East Beltline corridors.
One of the biggest reuses of vacant commercial space is through higher education and gyms such as Planet Fitness, said Bill Bussey, senior associate broker at Bradley Co. Investors are “getting good deals” on Class A retail spaces and malls, with some cheaper than last year, Bussey added.
While this is a buyer’s market for investors looking for Class A properties in high quality shopping centers, Class B and C properties are seeing more activity and filling more than d Usually due to overall demand for retail space, Bussey added.
“Subject to COVID, you will see more and more people going to stores and shopping,” Bussey said. “It’s not like retail brick and mortar is going to crumble and disappear.”
Consumer appetite for in-person purchases has also increased. Retail and restaurant sales in the United States in August were $ 618.7 billion, an increase of 0.7% from the previous month, according to U.S. Census data.
“Despite the Delta variant, consumers are doing their best to live their lives”, JLL Retail Advisory Services chairman Naveen Jaggi said in a statement. “The increase in vaccinations and reopenings are prompting shoppers to return to their local retailers, creating demand for retail space beyond pre-pandemic levels.”
Despite the more positive-than-expected retail state, most new openings will be on hold until the first quarter of 2022, Ansara said, as businesses that plan to be ready for the holiday shopping season of 2021 have mostly already opened.
“Most stores make 40 to 45% of their sales in the last four months of the year,” Ansara said. “A lot of these national retailers are going out in November and December because they don’t want to create new stores, but instead will focus on building existing stores. “
Meanwhile, the biggest hurdle for the commercial retail real estate market continues to be business owners, especially restaurants, who struggle to adequately staff their businesses, Ansara said.
“The only thing we are hearing right now that is constant and will continue to be constant is the job market, especially in the restaurant business. It is very difficult to get not only good people, but just people to continue working in this field, ”said Ansara. “You see a lot of local restaurants that aren’t open for lunch because they don’t have the workforce.”