Page 7 - Forecast Book_2017.indd
P. 7

Those who have planned, started or finished new                   26 projects  2.2 million
construction in 2016 include Lacks Industries, Gourmet International,             under   square feet
Laminin, Kent Quality Foods, RT Baldwin, Tesa Tape, FedEx, Viking
Products, Laserone and ETO Magnetic to name just a few. At year-           construction
end, we were tracking 26 construction projects totaling more than         or planned for
two million square feet. However, this represents less than two
percent of the current market inventory.                                           2017

            The Grand Rapids economy has largely rebounded from           1.9% increase
the recession, with annual Gross Metropolitan Product now nearly          in competitive
30 percent higher than it was in 2010. Industrial rental rates are
consequently 23 percent higher as well. In addition, approximately             inventory
100,000 jobs have been added to theworkforce over that period of time,
back to a level greater than what we saw before the downturn. Much of     Industrial Construction
that employment and production has come from the manufacturing
sector. Twenty years ago, manufacturing employment made up more           Kent & Ottawa Counties
than 25 percent of the Grand Rapids economy, however, an economy
that relies so heavily on one sector is more susceptible to feel             80
fluctuations in the economy, so during the recession the region               70
lost a lot of its strength – creating a large hole to dig itself out of.     60
            This is precisely what we have been doing for the past six       40
years. Manufacturing job growth has been positive at a rate of               30
roughly 34 percent annually, and as industrial production has built          20
back up, more than half a million square feet of industrial space has        10
been absorbed. Over that time, transactionvelocity has also remained
strong. However, heading into 2017 we are largely out of room for              0
companies to grow into. As mentioned, construction is occurring,                   2 0 0 8 2 0 0 9 2 010 2 011 2 012 2 013 2 014 2 015 2 016
but is expensive and only done out of complete necessity; transaction
activity has slowed two years in a row; rental rates are strong, but for                                  Purchasing Managers Index
the most part plateauing; and the Purchasing Managers Index shows                                         12-Month Moving Average
the industry is still growing, but at a slowing pace. So what does
this mean going forward? Does this mean we are at the end of an           Purchasing Managers
expansion phase, that we are done recovering? Or are we so pent-up
that something will inevitably have to give?                              Index (PMI)

            Well, the answer isn’t so simple. Industrial users have        The PMI is an indicator of the economic health of the
adapted and the way they utilize space has changed. It is possible         manufacturing sector. The PMI is based on five major
that we can both continue to see positive production and                   indicators: new orders, inventory levels, production, supplier
industry growth without an equal increase in space demand.                 deliveries and the employment environment. An index reading
Automation is creating efficiencies that allow companies to produce        above 50 indicates positive growth.
in less space with better quality and fewer people.
                                                                                      The small amount of spec construction that is taking place
                                                                          is designed based on flexibility and efficiency. Both 5300 Broadmoor
                                                                          Avenue SE and 3833 Soundtech Court SE were built with this in
                                                                          mind and saw leasing activity in 2016, despite above market rental
                                                                          rates. Companies are coming to grips with the fact that in order to
                                                                          position themselves in space for the future, it will cost them more
                                                                          than it does currently.

                                                                                      Local economic development organization, The Right

                                                                          Place, is reporting record amounts of capital investment, but

                                                                          - COLLIERS INTERNATIONAL -   7
   2   3   4   5   6   7   8   9   10   11   12