by Dan Rafter
When does a market reach the point when demand gets so strong that developers embrace spec construction?
That’s the question that commercial real estate experts are asking now in the Grand Rapids and West Michigan office markets.
Colliers International recently released its third-quarter 2016 office reports for the greater Grand Rapids area. According to Colliers, the West Michigan office sector is firmly in expansion mode. Demand for office space remains high in the city and its surrounding areas, Colliers said.
But despite this — and despite falling vacancy rates — the West Michigan office market is not seeing much in the way of speculative space, Colliers reports. That could be good for the area, of course, helping to ensure that office vacancy rates don’t rise.
But tenants undoubtedly want modern office space here. More spec office construction would provide it.
According to Colliers, the downtown Grand Rapids office market is an especially strong one, with a vacancy rate of just 9.56 percent. The suburban office vacancy rate is higher at 17.75 percent.
At the same time, office rents are rising. In downtown, the modified gross average asking price for office space came in at $19.32 a square foot in the third quarter, according to Colliers. This figure stood at $13.55 a square foot in the suburban office market.
Construction activity, though, is fairly muted in the office market, according to Colliers’ research. Colliers said there were 11 office projects under construction in the third quarter in the West Michigan market, totaling 137,500 total square feet. Of this number, 42,500 square feet was spec office space.