Research & Forecast Report WEST | RETAIL Q1 2019

West Michigan welcomes new wave of retail in 2019 Glen Gerwatowski Research Analyst The information contained herein is collected and analyzed by the Colliers International | Research Department. ECONOMIC OVEVIEW The new year got off to a sluggish start, according to the latest U.S. jobs report. The economy added 20,000 nonfarm jobs in February —the lowest month for national job creation since September 2017. Despite low job creation in February, there was good news for wages: CONSTRUCTION TRACKER Average hourly earnings increased by 3.4 percent year RETAIL SPACE UNDER CONSTRUCTION over year. The number of involuntary part-time workers also decreased, which could be a result of the partial government shutdown. 8 262,615 Looking further into 2019, another wave of changes is PROJECTS SQUARE FEET moving throughout the national retail market. A number of stores reported closures in Q1 2019. In February, Payless ShoeSource announced it will close all 2,100 MARKET INDICATORS stores in the United States. In March, women’s fashion RELATIVE TO PRIOR PERIOD Q1 2019 Q2 2019* retailer Charlotte Russe announced it will close 416 of its VACANCY remaining stores. Dollar Tree announced it will close 390 NET ABSORPTION Family Dollar stores, including one in Twin Lake, Michigan, and that 200 of those stores will be rebranded under the CONSTRUCTION Dollar Tree name. RENTAL RATE

Technology continues to drive a wave of change in retail, Note: Construction is the change in Under Construction. with e-commerce booming and creating opportunities *Projected for a convenient shopping experience. Brick-and-mortar business remains strong in an evolving retail market in which many retailers are looking for innovative ways change also continues. There are many bright spots on the horizon, to stay competitive and retain customers. This includes along with some labor challenges. A number of stores and restaurants implementing an omni-channel strategy in which retailers at Woodland Mall are entering the region, such as and have a strong online presence in addition to a brick-and- Cheesecake Factory, creating exciting new options for consumers. mortar location, such as Moosejaw and Duluth Trading Talent also continues to be an ongoing concern for retailers, especially Company. as Amazon opens its distribution center in Gaines Township. This will create additional demand for skilled and experienced labor in the MARKET ACTIVITY region. Looking at West Michigan’s retail market, the wave of Retail activity is up from Q4 2018, with developments on the corners OCCUPANCY RATE OCCUPANCY RATE of 28th Street and East Beltline Avenue SE, and Knapp Street and 97.2% East Beltline Avenue NE generating the most activity. Both areas continue to attract new developments and location-focused tenants 97.0% due to high traffic and visibility. Other submarkets around the area, 96.8% including Alpine Avenue and 28th Street SE, are reaching capacity, causing many retailers to find creative solutions elsewhere. In fact, 96.6% RiverTown Crossings nearly reached full occupancy this quarter. 96.4% Rental rates are staring to plateau, which is typically a sign that 96.2% demand is catching up with supply. 96.0% West Michigan continues to offer opportunities for landlords and 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 investors. Investment rates are leveling off, signaling a slowdown in the market. The majority of Class A retail space has already been VACANCYVACANCY % OOFF T TOTALOTAL IN VINVENTORYENTORY sold and there is still a lot of activity as Class B and Class C space 8,000,000 9% exchanges hands and ownership. These trends are a reflection of 7,000,000 8% low inventory for retail space and fewer developers building new 6,000,000 7% 6% retail space because of high construction costs. Spring is typically 5,000,000 5% an active time for retail leasing. Many tenant leases come up in Q2, 4,000,000 which will push retailers to either renew their current space or 4% 3,000,000 VACANCY relocate. Landlords also expect vacancies to fill after September SQUARE FEET 3% 2,000,000 due to the number of construction projects that will be completed 2% 1,000,000 at the Woodland Mall. 1% 0 0% Neighborhood shopping districts are thriving in Grand Rapids but reaching capacity. As of Q1 2019, there is limited available retail space in the popular Wealthy Street and Cherry Street corridors. As retailers come and go, new boutiques and restaurant concepts continue to enter the market. OCCUPIED SF VACANT SF PERCENTAGE Another retail trend taking shape in West Michigan is the growing number of outdoor retailers entering the market. The secret is WEWEIGHTEDIGHTED AV EAVERAGERAGE AS ASKINGKING RA TRATEE out about West Michigan’s recreation treasures – including Lake COMCOMPAREDPARED TO TOVA CVACANCYANCY RA TRATEE Michigan, recreational trails and parks – because outdoor retailers $15.00 3.4% are moving in. Michigan-based Boyne Country Sports, which specializes in ski, snowboard and outdoor lifestyle equipment, has $14.50 3.3% announced plans to open its seventh location in Grand Rapids. REI $14.00 3.2% Co-op, an outdoor clothing, gear and footwear retailer, will open $13.50 3.1% its first Grand Rapids location this summer just south of Woodland $13.00 3.0% Mall. $12.50 2.9%

West Michigan continues to offer an evolving restaurant scene. $12.00 2.8% Detroit-based Buddy’s Pizza is opening a Grand Rapids location 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 this spring on 28th Street. Lake Drive’s Paddock Place has opened its new restaurant, The Pub at Paddock, which is part of The Weighted Average PSF Vacancy Rate Gilmore Collection. The Woodland Mall area will welcome Panda Express and City BBQ, and a new Starbucks will replace the long ASKING RENT RANGE BY CORRIDOR vacant lot on Fuller Avenue near I-196 that was formally a Burger ASKING RENT RANGE BY RETAIL CORRIDOR King. Allendale will soon welcome a new Culver’s at 5128 Lake 28TH STREET SE Michigan Drive, which will offer a new dining option for the Grand Valley State University community. 28TH STREET SW In addition to new retailers joining the market, a number of ALPINE AVENUE expansions are also under way. Goodwill will continue its expansion EAST BELTLINE AVENUE throughout West Michigan. Its newest store will be located in the former Apple Avenue in Muskegon. This $1.5 million PLAINFIELD & NORTLAND investment will result in 25 new jobs. With the growing popularity RIVERTOWN PARKWAY of fitness studios, Fit Body Boot Camp is expanding again, adding an additional location in Grand Rapids at 28th Street and Breton 0 10 20 30 40 50 Road SE. Average Asking Rent Rate

SOURCE: RESEARCH DEPARTMENT, COLLIERS INTERNATIONAL | WEST MICHIGAN

2 West Michigan Research & Forecast Report | Q1 2019 | Retail | Colliers International RETAIL MARKET STATISTICS NET Q4 2018 Q1 2019 NUMBER OF EXISTING VACANCY OCCUPIED ABSORPTION WEIGHTED AVG WEIGHTED AVG SUBMARKET BUILDINGS INVENTORY (SF) (SF) VACANCY RATE SPACE (SF) Q1 2019 (SF) ASKING RATE ASKING RATE 28th Street SE 212 7,311,741 227,512 3.11% 7,084,229 11,090 $13.70 $14.90 28th Street SW 91 1,621,232 21,509 1.33% 1,599,723 32,137 $8.84 $11.45 Alpine Avenue 95 2,825,992 72,659 2.57% 2,753,333 6,680 $14.09 $14.81 East Beltline Avenue 32 767,016 20,385 2.66% 746,631 -2,268 $31.68 $31.90 Plainfield Avenue/Northland Drive 110 2,372,551 192,090 8.10% 2,180,461 3,785 $7.71 $9.52 Rivertown Parkway 48 3,203,716 8,779 0.27% 3,194,937 12,242 $18.54 $23.75 MARKET TOTALS 588 18,102,248 542,934 3.00% 17,559,314 63,666 $12.87 $13.27 Past statistics are subject to quarterly adjustments to improve accuracy going forward. All rates calculated on a Triple Net basis. WEST MICHIGAN UNEMPLOYMENT RATES

MARKET JANUARY 2019 FEBRUARY 2019 MARCH 2019 Battle Creek 4.4% 4.1% (P) 3.6% (F) Grand Rapids - Wyoming 3.1% 2.9% (P) 2.7% (F) Kalamazoo - Portage 3.9% 3.6% (P) 3.2% (F) Muskegon - Norton Shores 4.6% 4.2% (P) 3.8% (F) State of Michigan 4.0% 4.0% (P) 4.0% (F) National 4.0% 3.8% 3.8% (P) Projected (F) Forecast Source: U.S. Bureau of Labor Statistics SALE ACTIVITY 2301 44th Street SE PROPERTY NAME SIZE (SF) SALE PRICE CITY

3160 28th Street SE 30,000 $4,850,00 Kentwood

Grand 2301 44th Street SE 47,130 $2,100,00 Rapids

Grand 5039 28th Street SE 8,000 $2,000,000 Rapids

Grand 4797 Cascade Road SE 6,300 $1,325,000 Rapids

5128 Lake Michigan Drive 3.00 acres $460,000 Allendale

LEASING ACTIVITY 6080 28th Street SE PROPERTY NAME SIZE (SF) TENANT CITY Tuscan Grand 6080 28th Street SE 4,200 Mediterranean Rapids

2855 29th Street SE 6,136 Evo Corporation Kentwood

Natural Life 29 West 8th Street NW 15,192 Foundation Holland

Title 4491 Ivanrest Avenue SW 3,278 Boxing Grandville

Grand 3565 28th Street SE 2,349 MOD Pizza Rapids

West Michigan Research & Forecast Report | Q1 2019 | Retail | Colliers International 3 CONSTRUCTION Offices located in While there is limited retail construction happening around the region, there are a number of noteworthy construction projects underway. 68 countries on Studio Park in downtown Grand Rapids – which will feature retail, housing, restaurants, a movie theater, music venues, office space and much more – is slated for completion this fall. 17,000+ professionals. Development in the Stocking Avenue and Bridge Street Corridor $3.3* billion in annual brokerage revenue also continues. City of Grand Rapids Mayor Rosalynn Bliss touted billion square feet under management the “explosion of new economic activity” in this corridor in her 2019 2 State of the City address, according to MLive. These developments 69,000 sale & lease transactions include Meijer’s new Bridge Street Market that opened in 2018 and the new West Michigan Center for the Arts and Technology (WMCAT) with a total transaction value of location. In the Alpine Avenue Corridor, Jimmy John’s is filling an endcap $127 billion. at 406 Alpine Avenue NW. The construction of Planet Fitness was finalized as the health club opened for business in February. *All statistics are for 2019, are in U.S. dollars and include affiliates. HOLLAND MARKET Holland’s retail market continues to transform as new retailers A LOOK AHEAD enter the area. Although retail space is tight, new construction is underway, creating opportunities for new restaurants and shops to »» West Michigan will continue to attract new retailers, join the market. Rental rates are at $12.63 per square foot. including many national brands, as the market evolves and grows. Over the coming months, several new retailers will open to the public as part of the GDK Construction and Geenen DeKock Properties (GDK) »» With retail space tightening up and limited new development taking place along West Eighth Street in downtown construction, retailers will be forced to find new Holland. In March, HopCat announced it will open its Holland location options for space. in April and will create 160 jobs. The 6,200-square-foot restaurant »» Technology and e-commerce will continue to influence will feature 80 taps and offer indoor and outdoor seating, according West Michigan’s retail market as brands think about to a WOOD TV report. Additionally, Cakabakery plans to move into its new ways to attract and retain customers. new downtown Holland location in April.

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Glen Gerwatowski Mark Ansara Mike Murray CCIM Mike Howard Research Analyst Vice President Senior Vice President Associate | Lansing DIR +1 616 988 5813 DIR 616 988 5835 DIR 616 988 5810 DIR 616 242 5170 [email protected] [email protected] [email protected] [email protected]

Earl Clements Chris Prins Senior Vice President Senior Associate DIR 616 242 5175 DIR 616 988 5832 [email protected] [email protected]

Jon Geenen Drew Durham Associate Associate | Holland DIR 616 242 5164 DIR 616 355 3148 [email protected] [email protected]

Colliers International | West Michigan Colliers International | Holland 333 Bridge Street NW, Suite 1200 44 E. 8th Street, Suite 510 Grand Rapids, MI 49504 Holland, MI 49423 +1 616 774 3500 +1 616 394 4500

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