• Abstract and Figures
• Public Full-text

February 8, 2021 Mr. Dan Kinkead Smith Group, Incorporated 201 Depot Street, 2nd Floor Ann Arbor, Michigan 48104 Re: Hotel Hayes Building Highest and Best Use Analysis (Jackson, Michigan) Dear Mr. Kinkead: Bowen National Research has completed a preliminary Highest and Best Use Analysis for the former Hotel Hayes building in Jackson, Michigan. The purpose of the report is to provide you with key demographic, economic and relevant supply data and analyses as they relate to potential development alternatives currently being considered for the subject site. Per your request, we have evaluated the potential to develop rental apartments, for-sale condominiums, and retail/commercial space. Our report concludes with our recommendations as to the highest and best uses that can be supported at the subject site. Because a specific project concept has yet to be established, we have provided you with general development guidelines in terms of product type, design features and rent/pricing structures. We provided demand estimates at various rents/price points to allow you to understand how the project’s market potential is impacted by the changes among the different levels of affordability that may be offered at the site. Once you have prepared a financial model and refined the project concept, we can provide additional guidance and recommendations, if needed. Regardless, this report should give you sufficient information from which you can further develop the site’s project concept. We have enjoyed working on this project and look forward to getting your feedback on this analysis. Respectfully, Patrick M. Bowen [email protected] www.bowennational.com 155 E. Columbus Street, Suite 220 | Pickerington, Ohio 43147 | (614) 833-9300 Highest & Best Use Analysis Hotel Hayes 228 West Michigan Avenue Jackson, Michigan 49201 Prepared For Mr. Dan Kinkead Smith Group, Incorporated 201 Depot Street, 2nd Floor Ann Arbor, Michigan 48104 Effective Date February 8, 2021 Job Reference Number 20-660 (Patrick Bowen) www.bowennational.com 155 E. Columbus Street, Suite 220 | Pickerington, Ohio 43147 | (614) 833-9300 Table of Contents I. Executive Summary II. Highest and Best Use Analysis III. Qualifications Addendum A: Telephone Survey of Conventional Rentals Addendum B: Non-Conventional Rentals Note: Information on individual for-sale transactions and listings can be provided upon request BOWEN NATIONAL RESEARCH Table of Contents I. Executive Summary The purpose of this report is to determine the highest and best use for a vacant building (Hotel Hayes) located in downtown Jackson, Michigan. The potential development alternatives considered in this report include rental apartments, for-sale condominiums, and retail space. Project Demand Summary (Highest & Best Use Recommendations) – Based on the findings contained in this report, we believe there is a development opportunity for some residential units at the site, with modest support for retail space. The following table summarizes recommended uses for the subject site, at a variety of affordability levels. Highest & Best Use Estimates & Recommendations Market Potential by Affordability Level Primary Use Low Moderate High Apartments Up to 66 Units Up to 50 Units Up to 34 Units (Affordable/Workforce) Base Rent of $700 Base Rent of $800 Base Rent of $900 Apartments Up to 58 Units Up to 48 Units Up to 37 Units (Market-rate) Base Rent of $800 Base Rent of $1,000 Base Rent of $1,200 Up to 26 Units Up to 15 Units Up to 26 Units For-Sale Condominiums $150,000-$199,999 $200,000-$249,999 $250,000+ ~ 9,200 square feet Retail Space Not Studied Not Studied @ $13.00+ Triple Net Note: All estimates are approximations. The actual number of residential units or amount of retail space is contingent upon a variety of factors such as design, finishes, features, amenities, complementary uses, layouts, etc. Product design recommendations are provided starting on page I-5. Site Description – The subject project involves repurposing the vacant Hotel Hayes located at 228 West Michigan Avenue in Jackson, Michigan. Opening as the Hotel Hayes in 1926 with 203 rooms, this development was considered the most elaborate and largest hotel project ever undertaken in Jackson. The elevator-served 10-story structure offers approximately 10,000 square feet per floor. Operating for over 40 years as a hotel, the building’s most recent use was as office space (on the top three floors) for Consumers Energy. In the early 2000s, the Hotel Hayes was purchased by the City of Jackson for redevelopment while Consumers Energy consolidated in a new headquarters within the downtown area. The building has been vacant since 2003. Many features of the original hotel are still present on most floors and are clearly visible on the exterior of the building. BOWEN NATIONAL RESEARCH I-1 Key Market Metrics – The following summarizes key market metrics that impact development opportunities at the subject site: The Subject Building’s Historic Presence and Architectural Design, as well as its Downtown Location will Contribute to Its Marketability – The subject building is a nearly one-hundred year old 10-story structure that has many interior and exterior Georgian Revival design elements preserved. The subject site is situated in the central portion of the Jackson Central Business District, which offers a variety of employment, entertainment, shopping, and dining opportunities. Most community services are within 1.0 mile of the subject site. Overall, the subject property fits in well with the surrounding land uses, which are primarily comprised of the public library adjacent west; new multifamily rental properties, a proposed parking lot, and an engineering firm’s national headquarters to the north; and a public park, various area commercial and retail services, and cultural amenities to the south and east. Site access and visibility are considered excellent. The site should benefit from recently completed and ongoing development and investment in the area, such as the reconstruction of Michigan Avenue, several recently completed new construction projects and building renovations, and the recently opened Jackson School for the Arts. Based on the site’s proximity to community services, access/visibility, and availability of parking, it is our opinion that the downtown location of the subject site will be marketable for future development. Demographic Trends are Projected to be Positive Among Moderate- and High- Income Households – Within both the Residential Primary Market Area (PMA) and smaller Retail PMA, the trend of declining populations and households over the past two decades appears to be stabilizing to some degree. There appear to be two significant demographic changes projected to occur by 2025 that will have an impact on housing needs. First, despite a projected overall population decrease of residents over the next five years, the age group of 65 and older is expected to experience a notable population increase through 2025. Second, income levels for both renter- and owner-occupied households are expected to increase substantially in the moderate- and high-income brackets. This indicates a potential increase in demand for product that will serve higher income households and senior households (ages 65 and older) within the market, for both renter- and owner-occupied housing types. It is also projected over the next few years that the Residential PMA will experience notable growth among renter households earning between $30,000 and $60,000 annually, leading to a likely growing need for affordable/workforce rental housing units. Lastly, the distribution of households by size is not expected to change significantly over the next few years. One- and two-person households comprise the majority of households, which will lead to a likely need for smaller unit types (studio, one-bedroom and two-bedroom). BOWEN NATIONAL RESEARCH I-2 The Local Economy Appears to have Nearly Fully Recovered from the Impacts of COVID-19 and Several Ongoing and Planned Investments and Developments will have a Positive Impact on the Local Economy – The local economy is relatively diversified and was performing well prior to the COVID-19 pandemic, as evidenced by the declining unemployment rate over the past decade and the more than 5,700 jobs added to the county’s employment base since 2010. Based on a cursory review of local economic news and announcements along with our interviews with various local stakeholders, there appear to be numerous private sector (e.g., new residential and commercial development, business expansions, etc.) and public sector (e.g., infrastructure) investments and developments recently completed, planned or underway that should contribute to Jackson’s economy for the foreseeable future. This anticipated economic growth will positively impact the demand for a variety of housing and retail alternatives. Both Market-Rate and Affordable Rental Alternatives are Performing Well and Development Opportunities Exist for Both Segments – We identified and telephone surveyed 18 multifamily rental housing projects containing a total of 2,084 units within the Residential PMA. This survey was conducted to establish the overall strength of the rental market and to identify those properties most comparable to product that may be developed at the subject site. These rentals have a combined occupancy rate of 94.7%, which is a good rate for market-rate rental housing. The market-rate units are 92.2% occupied and the Tax Credit units are 99.8% occupied. Typically, healthy and well-balanced rental housing markets have overall occupancy levels generally between 94% and 96%. As such, the overall market-rate occupancy rate of 92.2% is slightly low. However, it should be pointed out that 45 (41.3%) of the 109 total vacant market- rate units identified in the market are within a single project: The 200 (Map ID 1). This 86-unit market-rate project recently opened and is in its initial lease-up phase. When this project is excluded, the overall market-rate occupancy rate increases to 95.1%.

Load more

  90

Copy Link