WEST MICHIGAN NORTHERN INDIANA CENTRAL INDIANA 25TH ANNUAL COMMERCIAL REAL ESTATE MARKET STUDY WEST MICHIGAN Montcalm Muskegon NORTHERN INDIANA CREATING REAL VALUE Kent Founded in 1978, Bradley Company is a diversified real estate firm providing commercial brokerage services, Ionia commercial and multi-housing management, real estate tax consulting, maintenance services, project and facilities CENTRAL INDIANA Ottawa management, research services, corporate services and strategic planning. Bradley Company is the largest full service commercial real estate solutions provider in Indiana and West Michigan. ADDITIONAL COUNTIES OF SERVICE Allegan Barry Eaton REAL ESTATE TAX CONSULTING Over $1 million saved in Van Buren Calhoun tax liabilities since 2011 Lake Kalamazoo Michigan MULTI-HOUSING Cass Branch CORPORATE SERVICES St. Joseph 3,000± Conventional, Berrien BROKERAGE Strategic partner serving Aordable, Senior, Student Over 50 brokers in 8 oces & corporate clients in all and Special Needs units classes of property LaGrange an average of 700 listings per year Steuben under management St. Joseph Elkhart LaPorte Porter DeKalb Noble COMMERCIAL Lake Marshall CAPITAL MARKETS Starke Kosciusko MANAGEMENT Over $1.5 billion 10± million commercial Whitley in experience Allen square feet managed Pulaski Fulton Newton Jasper Huntington Wabash White Cass Adams Wells 250+ Benton Miami EMPLOYEES Carroll Grant Blackford Howard Jay Warren Tippecanoe Clinton Tipton Delaware Madison Randolph Hamilton 40 Fountain Montgomery Boone YEARS IN BUSINESS n Henry Wayne Marion Hancock Vermillio Parke Hendricks Putnam Rush Union Fayette Shelby Morgan Johnson $202M+ Vigo Clay Franklin VALUE OF BROKERAGE Owen Decatur Bartholomew TRANSACTIONS IN 2017 Brown Monroe CONTENTS WEST 04 MICHIGAN PRESIDENT’S LETTER 42 06 NORTHERN CENTRAL PROFESSIONALS INDIANA INDIANA 16 RESEARCH | ANALYSIS LAYOUT | DESIGN COPY EDITOR STEVEN HEATHERLY MICHELLE MOREY MARSHALL V. KING [email protected] [email protected] [email protected] LUCAS DEMEL KYLIE CURTIS [email protected] [email protected] BRENDEN MCGANN JONATHAN KITCHENS [email protected] [email protected] /company/bradley-company @bradley_company /bradleycompanyCRE @bradleycompany PRESIDENT’S LETTER With this delivery of our 25th annual Market Study, we are again pleased to provide our clients with an understanding of trends in our industry, with a Midwest perspective. Our team of Bradley Company professionals is focused on helping our clients understand and capitalize on trends that affect our markets, as they evolve. We want to express our sincere thanks to our sponsors, who help make this 25th edition possible and who are recognized at the end of this report. Our expertise comes from 40 years of working toward prosperity and better communities in the Midwest. As Bradley Company continues to grow in our region, we are excited to see the dynamic ways in which our markets are changing. While some sectors of the markets have gone from hot to overheated, again, we are still seeing continued slow growth and expansions through many of our sub-markets. Valuations with existing property have stabilized in the past couple years, with opportunity found mostly in the form of new construction, however still difficult from a finance standpoint. All product types and class levels have become more broadly activated in 2017, which looks to continue through 2018. Exciting new projects are underway in all our regions, both from private, and public / private partnership initiatives with many “market relative” large-scale developments emerging. Regional Cities funding has helped trigger projects in the urban cores of many cities within North Central Indiana (now the South Bend – Elkhart Region). Great Lakes Capital and Martin’s Super Markets are planning a new mixed-use development for the River District in downtown Elkhart. The district has a $65 million aquatics center and a $32 million Flaherty & Collins mixed-use residential project underway, creating an urban, walkable neighborhood in the heart of the city. In downtown South Bend, The LaSalle, Studebaker Flats, and The Ivy at Berlin Place are all adding residential mixed-used components with diverse options to help remake the urban market. A new $400 million Four Winds Casino opened 10 minutes from downtown South Bend with fanfare in January, drawing guests to the city from around the region. In Northwest Indiana, state and local funds have been committed to the South Shore Line’s double-track project and West Lake extension. Indiana Gov. Eric Holcomb has touted the need for key upgrades to the electric train between South Bend and Chicago, which could shape new developments along the line. Chicago residents and businesses alike are rolling across the border in greater numbers every month creating a significant dearth of supply, principally in housing and industrial facilities. Northeast Indiana, which also received a Regional Cities grant, continues to expand in all sectors on its Road to One Million, with an appropriate concentration on spaces friendly to new kinds of urban residents and workers. Skyline Tower, a $40 million mixed-use tower by Great Lakes Capital, was topped off in January and will be completed for occupancy summer of 2018. Developers will use $440 million of investment to redevelop the former GE campus on the southwest side of downtown Fort Wayne, establishing a colossal new mixed-use innovation district called Electric Works, which could add transformative density to the region’s core CBD. The city’s $26 million Phase I Riverfront Project adds diversification, bringing even more people back downtown. Continental Property Group is planning to invest $61.7 million into yet another new mixed-use development along the riverfront, to include approximately 150 apartments and 20,000 square feet of retail space. 4 PRESIDENT’S LETTER In West Michigan, the demand for industrial space is significantly outpacing supply, generating new developments throughout the region. Medical providers are investing heavily into the region. Michigan State University completed a new $88 million Research Center in 2017 along the Medical Mile in downtown Grand Rapids, while Pfizer plans to invest $800 million in the next 10 to 12 years into its Portage facilities and Stryker is constructing a new $130 million corporate campus. Significant developments are underway in both downtown Grand Rapids and Kalamazoo. Momentum is building for the $140 million Studio Park development, that will feature a piazza, nine-screen Studio C! theater, hotel, apartments, retail and office space, and a residential tower in downtown Grand Rapids. The Exchange Building officially broke ground in 2017 in downtown Kalamazoo as the $52 million mixed-use development will bring 133 luxury apartments and nearly 60,000 square feet of commercial space. Our Grand Rapids office relocated in 2017 to the Waters Center, at 161 Ottawa Ave. NW, Suite 308, overlooking the city’s CBD as we have grown since opening in 2014. The Waters Center was the 2016 Project of the Year for the Commercial Alliance of Realtors in West Michigan. In Central Indiana, industrial construction continues to reach historic highs with more than 7.5 million square feet constructed in 2017. New construction is being seen in all sectors throughout the region, bringing thousands of jobs to the area. In 2017, Infosys opened a tech and innovation hub in downtown Indianapolis, potentially growing up to 2,000 employees. Indianapolis is among 20 finalists for Amazon’s new $5 billion HQ2 campus, that would employ 50,000 workers with average salaries of more than $100,000 a year. The region’s combination of connectivity, quality of life, affordable living, and business-friendly environment make it a very enticing option for Amazon’s second headquarters. Companies expanding and adding thousands of jobs have been contributing greatly to the growth of the multi-housing market in Central Indiana. More than 2,300 market-rate apartment units were completed in 2017, and construction doesn’t appear to be slowing down, as more than 2,400 units were under construction at the beginning of 2018. In our Indianapolis location, we expanded to a larger suite in Castle Creek I, at 8604 Allisonville Road as we have grown our brokerage and management teams. This brings the Indianapolis office to nearly 20 people, after opening its doors in the Central Indiana market in 2015. For 40 years, our professionals at Bradley Company have worked to contribute to success of our communities and clients. Since my father started the business in 1978, we have worked to create value-based solutions and opportunities. We very much look forward to 2018 and 2019 with the growth we can bring to our clients and our company. We hope you find the intelligence in this market study relevant and useful. We appreciate your partnership in all that we do. Best regards, Bradley J. Toothaker, CPM, SIOR President & CEO 5 WEST The West Michigan region is comprised of 10 counties with a total population of 1,970,678. Several companies call West Michigan home, including Strykers global headquarters, Whirlpool Corporation, Kellogg Company, Amway, Meijer, and many more. Grand Rapids, the state’s second-largest city, leads the way in economic development for the region, and was named the hottest real estate market to watch in 2018 by Trulia. The Lakeshore area, located along the east coast of Lake Michigan, draws in many tourists INDUSTRY annually for its award winning wineries. In the Kalamazoo area, medical device manufacturing STATISTICS companies, Stryker and Pfizer, are undergoing significant long-term investments that will benefit the region for many years. Scattered throughout the region, cities such as St. Joseph, South Haven, New Buffalo, and many others boast engaging downtown environments that attract thousands of visitors annually. Services: 40% Retail: 21% Manufacturing: 15% Wholesale Trade: 6% Other: 18% 1,970,678 11.6% 2017–2022 10.8% ANNUAL RATE 0.65% 6.2% 5.7% 4.2% 3.4% 2007 2017 2017 STEADILY DECREASING SINCE 2009 POPULATION Kalamazoo MSA Grand Rapids MSA Sources: U.S.