Where’s the next hot commercial real estate market in and around TC? Two local realtors compare growth and opportunities across Traverse City’s key commercial districts with The Ticker…and identify some of the hottest properties, best bargains and future “Front Streets.”
In the early 1990s, Grand Traverse Mall was commanding some of the highest lease rates in the county, while downtown struggled to compete. What a difference a decade – or two – makes.
“The highest rates you’re going to find for anything now will be downtown,” says Kevin Endres, owner of Three West, which represents office space on Front Street, State Street and Grandview Parkway. Annual lease rates typically range from $18.50-$22 per square foot for downtown commercial space (or $74,000-$88,000 for a 4,000 square-foot building), with vacancy in the first quarter of 2014 hovering at just 3.2 percent.
Openings in the recently constructed Copper Ridge development off Silver Lake Road are also commanding top-tier prices; a 4,000-square foot unit is currently listed at $19.5 per square foot, or $78,000 a year. “Those (rates) are comparable to what you’ll find at Radio City Centre,” says Endres, noting that the site’s new construction, high-end medical and professional office space and parking amenities are driving up its value.
Also earning high lease rates locally: Properties near Division Street and Fourteenth Street, neighborhoods bordering (but outside of) downtown TC, and high-traffic strip centers like the Fourteenth Street Plaza (presently fetching $22.90 per square foot).
New business owners and companies less dependent on foot traffic would do well to consider commercial space at Chums Corner, South Airport Road and Garfield Avenue, according to Dan Stiebel of Coldwell Banker Schmidt Realtors. “Those are lower rent areas that would be a good for a start-up,” says Stiebel. “The buildings tend to be older and there’s a little bit less traffic.”
“Any of the outskirt areas, you’re going to see lower rent,” agrees Endres. A 2,500 square-foot unit on South Airport currently lists for $7.68 per square foot ($19,200 annually), while 16,760 square feet on US-31 South – including 300 feet of highway frontage – is going for just $2.68 per square foot ($45,000 annually).
As for the once-mighty malls? While Grand Traverse Mall rates are difficult to precisely pinpont (the lease model includes a percentage of store revenues), both Stiebel and Endres point to an exodus of national chains and influx of smaller businesses as a sign rates are declining. Endres, who represented Cherryland Center in the past, says rates there have held at about $10 per square foot in recent years – a far cry from past decades when malls dominated the local commercial landscape with rents multiples higher.
Future Front Streets
So where will the region’s next burst of commercial development be – the corridor that could give Front Street a run for its money? Both Stiebel and Endres agree: The east side of Traverse City is due for a growth spurt.
“The one thing lacking on the east side is good retail options,” says Endres. “With Meijer breaking ground (in Acme), I think you’ll see that whole corridor from downtown all the way out start to pick up.” He notes national franchises with successful west-side locations are now eyeing east-side expansions, while a proposed redevelopment of East Bay Plaza is already attracting potential tenants with an expected $17.75 per square-foot lease rate.
Stiebel also believes Eighth Street, the Depot Neighborhood and pockets like Logan’s Landing and Racquet Club Drive are ripe for new growth. “Those all have good redevelopment potential since they’re so close to everything,” he says. Stiebel adds that even Front Street could become the next ‘Front Street’: “Going east and west on either side of the two main blocks, I think you’ll see development expand outward (in the coming years),” he predicts.
Milligan, Beth. “The Ticker: The Next Big Real Estate Hot Spots.” The Next Big Real Estate Hot Spots : News : The Ticker. The Ticker, 9 July 2014. Web. 09 July 2014.