WMichigan-based commercial real estate experts believe activity in retail and office markets is gradually improving, especially hit hard by telecommuting and staff shortages during the COVID-19 pandemic.
“The two slowest things to recover will be offices and retail, because one is fueled by the other,” said Mark Ansara, the company’s managing director. LLC “Advantage Commercial Real Estate”… “If you don’t have seat backs in your offices, retail won’t thrive. And if you don’t have enough employees working in shops and restaurants in the city center, people are unlikely to want to return to the office. “
However, the flow of deals remains unchanged and the West Michigan office and retail markets are doing better than expected for now, Ansara said. According to Advantage Commercial Real Estate’s 2021 Mid-Year Market Trends Report, as of June 2021, Western Michigan has grown 40 percent over last year.
Meanwhile, the office vacancy rate in Western Michigan remained stable and ended the second quarter at 9.5%, according to the Colliers InternationalQuarterly report of the Grand Rapids office.
“I think (office) activity will start to pick up a bit, but we are not yet close to pre-COVID levels,” said Gary Albrecht, chief and senior vice president of Advantage Commercial Real Estate. “I don’t think we are in the economic crisis of 2008-2009 because people are in control. It’s just an office world in which we don’t know how it will work yet. ”
Influence of labor
Labor problems also mean employers may be more inclined to hire workers who may not be willing to resume personal office work, Albrecht added.
Michigan’s unemployment rate in June was unchanged from the previous month. While it still exceeds the unemployment rate of about 4 percent before the pandemic, the unemployment rate is only a fraction of 14.8 percent in June 2020.
On the retail side, a recent Michigan survey found that 88% of Michigan hotel companies are understaffed. Michigan Restaurant and Hotel Association members. More than four in five survey respondents are working at least 10 percent below their staffing level, and nearly 80 percent of restaurant and hotel operators reported early closings or closings for certain periods of the day due to staff shortages.
“If you can’t staff your business, you’re not going to build it, and if you can’t build or remodel your store, there will be delays,” said Earl Clements, senior vice president of Colliers International’s Western Michigan office. … “It costs a lot more to hire someone now because you have to convince them to work for you.”
Talent shortages, high prices and long lead times for raw materials, as well as the delta variant of the coronavirus, are likely to impact project timelines next year and in 2023, especially with regard to new construction, Clements said. He also said that continued payment of extended unemployment benefits exacerbated labor shortages.
The June 2021 Invoice Index report released by the American Institute of Architects had 57.1, total below the May 2021 billing index at 58.5. Slightly fewer firms reported account increases in June than in May, according to the AIA, but current account growth rates are close to the highest levels ever seen.
Firms report an average of six and a half months outstanding projects, the highest in two years, after an average five-month lag at the start of the COVID-19 pandemic. Some firms have expressed concerns about their ability to handle the increased workload as they find it difficult to fill open positions, according to the AIA.
Meanwhile, retailing continues to perform well in high-traffic areas such as East Beltline Avenue and anywhere within a half-mile radius of 28th Street in Grand Rapids, Clements said.
“(Retail) deals are being made,” Ansara said. “However, stocks are scarce and we don’t have that many good stocks, which leaves many good retailers on the sidelines until they find what they need.”
Back to school
Western Michigan real estate consultants are waiting to see if the start of the upcoming school year will have a positive effect on getting employees back to work and resuming their daily activities before the pandemic.
“We haven’t had a normal life for almost two years, so getting the kids back to school can be a positive thing for any industry,” Ansara said.
According to Albrecht, construction of new office space is generally on hold, but the number of jobs in the office is expected to increase with the start of the school year.
“The phased approach will begin this fall when the children return to school,” Albrecht said. “We’re not going to just switch from day one by returning 100 percent of our employees. Most of the companies are looking to hire amazing employees for larger local businesses in Western Michigan. ”
Albrecht also noticed trends in buildings, with multiple tenants changing or changing premises based on their square footage needs. Smaller companies seem to be more willing to return to the office compared to larger companies, which tend to avoid extending long-term leases, Albrecht said.
“I really think we will potentially start seeing more long-term leases – we at least see a little more willingness to explore long-term lease options,” he said. “The general theme is this: I don’t think the office market is taking a step back. I think he is gradually approaching more positive prospects. Let’s see what the fall brings and whether the surge continues. “