The West Michigan multifamily rental market remains among the strongest in the U.S.
The dip at the start the year follows a strong 2022, and there is a promising outlook, according to Kevin O’Reilly, director of multifamily investment at NAI Wisinski of West Michigan.
“Last year was a bumper year,” O’Reilly said. “It was a front-loaded first half, as strong of a half as we’ve seen. In the second half, Even though there was a lot of talk of a slowdown, investment volume in the multi-family sector still hit $40 billion nationally in Q4, and that’s in line with the 10-year long run average, so while there was a slowdown, it was off all-time peaks.”
Coming off the exceptional year, O’Reilly said the fundamentals of West Michigan remain strong and should help the multifamily market withstand any potential nationwide downturn. That starts with a solid rent collection rate of more than 96%, according to O’Reilly.
His presumption of the strong market is supported by nationwide analysts who spoke at the National Multifamily Housing Council annual meeting in Las Vegas, which NAI Wisinski advisers attended last month. Grand Rapids and Kalamazoo were mentioned as strong multifamily investment opportunities, along with several other Midwest markets and more in the Southeast.
Moves from apartments into first-time homes appeared to slow too, which makes sense, according to O’Reilly, as mortgage rates have increased by 45% in the past 12 months.
While the fundamentals remain strong with plenty of opportunities, the costs to purchase and build make movement largely prohibitive at the moment.
“There is a gap in pricing with buyers and sellers waiting for each other to blink,” O’Reilly said.
He said buyers are waiting for better prices, hoping to make deals match those they might have found 12 to 18 months ago. Instead, O’Reilly believes they’ll just have to “sharpen their pencils a little bit” to make them work.
It might be another quarter or two before the real estate market finds its new normal, according to JLL Senior Vice President Jeff Karger.
“The market is still trying to figure itself out, and it will,” he said.
Perhaps the most important piece for O’Reilly looking at the potential for the West Michigan multifamily market is there are few distressed assets on the market.
“There are a lot of people using the big ‘R word’ out there, but that seems like more talk than anything,” he said. “Any of the distressed assets we’re seeing, anything in that ballpark would be that way regardless of the economic climate. It’s shaky operators as opposed to fundamental economics.”
Despite any potential slip in the market, there is plenty of need for more multifamily properties in West Michigan, based in part because of expected demand, as touched on in a recent GRBJ Q&A with Randy Thelen, president and CEO of The Right Place.
There is already a housing shortage in West Michigan, as detailed in a new documentary.
Moving forward, Karger said West Michigan remains a strong candidate for multifamily growth, particularly for out-of-state investors who can find excellent value in the region compared to other metro areas.
According to the NAI Wisinski of West Michigan multifamily construction pipeline report released this week, there are 969 units in lease-up in Grand Rapids with another 2,023 units under construction.
In the pipeline, there are an additional 1,836 units approved and more than 3,100 units proposed.
Projects under construction include more than 400 units at Rivertown Commons in Granville and 344 units at The BLVD at Wilson Crossings in Byron Township.
Other projects under construction include:
- 149 units at Avanterra Forest Hills Preserve
- 56 units at Eastpointe Commons
- 254 units at HÅM Flats at 28 West Phase 3
- 240 units at HÅM Flats at Maynard
- 250 units at The Savannah at Waterford Village
- 165 units at Studio Park Lofts Phase 2
- 140 units at Victory on Leonard Apartments
- 92 units at Village of East Ada
- 52 units at Union Suites on Coit
Major approved multifamily projects include:
- 753 units at Sligh Furniture Building by Sturgeon Bay Partners
- 432 units at The McConnell by Interra Realty
- 237 units at Boston Square by Rockford Development
Proposed projects include:
- 245 units at 501 and 516 Alabama Ave. NW by Rockford Construction
- 348 units at 3500 60th St. SE by BDR Inc.
- 250 units at Celebration Apartments by Victory Development Group
- 552 units at English Hills Country Club in Walker by Redhawk Multifamily
- 200 units at Heartside Health District Revitalization by Trinity Health Saint Mary’s
- 604 units at The Pines by Redhawk Multifamily and Dome Development
- 217 units at Vista 45 by JAG Development Inc.
