Warner Building/Hyatt Place - Lyon and Ottawa/Pearl and Ottawa

[x99]

48 minutes ago, torgo said:

So is the door of GR's new mini-fridge going to open to the left or to the right?

Nailed it.  

Not exactly a building to be proud of, as I expected from the elevation drawings.  Not horrible, which is not hard given how low the bar has moved recently, but certainly nothing special.  Not like what could have been had the mid-2000s proposal been built.  That would have been something special.

Time for a big picture recap.  Yes, this is infill, which is good.  However, it really doesn't do a darn thing for downtown, just like the Miller Johnson move.  Neither of these buildings were or will go up because of an unsatisfied demand for space.  Rather, that are mediocre vanity projects that leave other empty, abandoned office space behind, with what I suspect are pretty bleak prospects to fill it.  CWD has been gaming the office vacancy rates for some time now by withholding vacant space (so that it is not counted), and I suspect they will have to continue to do so for quite some time.  And yes, it does work that way.  If a million square foot building sits empty, unoccupied, and ready for tenants but unlisted, it may as well not exist so far as vacancy rates are concerned.  

As far as the apartments?  Suffice to say there aren't waiting lists at Waters, Arena Place, or Morton, if the apartment listing websites are any indication.  By my count, at least two are running 15% to 25% vacancy rates.  That's atrocious.  At another its impossible to tell since they aren't listing individual unit availabilities.  Remember, no one knew what the size of the market was for these things, or what prices they would support.  I have to wonder if we've gone past the limit already.  But perhaps because I've lived and worked here for so long, I'm simply incapable of understanding the claimed magnetic draw of downtown Grand Rapids.  Perhaps living in a retail desert in the snowbelt really is that great?

Ultimately, if those vacancy rates do not start trending downward, it is going to bring rents down, which will put a quick end to new construction. 

[GRLaker]

22 minutes ago, x99 said:

Nailed it.  

Not exactly a building to be proud of, as I expected from the elevation drawings.  Not horrible, which is not hard given how low the bar has moved recently, but certainly nothing special.  Not like what could have been had the mid-2000s proposal been built.  That would have been something special.

Time for a big picture recap.  Yes, this is infill, which is good.  However, it really doesn't do a darn thing for downtown, just like the Miller Johnson move.  Neither of these buildings were or will go up because of an unsatisfied demand for space.  Rather, that are mediocre vanity projects that leave other empty, abandoned office space behind, with what I suspect are pretty bleak prospects to fill it.  CWD has been gaming the office vacancy rates for some time now by withholding vacant space (so that it is not counted), and I suspect they will have to continue to do so for quite some time.  And yes, it does work that way.  If a million square foot building sits empty, unoccupied, and ready for tenants but unlisted, it may as well not exist so far as vacancy rates are concerned.  

As far as the apartments?  Suffice to say there aren't waiting lists at Waters, Arena Place, or Morton, if the apartment listing websites are any indication.  By my count, at least two are running 15% to 25% vacancy rates.  That's atrocious.  At another its impossible to tell since they aren't listing individual unit availabilities.  Remember, no one knew what the size of the market was for these things, or what prices they would support.  I have to wonder if we've gone past the limit already.  But perhaps because I've lived and worked here for so long, I'm simply incapable of understanding the claimed magnetic draw of downtown Grand Rapids.  Perhaps living in a retail desert in the snowbelt really is that great?

Ultimately, if those vacancy rates do not start trending downward, it is going to bring rents down, which will put a quick end to new construction. 

Good. The rental rates are FAR too high as it is. I'm not at all surprised by the vacancy rates...The very people that would fill these units (millennials) are incapable of affording $1,500+ apartments when they're paying off $50,000+ in student loan debts and living in a region with the lowest average income in the US for metro areas of 1 million or more. These developers came in and thought they could charge Chicago rates in a 190,000 person city. They then slap us in the face and insult our intelligence by calling it "market rate" when the reality is that it's the very top of what the market could possibly allow. They're going to find that they were way off in what the West Michigan market is actually demanding.  

Edited October 12, 2016 by GRLaker

[arcturus]

29 minutes ago, x99 said:

Suffice to say there aren't waiting lists at Waters, Arena Place, or Morton, if the apartment listing websites are any indication.  By my count, at least two are running 15% to 25% vacancy rates.

Not disputing your figures, just wondering where you got them.  I posted a question earlier this year about what the vacancies were and got nothing but zzzzzzzz.....

Edit:  sorry, just noticed apt listing sites.  Could you name a few?

Edited October 12, 2016 by arcturus

[x99]

35 minutes ago, arcturus said:

Not disputing your figures, just wondering where you got them.  I posted a question earlier this year about what the vacancies were and got nothing but zzzzzzzz.....

I extrapolated them from apartment listing websites.  Morton lists 25 units available.  (Probably not the brightest move to advertise all of your vacant units like that, but oh well.  Now everyone knows... (You're welcome)).  With a 100 unit project, that makes for 25%.  It's not a good sign, since it was the first one and the first round of "Oh, gosh, it's new let's go live downtown" is probably just starting to wear off.  Now, bear in mind that Rockford was also so bold (or stupid, depending on your perspective) that they did Morton without any "free" parking.   If am correct that people are leaving and they cannot refill these units, this should serve as a stern warning to every other developer who still thinks that is a good idea.  I AM LOOKING AT YOU, MICRO UNITS.  Waters has 7 units of their 40 or so (?) empty.  And I know they were trying to pre-lease for a long time.  Arena Place I could not really tell because they are listing two "ranges" of apartments (a much smarter way to avoid advertising to the world that your occupancy sucks).

What does all this have to do with the Warner Apartment Brick?  (I refuse to call that joke a "tower").  Well, when the first project in the area is running 25% empty, why build more of the same?  Sure, perhaps having on-site parking helps, but it isn't some magical ace-in-the-hole that is a long term panacea for rents that the market is apparently refusing to pay.  The real test of a new, large, high priced downtown building is whether it call keep leases filled after a year.  Morton AFAIK is the only one of those to have reached that stage, and it seems to be in trouble, unless I just stumbled across some momentary anomalous blip.  This is a good sign for rents, but it is NOT a good sign for this "residential, walkable" city nonsense that the planning department is pushing...  Nor is it a good sign for the endless apartment construction...Or for the banks throwing money at these... Or for the developers who sign the guarantees to the banks...  

Maybe Morton is a canary in the coal mine, maybe not.  But 25 available units in a 100 unit project is very, very alarming.

 

Edited October 12, 2016 by x99

[torgo]

16 minutes ago, x99 said:

it is NOT a good sign for this "residential, walkable" city nonsense that the planning department is pushing.

I am not sure what you mean, but "residential and walkable" is exactly what they should be striving for.  If you want a vibrant, thriving downtown with lots of stuff to do, you need residents.  Lots and lots and lots AND LOTS of residents.

[GRLaker]

5 minutes ago, torgo said:

I am not sure what you mean, but "residential and walkable" is exactly what they should be striving for.  If you want a vibrant, thriving downtown with lots of stuff to do, you need residents.  Lots and lots and lots AND LOTS of residents.

You have to attract the residents first. Charging ungodly prices and not providing the freedom to have a car without being charged more isn't going to make them come. 

[SupercityGR]

I like the new renderings. I just wish it were 100 feet taller 

[ironyisadeadscene]

1 minute ago, SupercityGR said:

I like the new renderings. I just wish it were 100 feet taller 

True this. But whatever happens I like it better than the parking lot. 

[GRDadof3]

2 hours ago, torgo said:

I am not sure what you mean, but "residential and walkable" is exactly what they should be striving for.  If you want a vibrant, thriving downtown with lots of stuff to do, you need residents.  Lots and lots and lots AND LOTS of residents.

Yes, but the market isn't "infinite." Those Zimmerman Volk studies that I've been hammering on for the last decade seem to make people (developers?) think differently?

There are about 150 - 180 condos in downtown Grand Rapids that change hands every year. I would guess then that the annual absorption rate for new "market rate" apartments is somewhere around 300 - 400 per year (more people want to rent downtown than own, but probably not by a lot). I'm just extrapolating based on anecdotal evidence, but historically over the last decade downtown GR has added about that many residential units per year and they were being almost completely absorbed, particularly after the recession was over.

But since the typical renter (millennial or semi-retired) for a downtown apartment probably makes $40 - $60,000/year, many of the market rate apartments are unattainable, without doubling and tripling up with other people. 

The fact that the new ones aren't completely leased out is interesting. How long do investors/developers give themselves to get a building 90 - 95% leased out? What's the pro-forma on that I wonder? 

So someone do the math and figure out how many new apartments have opened in the last year, and how many will open next year. Just market rate, I do believe income restricted are on a multi-year waiting list still. 

*Edited my condos sold number

Never mind, I did the math:

Morton (100), 616 on Michigan (54), 616 at Alabama (100), 616 at 820 Monroe (85), Arena Place (100), Orion's project in Eastown (not downtown but similar buyers I would assume) (34), Fulton Place West of GVSU (112), 555/601 Michigan (10), Rowe (77), what else? 

That's nearly 650 units that have come on the market in the last year or so, just market rate. 

Coming very soon will be the projects in Belknap (88 + 75), Fulton Square (50), Barley Flats (36) and Venue Tower (88). Coming after that will be LMD and Seward, Grand & Benson, half of 20 Fulton East, and the Proos site (those that are under construction already).

We might be getting way off topic...

 

[MJLO]

2 hours ago, x99 said:

Maybe Morton is a canary in the coal mine, maybe not.  But 25 available units in a 100 unit project is very, very alarming.

 

The Morton offers the smallest units at the highest price, which do not include parking making it even MORE expensive.  I do think it's an outlier, and its vacancy rates reflect that.  Although in fairness the building isn't immediately connected to parking so that had to have factored into the plans. But to your bigger point I do believe the market is being saturated with rents that it can't absorb quickly.  I don't understand how financing or business planning and projections work for developers.  I have to imagine they are expecting vacancies to fill at a certain frequency.  These projects keep going up even with the slower rate of leasing.  Banks keep lending money to these projects, which I also cannot believe they are expecting 90% occupancy upon completion, or that money is being lent just because a report showed that downtown could absorb a bunch of units.  There has to be a logic to it that we aren't privy to, because we are not in that business.  (Well at least I'm not in it) 

A big chunk of Grand Rapids population growth has been educated professionals relocating to the area.  People who are attracted to and can afford these rents, which by coastal standards are a steal.  I have to think a lot of the speculation for these developments is tied to that statistic.   Remember that even as recently as a year ago there were quite a few reports of people deciding not to relocate to Grand Rapids due to the housing shortage.  If that logic holds true with this influx of housing availability, it should reflect an increase in population growth estimates( 1%a year to 1.3% ect).  The area will have more capacity to absorb new residents.  That also has to be weighing into these decisions.    When a home builder like Pulte builds 1000's of homes in a year in a place like Phoenix they are putting a product out there on the speculation that people will be moving to the area,  this has to be a similar business structure with a different product.  If you build it they will come?

[arcturus]

1 hour ago, GRDadof3 said:

Morton (100), 616 on Michigan (54), 616 at Alabama (100), 616 at 820 Monroe (85), Arena Place (100), Orion's project in Eastown (not downtown but similar buyers I would assume) (34), Fulton Place West of GVSU (112), 555/601 Michigan (10), what else?

Rowe.

[GRDadof3]

8 minutes ago, arcturus said:

Rowe.

I realized that later. And 234 Market will come on line next year.

[mpchicago]

We also have to remember occupancy for the 150 Ottawa apartment tower (if it's ever built...still needs state tax breaks) is 2 and a half years out.

Wheeler also confirmed, what I had mentioned in this thread a while ago, that an unnamed Bank/Lender was going to take a floor in the building.  Still a little bit surprised that they aren't including a spec floor in the office tower.  Does anyone know the class A vacancy rate downtown?

Edited October 12, 2016 by mpchicago

[WMrapids]

So... will this thing be value engineered and turn into one of those beauties on Michigan?

[GRDadof3]

1 hour ago, MJLO said:

The Morton offers the smallest units at the highest price, which do not include parking making it even MORE expensive.  I do think it's an outlier, and its vacancy rates reflect that.  Although in fairness the building isn't immediately connected to parking so that had to have factored into the plans. But to your bigger point I do believe the market is being saturated with rents that it can't absorb quickly.  I don't understand how financing or business planning and projections work for developers.  I have to imagine they are expecting vacancies to fill at a certain frequency.  These projects keep going up even with the slower rate of leasing.  Banks keep lending money to these projects, which I also cannot believe they are expecting 90% occupancy upon completion, or that money is being lent just because a report showed that downtown could absorb a bunch of units.  There has to be a logic to it that we aren't privy to, because we are not in that business.  (Well at least I'm not in it) 

A big chunk of Grand Rapids population growth has been educated professionals relocating to the area.  People who are attracted to and can afford these rents, which by coastal standards are a steal.  I have to think a lot of the speculation for these developments is tied to that statistic.   Remember that even as recently as a year ago there were quite a few reports of people deciding not to relocate to Grand Rapids due to the housing shortage.  If that logic holds true with this influx of housing availability, it should reflect an increase in population growth estimates( 1%a year to 1.3% ect).  The area will have more capacity to absorb new residents.  That also has to be weighing into these decisions.    When a home builder like Pulte builds 1000's of homes in a year in a place like Phoenix they are putting a product out there on the speculation that people will be moving to the area,  this has to be a similar business structure with a different product.  If you build it they will come?

Well not exactly. Builders aren't building nearly the number of spec homes today that they were before the crash, even in Phoenix. Here in West Michigan spec homes are at very low levels, mainly due to land and carrying costs.

The people I've heard about not taking a relo here were looking for homes, not apartments or condos.

That "build it and they will come" got us into a lot of trouble before. I can't imagine lenders are allowimg that.

[arcturus]

Don't assume millennials will fill those towers.

http://www.usnews.com/news/articles/2015/12/09/old-people-not-millennials-are-taking-all-the-apartments

While probably against rules I bet you will see 3 to 4 millennials in some of those higher priced units to split costs. 

Edited October 12, 2016 by arcturus

[mpchicago]

GRdadof3 said:

Here in West Michigan spec homes are at very low levels, mainly due to land and carrying costs.

 

I think a few of the homes being built in my parents' subdivision off of Pine Island are specs Jeff 

 

Edited October 12, 2016 by mpchicago

[GRDadof3]

26 minutes ago, mpchicago said:

GRdadof3 said:

Here in West Michigan spec homes are at very low levels, mainly due to land and carrying costs.

 

I think a few of the homes being built in my parents' subdivision off of Pine Island are specs Jeff 

 

Oh yeah there are still specs being built, but not at the levels they used to be. People moving here don't usually have 6 to 7 months to build, so bigger builders keep an inventory of specs on hand, but lenders only allow a certain number based on "historic" sales, not on wishful thinking.

Anywayyyy, back to mini refrigerators. 

[x99]

3 hours ago, GRDadof3 said:

The fact that the new ones aren't completely leased out is interesting. How long do investors/developers give themselves to get a building 90 - 95% leased out? What's the pro-forma on that I wonder? 

I don't know, but most of these projects attempt to start pre-leasing even before completion.  And I would bet money that 75% a year or two after completion is not what anyone expected.  That's catastrophic under any reasonable landlord math.  If parking is the only issue with Morton, then great.  It just disproves the hypothesis of a large moneyed population that will forego a vehicle.  Simple enough.  Then this tower is still safe.  But if parking is not the issue, it means we're nearing or at saturation, which would signal problems for the Big Black Box (or at least half of it). 

EDIT:  And the issue at Morton is not just still waiting for it to fill up.  A lot of these look like units rolling over.

Edited October 12, 2016 by x99

[GRDadof3]

39 minutes ago, x99 said:

I don't know, but most of these projects attempt to start pre-leasing even before completion.  And I would bet money that 75% a year or two after completion is not what anyone expected.  That's catastrophic under any reasonable landlord math.  If parking is the only issue with Morton, then great.  It just disproves the hypothesis of a large moneyed population that will forego a vehicle.  Simple enough.  Then this tower is still safe.  But if parking is not the issue, it means we're nearing or at saturation, which would signal problems for the Big Black Box (or at least half of it). 

EDIT:  And the issue at Morton is not just still waiting for it to fill up.  A lot of these look like units rolling over.

Now that you say that, I know someone who lived at Morton who doesn't now. I'll ask them what they think. 

[Guest]

I like it, but why not stack the apartments on top of the office?!  Thirty stories there would be perfect.  The tenants will have an actual view AND you can slap a Warner Norcorss and Judd sign on top of it,  It would be a higher sign than the Varnum at BWP.  When I'm looking for the right law office, I base it solely on height of signage.

[GRDadof3]

Some interesting comments in this article:

http://fox17online.com/2016/10/12/downtown-grand-rapids-projects-address-growing-need-for-businesses-and-housing/

[WMrapids]

Going south on Ottawa will is going to look way different if this and the Hinman pull through.It's amazing how many of these larger size projects are proposed/under construction (20 Fulton, BOB, Hinman and Warner).

 

[discgrab21]

10 hours ago, GRLaker said:

It is a case where so much garbage has gone up that this looks like a masterpiece in comparison. However...It's no Lyon and Ottawa tower from the early 2000's by a long shot.

Definitely agree there.  I am not inspired by these renderings one bit. It is too bad that they couldn't find other office tenants to make a statement at this site, but it is way better than what we have been seeing.

[discgrab21]

3 hours ago, Floyd_Z said:

I like it, but why not stack the apartments on top of the office?!  Thirty stories there would be perfect.  The tenants will have an actual view AND you can slap a Warner Norcorss and Judd sign on top of it,  It would be a higher sign than the Varnum at BWP.  When I'm looking for the right law office, I base it solely on height of signage.

The height would be great, but I think the view should still be good.  The view from the top 3 floors of the courthouse are very good.