COMMERCIAL REAL ESTATE: Is Traverse City Spaced Out?
TRAVERSE CITY – As you drive around the Traverse City area, it’s nearly impossible not to notice the new office buildings sprouting up all over town. “Who’s going to move into all of these spaces?” you wonder.
Although it may seem unlikely that the demand for commercial space is that great, developers and Realtors have a different take.
“To some people, it may look like we’re overbuilt on space,” said Dave Frost, an agent with Real Estate One in Traverse City. “That’s not so true. You’d be surprised at the commitments coming through on buildings that appear to be empty. For people putting up buildings, it’s a calculated risk. There may be a time where we’re momentarily overbuilt, but there’s no question they will be filled.”
Case in point: Gary Wilson, owner of Wilson Construction, the developer of The Stations on Eighth Street, has already sold both the office and residential condos in the Baltimore and Ohio, the first of the four-phase development. The 3,000 feet of commercial space in the first building sold for approximately $128 per square foot.
But why the great demand in the area?
“There’s no question it’s driven to a degree by the economy, but also by the fact that Traverse City draws. And with all the technology available now and the ability to work out of Traverse City, the desire is great,” said Frost, who sees a mixture of companies moving into new commercial space. “Companies from out of the area want to locate in Traverse City, and we’ve got growth. (Local) companies are outgrowing spaces and doing well.”
Many of the new office buildings going up are fetching top dollar–$20 to $25 per square foot. Tenants can expect to add as much as $4 to $5 per square foot to that figure to cover taxes, insurance, common area maintenance charges and utilities. That’s the average going rate in this area for Class A space–defined as new, high-end and usually with water views.
Class B space typically offers the same functionality and even the same amenities, but without the views and the brand-spanking-new sparkle. Expect to pay between $12 and $14 per square foot on average. Class C space is found in more industrial areas and tenants pay an average of $5 per square foot.
What are tenants looking for? According to Frost, who between himself and his assistant Adrienne Raven field an average of three to five calls each week for commercial space, “There’s a wide range. One week someone will want 5,000 square feet of office space and the next week we’ll get a call about 2,000 square feet of warehouse space. And some people are looking for destination places; they don’t care if it’s not ‘high end’ space. Others want visibility in the downtown area with a sign out front that let’s people know they’re there.”
According to Doug Meteyer of Spectra Real Estate and Spectra Development, Inc., visibility is a key factor for businesses. Meteyer is putting up an 11,212 square-foot building at the corner of Randolph and Division. The Spectra companies will occupy a quarter of the space, with the rest available for lease or purchase.
“The main differences between this project and much of the other Class A space going up, aside from our own parking, is that because it’s a small building, there will be probably only three, maybe four tenants,” Meteyer said. “We’ll have a large brick-based sign, so each tenant is going to have lots of sign space.”
Since 30,000 to 40,000 cars pass through that intersection each day, signage is a “major attraction” to a lot of businesses, says Meteyer. Space in the building will lease for approximately $19 per square foot. Interested in buying the 5,030 square-foot first floor office condo? That’ll be $969,000. Second floor space will sell for $399,000 for 2,059 square feet and $528,000 for 2,661 square-feet.
Meteyer has had interest in the space, slated to be ready January 2001, from medical professionals, legal, consulting, and financial sectors.
“Interest has been pretty strong, and we haven’t advertised to date,” he said.
Three other major offices going up in Traverse City include the following:
? Jerry Snowden of Snowden Development, developer of Radio Centre, says prospective Radio Centre tenants are looking for a “prominent downtown location,” along with parking and Class A space. Snowden expects the four-story, 35,000 square-foot project to be completed by next summer or fall. Space will lease for between $18 and $20 per square foot. Snowden would not say whether any leases have been signed or what types of businesses are expressing interest.
? As for five-story Harbour View Centre under construction on Grandview Parkway, it offers 30,000 square feet of commercial space on three floors. Two of the floors are filled and developer Bernie Stover of Stover Associates is “very seriously” talking to two additional prospective tenants about the remaining space. Stover says a variety of financial businesses have expressed interest and that prospects have been looking at three main aspects: the spectacular water views, the elegance and quality of the building, and private parking–a “big feature” for businesses, he added.
? Speaking of spectacular views and parking, Gateway, a 32,000-square-foot project at the intersection of M-22 and M-72 West, with 25,000 square feet of commercial space spread over three stories, offers “city lights and bay views,” according to Karen Clark, vice president of property management and project development for Pinnacle Management, manager for Jade Venture Group.
The building features a security system, cherrywood trim throughout, a lobby waterfall and marble tile. And developers were just granted permission for 12 boat moorings and a floating dock. One floor is already spoken for, says Clark. Financial and investment companies are among the businesses that have expressed interest in the building, which should be available for occupancy this fall. BIZNEWS