Real Estate Review for Northern Indiana and Southwest Michigan
FM Stone and Bradley Company have published their most recent real estate market studies for the northern Indiana and southwest Michigan region. Kruggel Lawton is proud to partner with both of these organizations. Following are highlights from each publication for construction, office, retail and industrial real estate. Links to download the full reports are below.
In 2015, Elkhart County reported more than four times the number of new construction permits than it did in 2014 and more than 12
times the number of additions & alternations permits than it did in 2014.
The City of Goshen had more than 9 times the number of new construction permits in 2015 than it did in 2014.
St. Joseph County (Ind.) had almost double the value of permits issued in 2015 as it did the year before.
Construction prices for 2016 expected to stay at 2015 levels with a possible jump of 1% to 2%.
In 2016 premium talent and skilled workers will still be rare; it has become harder and harder to attract talent to the construction trades.
53,317 SF sold or leased in Elkhart County, Ind.
509,614 SF sold or leased in St. Joseph County, Ind.
Total of all office space available in Elkhart County - 4.4 million SF
St. Joseph County (Ind.) - In the years to come, medical office construction and expansion will continue to dominate the office sector of North Central Indiana. In many cases, medical office consolidation will play a leading role in the overall office activity of the area. Sites such as Ignition Park, Innovation Park, and the proposed Renaissance District will continue to generate regional attention, and it is expected that complementary tenants will occupy these sites in the future.
According to Brad Toothaker, president & CEO of Bradley Company, “The St. Joseph office market saw a narrowing of inventory with the JMS Building and former Chase Tower taken offline. Future plans show only limited office space returning to the market after the JMS renovations, while all Chase Tower office space will be converted to residential. As the region continues to invest in development of a quality of place, and there is an increased interest in moving to the urban core, we do expect forces to converge to support the development of more attractive office space in the urban centers of the region.”
In Berrien, Cass, and St. Joseph counties (Mich.), the availability of office space remains relatively constant. From the beginning of 2014 through the end of 2015, total available office square footage fluctuated around 500,000.
Calhoun, Kalamazoo, and Van Buren counties (Mich.) saw a significant decrease in the availability of office space in 2015. At the beginning of 2015, total available office space topped two million square feet, and by the end of the year, this number dropped to 1.6 million square feet. This 22% decline was largely affected by the former State Farm regional headquarters office building in Marshall. The 250,000-square-foot building came off market in the second quarter of 2015.
For Lease (Elkhart County)
Total available: 291,530 SF (95,941 SF LESS than 2015)
For Sale (Elkhart County)
Total available: 665,370 SF (121,498 SF MORE than 2015)
St. Joseph County (Ind.) - The push to grow and improve the region's “quality of place” expects to have positive benefits for retail real estate throughout the region. Within the next two to three years, over 500 residential units are expected to come to the market in St. Joseph County. As this urban core grows, it is expected to positively impact the retail presence in those areas, as new residents will create a demand for more urban retail.
Berrien, Cass, and St. Joseph counties (Mich.) saw a steady decrease in the availability of retail space in 2015. Over 500,000 square feet was absorbed throughout the year. This is approximately a 30% decrease in total availability from year-beginning to year-end. The most absorption was seen in St. Joseph County (Mich.) where an average of eight, 5,700-square-foot buildings came off the market every quarter.
Retail space in the tri-county sub-region of Calhoun, Kalamazoo, and Van Buren counties (Mich.) experienced rapid absorption in 2015. At the beginning of 2015, approximately 2.2 million square feet was marketed as available. By the end of 2015, slightly less than 1.5 million square feet was available. Kalamazoo County saw the biggest decrease in available retail space with over 500,000 square feet coming off the market in 2015. This decrease can be explained by steady absorption of retail buildings in the 5,000 to 10,000-square-foot range. As this trend continues, it is expected that new construction of retail buildings will occur.
Elkhart County Highlights
2015 was another good year in the industrial market and could have been better if not for the lack of inventory.
In Elkhart County we continue to have a shortage in all building sizes, especially on the sales side. At the end of 2015 we only had 23 buildings for sale. This was 12 less than the previous year. We saw positive absorption on the sales side of just under 450,000 SF. On the lease side things remain relatively steady and we had positive absorption of approximately 100,000 SF.
Quality buildings continue to bring a premium and new construction remained steady.
We only saw a slight decrease on vacancy rates last year (to 1.74%).
Sale prices continued to increase in 2015, while lease rates remained relatively flat, despite efforts to push them higher.
“We haven’t seen anything that suggests 2016 won’t be another good year for industrial in both St. Joseph and Elkhart counties,” says Brent Miller,
SIOR for FM Stone. “The lack of inventory will continue to be a stumbling block but not much different than the previous few years. I believe we’ll continue to see land sales increase and new construction remain steady. Sales and lease rates should remain steady if not slightly increase.”
St. Joseph County (Ind.) Highlights
As industrial inventory continues to tighten, quality space will become even more attractive and the need for build-to-suit developments could significantly increase. Factors such as the over $1 billion in construction projects at the University of Notre Dame will almost certainly have a continued impact on construction costs, the labor force, and the amount of time it will take for projects outside of the campus to be completed. However, given the healthiness of asking rates and demand for building permits, such factors have not had a deleterious effect on development activity in the region.
By the end of 2016, the region will boast one million more square feet of industrial space than it did at the beginning of 2015, including multiple speculative projects. Holladay Properties recently announced it will include 90,000 square feet of speculative space in its new Ontario building that will go up right across the street from Great Lakes Capital soon-to-be-complete 210,000-square-foot speculative building at Ameriplex I-80/90.
Southwest Michigan Highlights
The total amount of available industrial square footage in Berrien, Cass, and St. Joseph Counties fluctuates around two million. In 2015, the average marketed industrial space was approximately 2.2 million square feet, a slight increase from the average of approximately 1.9 million square feet in 2014.
The total available industrial square footage in Calhoun, Kalamazoo, and Van Buren Counties also produced no significant trends during the past two years. The average in 2014 was approximately 3.2 million square feet, and the average in 2015 was approximately 3.3 million square feet.
Full reports with additional comparative data provided in chart or graph form: