GRAND RAPIDS –– When developer Franklin Partners LLC brings its proposed seven-story downtown office tower to market in the coming years, it will offer tenants Class A office space that’s currently in short supply across the city.
But interested users will need to get out their wallets if they want to occupy the high-amenity project, which will include ground-floor commercial space, a gym and a rooftop patio, according to plans released publicly for the first time and shared with MiBiz.
Principal Don Shoemaker wouldn’t disclose specific lease terms or a total development cost at this time, but did say that rental rates would possibly be the highest that Grand Rapids has ever seen, likely reaching $25 per square foot or more, given the type of building the firm hopes to construct.
It comes down to getting interested tenants to think holistically about the space and the benefits it could have for attracting and retaining employees, he said.
“(It’s) more than anyone has paid downtown before, but well worth it,” Shoemaker said. “I think that tenants that are interested will understand that. The value is there. We think it’s much more of a value proposition than a rental rate proposition — it’s what you are getting for your rent. And as companies value their employees, the price per foot for rent is less significant and the environment is more significant.”
The proposed seven-story, 90,000-square-foot glass and steel building will be located at the corner of Ottawa Avenue and Oakes Street SW as part of the mixed-use Studio Park development planned by Jackson Entertainment LLC. MiBiz broke news of the Grand Rapids and Oak Brook, Ill.-based real estate developer’s involvement in the project last April, but executives have been mum about the plans since then.
Citing continued corporate growth in the region, Shoemaker sees plenty of demand for high-quality office space with amenities such as gyms and rooftop decks, particularly because of the relative strength of West Michigan’s economy and continued interest in downtown Grand Rapids.
“The need to hire and retain talent and the lack of true Class A office space available creates real demand for this true type of Class A product,” Shoemaker said. “We don’t think it’s purely speculative. We think there’s a lot of demand in the market.”
A fourth quarter 2017 market report from the Grand Rapids office of commercial brokerage firm Jones Lang LaSalle IP Inc. (JLL) shares a similar sentiment, noting that absorption continues to increase and gross asking rents are on the rise.
The average gross office rental rate in the Grand Rapids market stands at $17.84 per square foot, according to the JLL report.
Franklin Partners has yet to select a general contractor for the project, but the company did retain Chicago-based Wright Heerema Architects Ltd., which it worked with on several other office redevelopment projects.
While Franklin Partners has yet to sign a tenant, the company is targeting users willing to take at least 30,000 square feet, Shoemaker said. He expects to have some pre-leasing completed prior to breaking ground on the project in the next 12 months, followed by approximately two years of construction.
Shoemaker said it’s possible that Franklin Partners could bring in a tenant from out of the market, but the firm is targeting growing local companies with the project, he said.
Other developers also are developing Class A office space in downtown Grand Rapids. Both CWD Real Estate Investment Inc. and Orion Construction Co. Inc. have new construction or office redevelopment projects underway. Amid a tight supply of downtown office space, other users have looked to adjacent areas for space, including along the Bridge Street corridor west of downtown.
According to figures from Downtown Grand Rapids Inc., developers have proposed or are building about 450,000 square feet of office space in the downtown area.
“We’re probably at the peak of the cycle, but this is all good,” said Tim Kelly, interim president and CEO of DGRI.
Kelly said that one of DGRI’s primary goals is to bring a flagship corporate tenant to the central business district, although it’s unclear if the Franklin Partners proposal will help to fulfill that goal.
The proposed building at Studio Park will be Franklin Partners’ first newly built office building in Grand Rapids, but the firm has experience with office projects in the city, including at 99 Monroe Ave. NW and 25 Ottawa SW.
The company completely renovated and leased the pair of buildings, later selling them in 2016 for approximately $50 million, as MiBiz reported at the time.
The $140 million Studio Park project has been in the works for years, evolving in size and scope from the original proposal of simply building a Celebration Cinema! movie theater downtown.
It now encompasses two surface parking lots with a movie theater, office development, hotel, residential and approximately 900 parking spaces, as MiBiz previously reported.
Jackson Entertainment completed its $6.9 million acquisition of the land for the development last week, according to a statement from the city, signaling that construction could soon commence.
“We’re a very significant, but relatively small part of the (Studio Park) development. We’re really excited to be part of a true mixed-use development,” Shoemaker said. “It’s a sustainable (project). I believe it’s a truly transformational mixed-use project for downtown Grand Rapids.”