The first half of 2016 has shown strong demand and rising prices in the Traverse City real estate market and the commercial sector has been no exception. Traverse Area Association of Realtors (TAAR) just reported the first ever sale above ten million dollars and it was for a commercial piece of property with 110 acres between Chums Corners and the Grand Traverse mall. The property is a mobile home park with almost 500 pad sites and sold for a record thirteen million dollars!
While I would love to report that the average sale price for commercial property in Grand Traverse County has increased in the first six months of the year by a whopping 173%, this would certainly not tell the whole story as the previously mentioned sale has brought the average sale price from $267,625 for the first six months of 2015 to $731,203 for the first six months of 2016. However, even if we exclude this sale, the average sale price for the first six months of 2016 is $380,666 which is an increase of 42% over the same time frame last year. Historically the last quarter of the year has had sales with higher prices, so comparing the average sale price to all of 2016 where the average sale price was $304,133, we still have seen a large increase in prices.
Last year we noted that because we only have 50-60 commercial sales in Grand Traverse County each year, the numbers can get skewed easily by a few sales and so I broke down the sales into a price per square foot. If we look at the numbers this way, we see that industrial prices have risen from $46.08/SF from the first half of 2015 to $51.68/SF in the first half of 2016 in Grand Traverse County. Office space has risen from $95.07/SF to $128.50/SF over the same period and retail space has decreased from $104.81/SF to $100.75/SF. Overall this shows very strong demand in Grand Traverse County.
Looking at the larger region covered by all of TAAR, we can study about double the transaction volume for the first six months of 2016 and see that prices in this larger area have increased 32% from $230,179 in the first half of 2015 to $304,722 for the first half of 2016 (excluding the one-time $13 million sale). While these numbers show a strong increase in prices, 2015 did have a lower average price than the previous four years and is more on track with previous years. That said, 2013 is the only year that has had higher pricing since 2007 and that is not entirely accurate since the 2016 pricing would be much higher if we included the mobile home park sale.
Part of the reason for pricing increases can be attributed to rising demand and shrinking supply. In fact, there are very few leased investment properties on the market and sellers are not as motivated to sell as they were a few years ago. With interest rates dropping again, real estate investment is looking more attractive for investors to get the higher yields offered in the real estate market than can be found in other capital markets. I’m often asked what good deals are still available so I would like to mention a few listings that could be very enticing to investors as they are all offered at least 40% below their replacement value. We have a 3,400 SF medical office building for sale near Munson Hospital offered for sale at $499,000. We have a life style center with over 50 retailers and restaurants for sale in Mackinaw City which offers very promising returns as this area continues to grow and attract more tourists. And we also have a full service restaurant and bar near Crystal mountain with an apartment and retail rental property also included in the sale.
For those looking at the future growth of the area, I would suggest looking at vacant land that has the highest visibility and largest traffic counts, as this will have the highest demand for future growth. We have three fantastic sites with motivated sellers and great pricing. One is a 17-acre site on the main corner of Kalkaska (US-131 & 612) adjacent to Rite Aid and Arbys, another is a 1.5-acre development site on US-31 between 4 Mile and 5 Mile Roads which has some of the highest traffic counts in Traverse City and last but not least, a 36-acre mixed use site on the high traffic and signalized corner of Garfield and Hammond Roads. (click here to email for more info on any of these properties).
Dan Stiebel, CCIM