Traverse City Commercial Real Estate: A Review of 2017
Overall, the commercial real estate market in Northern Michigan continued to be very strong throughout 2017. According to Northern Great Lakes Realtors MLS (NGLRMLS), Grand Traverse County had an average sale price of $428,101 in 2017, while 2016 was a record year with an average sale price of $557,493. However, in 2016, we had one outlier sale of $13,000,000 that skewed the data. By excluding that sale, 2016 had an average sale price of $407,583. Depending on how you look at it, we could be up 5% or down 23%. Perhaps the median sale price is a better indicator of the market. In 2017, the median sale price for Grand Traverse County was $312,500 compared to $292,500 in 2016, which is a 7% increase. Total sales in Grand Traverse County last year were 71 compared to 84 the year before. The decrease can be partially attributed to higher sale prices, but it is also due to the fact there were fewer properties on the market.
With only 71 sales reported in a year, it can be difficult to ascertain significant changes in the market. In an effort to have better data and track market changes more effectively, we have run our own set of metrics on the year end data. This enables us to have better reporting on sales per square foot, what types of buildings are selling, and a more accurate representation of the market, by using median sales numbers, as well as averages. Using our newly compiled data, we are able to report specific changes within each subclass of commercial real estate while providing property owners and investors with a better understanding of the market to potentially help in purchase and sale decisions.
Here’s a look at what we’ve found for Grand Traverse County:
The industrial market had 253,454 square feet (SF) of space sell in 2017, up 4% from 2016. The average sold price was $43/SF and the median sold price was $53/SF, up 8% and 15% respectively. The increase in sales and price led to a 12% increase in overall sales for a total of $10,915,033 in sales of industrial and warehouse buildings.
Office & Medical Office
The office market saw the biggest decrease in sales volume and value. This was most likely due to the fact there were fewer office buildings on the market in 2017 and the ones that sold were older and further from downtown than the ones that sold in 2016. 53,796 SF of office space sold for an average and median price of $108/SF. This compares with 72,769 SF of office in 2016 that sold for an average of $155/SF and median price of $138/SF. If we look at just buildings that sold in the downtown area, there were only 3 sales in 2017 that averaged $186/SF, compared with 9 sales in 2016 that averaged $218/SF.
Medical office space had 24,278 SF sell, down 12% from the year before. The average and median sale prices were $173/SF and $166/SF, respectively. The median increase being up 14% from the 2016 median price of $145/SF and the average rising an impressive 35% from the 2016 average of $128/SF.
Retail sales were at 46,756 SF, up 13% from the previous year. The average sale price was $79/SF, up 11% from 2016 and the median sale price was $90/SF, up a whopping 55% from the previous year.
Only 3 restaurants sold in 2017, totaling 6,808 SF, and not providing enough data for a significant comparison to the previous year. They sold at very high rates per square foot, leading to an average sale price of $275/SF and median of $352/SF. In 2016, we had 3 sales totaling 14,090 SF at an average price of $78/SF and median of $81/SF. Although this may not be enough sales to be significant, it definitely shows investors’ appetites for restaurants in our area!
This year we also added some multi-family housing statistics to our analysis. While these are typically not included in the annual “commercial sales” numbers, we have a lot of investors interested in this market and started analyzing the sales this year. NGLRMLS reported 20 sales in Grand Traverse County for a total of 57 units. Comprised mostly of duplexes and quadplexes, the average sale had 3 units, with the largest being 8 units. The average sale price was $81,652 per unit and the median sale price was $77,475/unit.
Vacant Commercial Land
As development picks up around the region, we thought it was also important to look at the commercial land that has sold in the area and is zoned for commercial use. The range of sales varied from a low of $2,400/acre, for a 20-acre parcel that was only partially usable, to $1,400,000/acre, for two different parcels that sold in the downtown area. Overall, 56 acres of commercial property sold for an average sale price of $94,662 and a median sales price of $48,942/acre. Because of the significant difference in sales of downtown parcels compared to outlying development parcels and lots, the median sale price is almost half of the average. Either way, we can see that investors are basing values on density and how much can be built on a site.
We also tracked how long it took to sell each type of property. Industrial properties were on the market the longest of any building type, for an average of 438 days. Office buildings averaged 376 days. Medical offices showed 139 days on the market, but this was skewed by a couple of sales that were sold privately, so they showed 0 days on the market. Retail buildings averaged 147 days and multi-family was the quickest to sell at an average of 128 days. Vacant land took an average of 542 days to sell, which reflects the long due diligence time frames needed to get new construction projects approved at the municipal level.
Leasing in Grand Traverse County held fairly steady with 75 leases signed in 2017. This was only 2 fewer leases than we had in 2016, but considering there were 16 fewer properties that came on the market in 2017, this represents a higher percentage of available properties leased. The average marketing time dropped from 239 days to 186 days which is the shortest marketing time we’ve seen in the past decade. When we look at the larger region and include all the Traverse Area Association of Realtors counties, there were 92 properties leased, up 4 from the previous year. Again, there were 39 fewer properties coming on the market, so this shows a strong leasing market. The average days on market for the larger area went from 229 to 210, so it also had a decrease in marketing time.
Coldwell Banker & Dan Stiebel
Coldwell Banker Schmidt continues to lead the way in sales in the NGLRMLS region, with over 3,022 property sales, compared to 1,821 sales for the second largest company and 986 sales for the third largest. Similarly, for commercial sales in Grand Traverse County, we had 20 listings sell compared to 9 listings of the next largest company and 6 for the third largest. Our Coldwell Banker Corporate brand continues to be number one in sales nationwide.
Our team had a momentous year selling and leasing 23 of our listings and helping buyers and tenants in 30 transactions last year. The breakdown was about evenly split with 24 of the transactions being leasing, 23 being sales of commercial properties, and 6 sales being vacant land for development projects. In Grand Traverse County, we were involved with 24% of the commercial transactions that occurred last year, which means you’ll see my name on 1 in every 4 commercial sales or leases around town. Thanks for helping make 2017 a great year!
- Dan Stiebel, CCIM