/ YieldStar® Asset Optimization / Market Research Blog / Longtime Manufacturing Center Grand Rapids Experiences a Rust Belt Renaissance

Longtime Manufacturing Center Grand Rapids Experiences a Rust Belt Renaissance

Longtime Manufacturing Center Grand Rapids Experiences a Rust Belt Renaissance

For most outside of the region, the term Rust Belt stirs up images of cities decades past their prime, with dilapidated buildings and infrastructure and shrinking population. For some Rust Belt cities, those images hold some truth. Historically, Grand Rapids held many similarities to its Rust Belt neighbors, with a heavy industrial concentration in manufacturing and furniture. As these industries declined, so did the populations and prospects.

However, that’s not the case for Grand Rapids any longer. The metro is attracting a variety of new businesses. Among them, the former Steelcase Pyramid is being converted to a data center for Switch, creating 1,000 jobs and a total investment of $5 billion over the next decade. The substantial investment has even attracted the construction of two new hotels near the site. Breweries continue to open across the area, and a 40-story tower may soon grace the city’s skyline. New business has promoted job growth, and the metro has averaged healthy employment growth around 3% annually since 2011, according to the Bureau of Labor Statistics. Local employers are also expanding, and reports of telecommuters descending into the area to snap up real estate to take advantage of the area’s lower cost of living are emerging.

New jobs and new quality-of-life amenities have reversed a trend of population decline common in most Rust Belt manufacturing centers. After experiencing consistent net out-migration for much of the time from 2003 to 2009, Grand Rapids has experienced net in-migration since late 2010. In turn, population grew to 916,000 in 2015, up 5.7% since 2010. And despite rhetoric of the young and able leaving Rust Belt cities, Grand Rapids remains a city younger than the U.S., with a median age of 35.1 years, significantly lower than the national median of 37.4 years, according to Census data. Grand Rapids also has a workforce similarly educated to the national average, with 33.4% of its population over 25 years old having a bachelor’s degree or higher. Having a young, well-educated population bodes well for future development in the area.

Apartment multifamily rental housing market data

The influx of new residents has coincided with growth in gross metropolitan product that has tended to outpace the broader U.S. economic growth. While the metro was not spared in the most recent recession, it has seen growth for most of the period since 2009, only contracting twice, when the broader U.S. economy was also in the red.

Apartment multifamily rental housing market statistics

Contributing to local economic growth, Grand Rapids is following the same trajectory as the U.S. as a whole – an ongoing shift towards service-providing industries. Over the past 16 years, the prevalence of manufacturing as an employment sector has diminished. Despite rebounding during the Great Recession, due to a cheap dollar, manufacturing is no longer providing a job for a fourth of Grand Rapids-area workers. The most pronounced increase in relative industrial employment performance has been in Education/Health Services. The Professional/Business Services sector has been gaining ground at a slower pace, but remains impactful due to its status as a higher-paying employment.

Apartment market multifamily rental housing

Economic diversification has increased stability for area businesses and workers. Looking to bankruptcies in the region, businesses and consumers seem to be in a good place. Both businesses and consumers are seeing numbers in the neighborhood of 10-year lows, supporting the sunny sentiment in the region.

Apartment market multifamily rental housing statistics

Momentum is also seen in the Grand Rapids housing market.The Grand Rapids Association of Realtors reported extremely short supply of both single-family and multifamily housing in August 2016. The average residential sale for the month was on the market a brief 26 days, with multifamily units sold during the period lasting only 22 days. A balanced inventory is around the six-month mark.

For the apartment market, occupancy has not dipped below 97% since early 2013, with 2nd quarter 2016 occupancy rate of 98.5% placing the city at #5 nationally. Strength is also reflected in annual rent gains, which have averaged 6.7% over the past four quarters. In 2nd quarter 2016, a 6.6% annual rent increase was among the nation’s top 15 performances.

Multifamily rental housing data

Tight occupancy and strong rent growth has attracted apartment developers to the metro. In turn, multifamily permitting activity in Grand Rapids is at its highest in about 20 years.

Apartment market rental housing statistics

Growing inventory should not fundamentally affect the multifamily market in Grand Rapids, as development was so hard-hit in the area during and following the last recession. As an early-cycle economy, Grand Rapids’ greatest risk lies with broader U.S. macroeconomic conditions. While a weak dollar stimulated the manufacturing sector in the region, a strong dollar could have the opposite impact. It is difficult to know what the multiplier effect might be across other industries – for example, the level to which the region’s non-manufacturing sectors support manufacturing.

At its core, the metro’s demographics support longer term growth. Grand Rapids remains a relatively affordable market, and as more workers descend on the metro, the appeal of a city with charming neighborhoods and impressive nature could lure more into the region.

Ready To See What Investment Analytics Can Do For You?

Learn More