Suburban Grand Rapids is experiencing a spike in activity from both longtime and relatively new multifamily housing developers who see opportunity with high demand and often readily available land.

The dwindling supply of land in the city of Grand Rapids is forcing developers to be increasingly creative with renovation projects, or is pushing them to outlying communities, said Jason Wheeler, vice president of marketing and communications for Wheeler Development Group LLC.

The Grand Rapids-based firm is in various stages of developing 214 units of townhouse and multifamily projects in Grand Rapids Township, Caledonia and Ada.

“We were just seeing these markets like Caledonia, Ada and Grand Rapids Township by the Beltline are booming right now,” Wheeler said. “We’ve lost a lot of housing in Grand Rapids. You have to jump on whatever you find.”

Meanwhile, Wheeler Development Group recently halted plans for a four-story, 39-unit mixed-use redevelopment project in Grand Rapids’ Eastown neighborhood because of spiking costs that brought the project “way over budget.”

Wheeler also noted that many potential first-time home buyers have paused their search because of the currently competitive and cost-prohibitive housing market, opting to bide their time with a rental unit.

As well, the city of Walker for the past couple of years has experienced a growing number of multifamily development proposals. 

“It has definitely been on the upswing,” said Walker Mayor Gary Carey, adding that pressure also has been building on developers. 

“The demand for more housing has increased, but also the demand for available land to build on and the cost to build new has become prohibitive, so developers are trying to be more creative, we’re seeing,” he said. 

Former golf courses, in particular, appear to be attracting interest. Walker has three active housing proposals at the former Lincoln Country Club, the former English Hills Country Club and the former Greenridge Country Club. Combined, the three projects — proposed by two Illinois developers and Grand Rapids-based CWD Real Estate Investment LLC — would add 980 units in the city of Walker if completed as planned.

However, developing land that has long been a source of greenspace and entertainment for residents has been met with opposition and careful consideration by the city’s planning commission, Carey said. 

“The approach has been: Where it makes sense, we are definitely wanting to be a part of any plans or possible ideas for housing,” Carey said. “Where it’s going to have an adverse impact on the neighborhood or environment, we have to be careful about considering plans.”

With the high demand for housing, developers appear to be more interested in properties that they might not have considered in the past, Carey said. 

The Greenridge and Lincoln country clubs proposals have both experienced pushback from neighbors. The Greenridge property has been owned by Jade Pig Ventures LLC’s Scott Wierda, who also serves as CWD’s principal and managing partner, for nearly 26 years. The property was slated for a similar multifamily development in the past before neighbors sued the developer to halt plans, leading to a 1989 consent judgment that requires any future development to adhere to a 150-foot green belt along the property line that’s adjacent to a single-family residential neighborhood.  

Thinking outside the box

The combination of extremely high demand for multifamily housing, high construction costs and rising rents is causing many developers to “think outside the box,” said Matt Jones, managing director of Walker & Dunlop LLC, which provides financing for commercial real estate development.

“It’s causing people to look at sites that they may not have otherwise looked at or thought were locationally challenging previously,” Jones said. 

A “lot of new names” are both buying up — and for the first time developing — multifamily projects right now, Jones said. 

Scott Nurski, senior multifamily investment specialist at NAI Wisinski of West Michigan, is seeing a similar trend of new developers entering the multifamily space.

“We have people who have never called themselves a developer before who are calling us now and saying, ‘Show me land, I want to build,’” Nurski said. “That’s been popping up more and more.”

Meanwhile, high construction and materials costs are also driving up rent prices, Nurski said.

“Pricing in general is so high to build something that you almost have to build Class A because the rents are substantially lower in the Class B and Class C sectors. The numbers don’t work,” Nurski said. “On the rental side, pricing has gone up so substantially that folks that normally don’t get involved in development are saying, ‘I should just invest in building something.’”

The cost of construction materials and services for nonresidential construction increased by nearly 21 percent in April 2022 compared to April 2021, according to the latest data from Associated General Contractors of America. 

“As a developer, we have to deal with the high costs by being on top of our contracts, making sure we’re engaging with our contractors, teams, bankers, building more time into our development schedules and learning what types of materials in the supply chain are affecting the global market,” Wheeler said. “It comes down to coordination and being innovative and putting a larger emphasis on locally procured products and materials.” 

By AKDSEO