2021: A Year for the Record Book for Traverse City Commercial Real Estate
After a tumultuous 2020, the world seemed to acclimate to waives of shutdowns as the pandemic continued to disrupt life in 2021. In some ways, disruptions became part of our routine as people accepted that Covid was not going away anytime soon. Employers could not retain enough workers and many employees were out sick, quarantining from a covid exposure, taking care of relatives, or holding out for higher wages. Everything from retail and restaurants to transportation and manufacturing faced labor shortages and that created a shortage of products. At the same time, government spending, pent-up demand, and low-interest rates drove consumer spending causing demand to skyrocket for the short supply of consumer goods. It is no surprise that prices sky-rocketed as demand outstripped supply and inflation is now the trending topic for 2022.
Low-interest rates and loose monetary policy caused a record number of people to turn to real estate for an investment hedge against inflation. As reported in Northern Great Lakes Realtors MLS, there were 92 commercial properties sold in Grand Traverse County in 2021, which was over an 11% increase from the previous year and the most sales ever reported in one year. The total sales volume was $53.2 million, which was 43% higher than last year and 30% higher than the previous record of $36.9 million, which was set in 2018. This huge increase in volume was also seen in the 5-county area (Grand Traverse, Leelanau, Benzie, Antrim & Kalkaska) which hit a record of 184 sales totaling $93 million. In 2020, that number was only $52.5 million in sales with 150 properties selling.
Record sale prices drove this huge increase in sales volume. We had 22 properties sell for over $1,000,000 in the 5-county area, double that of 2020, causing the average sale price to increase to $505,692 in 2021. This was a 16% increase over 2019 and a 31% increase from 2020. Below is a breakdown of the major categories of the commercial real estate market where we can see that office spaces had the largest increase in pricing, retail pricing declined, and multi-family sold in record time. All statistics are based on Grand Traverse County unless it is specifically noted that it is based on the 5-county area.
The industrial market was our hottest sector last year with 24 sales at near-record prices. Price appreciation in 2020 led to more sellers taking advantage of the huge change in values over the past 5 years and putting their properties on the market. A record 317,310 square feet sold at an average price of $64/SF. The price was down slightly from the previous year due to two large building sales (over 40,000 SF each) that skewed the average down. Without these two included, the average price per square foot would have been higher than in previous years at $79/SF. We expect demand to remain strong in this segment of the market, but fewer properties to become available.
Office & Medical Office
The office market showed the highest increase in sales in 2021, which is not surprising after having the largest decline in 2020. Grand Traverse County had 15 sales totaling 61,172 square feet, which was over double the total sales of 2020. Prices rose with the average price per square foot in Grand Traverse County increasing 20% to $164/SF. Medical offices continued to be difficult to sell with only one sale in 2021, the same as we had in 2020 & 2019.
Retail properties had a higher sales volume and more space sold than the previous year as investors sought higher yields in the real estate market. Yields for this sector increased because market shifts to online purchases led to continued weakness and the third year of price declines. The average price per square foot in Grand Traverse County dropped 18% to $121/SF this year.
Multi-family in the 5-county area continued to gain in 2021. There were 117 units sold, up 10% from the previous year. Sale prices increased 3% with the average sale price hitting $111,000 per apartment unit. This segment of the market saw the fastest sales with properties selling in an average of 106 days. In Grand Traverse County that number was a record 66 days to sell a property and the average price per unit was $132,000.
Personal Storage Units
This is a new category we started tracking last year after a surge of construction and sales of small condominiumized warehouse spaces. As consumers cleaned out their homes and purchased boats and campers, the demand for personal warehouse space grew. We had 30 sales in 2021 with an average size of 2,000 SF. That is down from the 38 sales in 2020, but the size of the units increased from an average of 1,600 SF size in 2020. Prices remained steady at $65/SF which had increased from $51/SF in 2019, which only tracked 13 sales. In 2018, we didn’t even have this category on our radar as there were only 2 sales at an average price of $42/SF.
Vacant Commercial Land
Sales of vacant land and development properties continued to increase last year. 315 acres of commercial property sold last year compared to 205 acres the year before. The average price was $36,057/acre which was 7% higher than the year before. Of the 30 sales, prices varied widely from a low of $3,100 per acre in the outlying townships to a high of $740,700/acre for a parcel in the city limits, on a prime corner, and with a traffic signal.
Leasing activity in Grand Traverse County was back in full force in 2021. After two years of below-average leasing, 2021 had a record 132 leases signed, which beat the 2018 high of 122 and was 37% above the two preceding years. We saw a record number of new properties hit the market for lease (271) and the fastest leasing times on record with the average property being on the market for 174 days before it was leased. The fact that companies had been delaying lease renewals and long-term commitments in 2020, was most likely the largest factor generating increases.