Some housing developers in West Michigan are turning to condominiums and townhomes in targeting Millennials who are looking for more space and quieter locations.
Grand Rapids-based housing builder Eastbrook Homes Inc. has identified strong opportunities with condo and townhome developments as an alternative for people facing high rents in the urban core. Eastbrook typically develops single-family homes, but over the last decade has shifted its business model in reaction to the strong condo and townhome market.
Townhomes now make up about 30 percent of the firm’s work, said Eastbrook co-owner Josh McGraw.
“We’re seeing big populations of Millennials coming in,” McGraw told MiBiz. “The townhouses are something we’re focusing on as well, seeing that Millennials are looking for something more affordable.”
Eastbrook Homes, which recently finished constructing Trillium Ridge, a 64-unit condominium development located on 22nd Avenue in Ottawa County’s Jamestown Township, is one of several firms working on condo projects throughout West Michigan. As Baby Boomers retire and look for a more maintenance-free lifestyle, and as younger Millennials continue to put off single-family home purchases, developers say they see more opportunities in offering condo and townhome options.
“There is a push toward more affordability and townhomes are a way to do that,” McGraw said. “(Millennials) will still look for single-family homes, but it happens later in life. That is pushed back another five to 10 years.”
Additionally, if a renter can spend $2,000 per month, they often are interested in locations outside of Grand Rapids where that budget goes a bit further, according to developers.
“If you’re in that range down here in Grand Rapids, you can get a two bedroom with a parking space,” said Jason Wheeler, director of communications at Grand Rapids-based Pure Real Estate Management. “But if you were to take that $2,000 and apply it to Ada, you can get a two bedroom with a basement and a yard, and still have that maintenance-free lifestyle that you would have downtown.”
Orion Construction Co. Inc. has worked on several townhome projects, recently completing Knoll Townhomes in Ada, a 72-unit project with two- and three-bedroom units. Sixty-five of the units have been leased by a “diverse group of renters,” Wheeler said.
The company also is working on Michigan Meadows, which will be managed by Pure Real Estate, an 87-unit townhome project at 2233 Michigan St. NE that is just beginning pre-leasing.
The pre-leasing rates for the Ada project got Orion more interested in developing the site on Michigan Street, Wheeler said. The firm is using the same model for another location in Caledonia that is in its first phase of construction with 88 units.
“It does seem like a completely different market from the downtown housing pool,” Wheeler said, adding renters might be tired of 500-square-foot studio apartments in the urban core. “I think over a couple of years’ time, there’s a natural progression of wanting more space.”
With a competitive housing market, condominiums are a good solution for affordable starter homes, said Matt Jones, associate vice president at the West Michigan office of Colliers International.
“That market is so competitive and saturated that it’s hard to build a new house, where you could build a townhome development with more density,” Jones said. “There definitely is demand out there for condo projects.”
Even in more urban areas, current renters appear to be looking for ownership opportunities, according to industry sources.
To that end, Rockford Construction Co. Inc. is working on apartment-to-condominium conversions at two of its properties on the west side of Grand Rapids at 600 Douglas St. NW and Seventh Street Lofts.
Mike Mraz, president of real estate development at Rockford, said tenants at those developments expressed interest in homeownership.
“That was driven by the marketplace and people reaching out to us,” Mraz said of the conversions. “It allows us to recycle capital and equity into new projects as well.”
Mraz also expects “more and more” townhome development, and noted Rockford is looking at some projects that are not in the central business district.
“We continue to talk with those interested in condo living, not necessarily in a high rise, but that are still near the action (of downtown),” Mraz said. “We’re trying to find new ways of developing that are a balance of all of that.”