After several years of planning, Hinman Company is scaling down its downtown development strategy. The Portage-based company unveiled plans in 2016 to deliver Grand Rapids’ tallest skyscraper, at 10 Ionia Ave. NW, but market pressures are steering the company toward a shorter structure.
According to the Grand Rapids Historic Preservation’s June 20 meeting agenda, the proposed build will be reduced from a 42-story hotel and apartment complex to a 13-story hotel with ground floor retail.
“The really notable change is the height,” said Rhonda Baker, board liaison for the Historic Preservation Commission. “The overall design and material remain pretty much the same.”
The structure will keep its initial look, with a glass and concrete exterior and horizontal banding to help define the sections of the building from base to shaft to top. The building also will maintain the iconic wedge or “flatiron” shape previously approved by the historic commission in 2016.
Hinman Co. first acquired the property in the mid-1990s as the Business Journal previously noted nearly two years ago. Hinman COO Rich MacDonald said the company had been waiting for the correct time to develop the iconic structure.
But it seems the time is not right for Hinman to add more apartments to the downtown inventory. MacDonald in a recent statement said it was necessary to revisit the residential portion of the development, as more apartment complexes come online or are currently being built.
“Many factors impact the potential development of any property, and 10 Ionia is no different. … The building’s exterior design will be slightly adjusted to better fit its revised scale, but the building will fill the property’s unique and iconic ‘flatiron’ shape,” he said.
MacDonald said the size and shape of the building did not make it suitable for office space, and the cost efficiencies of providing additional infrastructure like elevators would be lost if the company opted for a shorter apartment complex.
MacDonald added Hinman Co. remains committed to the development and hopes it would positively impact downtown Grand Rapids.
Grand Rapids’ downtown corridor already has a large number of residential units in the works. Scott Nurski, senior multifamily investment specialist for NAI Wisinski of West Michigan, counted approximately 840 units in and around downtown to come online in 2018.
Nurski said while there is a supply/demand concern, it is more a reflection of how many tenants are able to pay downtown rental rates than of how many people actually want to live downtown.
“The question is: how many additional units does downtown Grand Rapids require to fill the tenant demand at the prices that are being offered? If the answer is less than 840, then we will potentially see increased vacancy levels or forced price adjustments to meet the market,” Nurski said.
The demand for market-rate housing in downtown Grand Rapids also depends on the area’s economic strength. Considering the downtown corridor’s housing market is only a few years old, Nurski said it still has a long way to go to offer the amenities that make downtown living appealing.
“Our revitalized version of downtown is really only beginning to mature,” he said. “For instance, we still have a long way to go on things such as transit and walkability (grocery, pharmacy, staple goods, other larger-scale shopping amenities).”
Nurski also suggested if a developer could construct a downtown building at a third of the current cost, there would be a “substantial” number of new prospective tenants.
In response to Hinman’s change of plans, John Wheeler, president of Orion Real Estate Solutions, agreed developers like him are considering more than simple supply and demand when choosing when and where to build more residential complexes.
“Site selection, available tax credits, surrounding inventory and quantity of units all become important variables to consider when we reach this phase in Grand Rapids’ housing discussion,” Wheeler said.
Wheeler pointed to his own work on the Warner Tower and Hyatt Place Hotel at 150-160 Ottawa Ave. NW. The Business Journal previously covered the project and noted the Hyatt Place, like 10 Ionia, originally would have been a residential complex, but Wheeler opted against it, considering its close proximity to other Orion projects with residential components.
“Certain apartment projects still make perfect sense,” Wheeler said. “Other projects that looked great on paper a year ago now present higher risk, and it’s wise to reconsider a 42-story building in today’s market.”
Recently, the Business Journal covered Orion’s increased investment in suburban residential projects. Wheeler said it was a strategic decision, as the firm currently has enough downtown holdings.
Wheeler also said suburban residential ventures tend to have lower interest rates, lower rents and more available land than downtown.