2023 CRE Mid-Year Market Report for Grand Traverse County
The first half of 2023 shows that the number of sales transactions have decreased considerably in comparison to last year, while lease transactions have gained significant momentum. Marketing time for commercial properties (days on market) has increased by 60 days and the average price per square foot has increased by 32% in the first half of the year.
Currently, there are 135 commercial properties for sale in Grand Traverse County, including 40+ self-storage units. The average list price is $970,011, which is just under last year’s price of $998,297. The average sale price this year is $726,414, representing a 10% drop over last year’s avg. sale price of $814,421. The reason for this drop is due to the fact that smaller buildings have been selling this year and although the average price is down, the price per square foot is up considerably. Last year we saw an overall average of $121/SF for commercial buildings and in the first half of 2023 our average sales are $160/SF. Office is leading the way with a 59% increase in price per SF followed by a 16% increase in retail price/SF and then 6% increase in storage condo price SF.
In the first half of 2022, our highest reported sale was $6,800,000 for a 40,505 S.F. medical office building located at 3537 W. Front Street. This year our record sale was $3,200,000 for a 12,976 S.F. downtown Traverse City building, formerly the Mackinaw Brewing Company, located at 161 E. Front Street.
Shown in the table below, the number of sales transactions have mostly trended the same in 2023 compared to the first half of 2022, apart from storage condos. Last year at this time, we had 17 storage units sold and now there have only been 9 sales. In addition to storage units, medical office sales have decreased from 3 units sold last year to 1 this year.
Another market trend that we look at is the length of time it takes to sell a commercial property. In 2023 it has taken 251 days on average to sell a commercial property in Grand Traverse County, whereas last year, it was only 180 days.
One reason for the higher marketing time is an outlier of one office building sale that was on the market for 2,377 days. The median days on market for the first half of 2023 brings the days on market back down to 174 days. While this number is still slightly higher than last year at this time, it is a comparable number that makes sense with the economic and real estate trends for 2023. Although commercial properties’ days on market are longer than last year, they are still selling in almost half of the time they did 9 years ago.
Leasing activities in 2023 are showing a moderate increase in transactions while square footage leased has almost doubled since 2022. In 2023 there have been 65 completed leases reported in the MLS while 2022 had 57 leases. The leasing of industrial space in the Grand Traverse area is gaining popularity among every type of business. The retail sector is also showing twice the units leased and has the highest number of leased units in over 4 years.
As shown in the table above, 2022 had 91,711 SF leased, while in the past six months there has been 173,274 SF of leased space.
Overall, the largest differences between the first half of 2022 and 2023 are larger amounts of leased space and lower number of sales, but at higher prices per square foot. We have also seen a decrease in sales of storage condos, and longer sales times. The sales environment has been slowed down by such factors as potential buyers wanting to hold on to their money due to inflation and rising interest rates and sellers holding onto their properties because they would need to finance replacement properties at higher interest rates. This has contributed to a decrease in sales volume in Grand Traverse County of about 36%, however the buildings that are selling are still seeing premium prices.
Kayla Anderson, CBCSR Commercial Coordinator
*NOTE: THESE FIGURES DO NOT INCLUDE COMMERCIAL VACANT LAND OR MULTI-FAMILY PROPERTIES.