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Crain's Grand Rapids Business Brief

Crain's Grand Rapids Business

WGVU talks with Crain’s senior writer Mark Sanchez about a study indicating consumer sentiment towards electric vehicles is cooling – and – Grand Rapids industrial commercial real estate market is the tightest in the nation.

Mark Sanchez: It is the tightest in the U.S. and you could say that nice problem to have if you want to compile a list of problems. Basically, this is data that comes to us from the CoStar Group Inc. and that's involved in commercial real estate. The region's industrial vacancy rate across 192 million square feet of inventory is just 2.5%. That's the lowest rate among 50 markets across the nation, the 50 largest industrial markets. And it's about half the rate of the national average. So, it's kind of indicative that, you know, the manufacturing sector here in the Grand Rapids region is doing okay and doing well. And it's also got the issue of, boy, manufacturers are growing, industries are growing, they need more space. So, we are seeing developers trying to build more industrial space for this growing sector. And, uh, we'll see how quickly they can get all that online, but it's really a story that's been around for a while. And here's now a report from this organization that really puts it in stark contrast, a 2.5% vacancy rates pretty low. And we'll see how those investments go here and this year and next and kind of bringing some of these new facilities online for these manufacturers to grow into.

Patrick Center: There are industrial office parks, the infrastructure is in place. It's just a matter of construction.

Mark Sanchez: Yeah, it's a matter of getting the new facilities up and going. And yeah, there are issues that folks can build spec buildings, but sometimes you don't want to go too far building too far in the future with the spec building because something turns, the economy turns and industry turns, all of a sudden you've got empty space. But right now the demand is there. So, you are seeing developers building these new facilities. Some are specifically for clients and you are seeing some of that spec development occur. And we should also just mention that, you know, just as an indicator of the economic fortunes for the region, the latest survey came out this week, the other day from Brian Long there at GVSU and it looks good. He's saying we had some modest growth in the West Michigan industrial economy here in March. And some of those key metrics he looks at, new orders, production, employment, lead times, they all looked better in March versus February. So that's kind of another data point you look at to see how well that industrial economy is doing. And we see those metrics doing well. And now we've got a report that says we have a really low occupancy rate or vacancy rate for industrial real estate in this region. It's low and we need more of that space for these employers to keep growing.

Patrick Center: Industries are doing very well right now and one that maybe we don't think about, not necessarily top of mind, but that's Michigan's outdoor recreation industry. And there's now an investment fund focused on outdoor recreation.

Mark Sanchez: Yeah, this is something that the MEDC (Michigan Economic Development Corporation) has helped to create. It's a $3 million fund looking to support outdoor recreation. And this is a good size industry in Michigan, obviously, for, you know, a lot of folks know it for tourism. If you're a sportsman, hunter, fishing, and it's a good size industry in Michigan. So, this has been put together. It's a new investment fund that targets startups. And it's offering up to $250,000 out of this new investment fund. That's called the Michigan Outdoor Innovation Fund. It'll typically make investments between $50,000 and $250,000. And obviously those startups in technology, outdoor industry, tourism, natural resources. You know, once they get going, they'll need to find other capital as well, but here's some seed money available. If you've got an innovation to build a business around in kind of that outdoor economy, so to speak, here's a potential source for capital for you. Again, it's a $3 million fund and that'll offer some investments of $50,000 to a quarter million.

Patrick Center: We're talking with Crain's Grand Rapids Business Senior Writer, Mark Sanchez. The electric vehicle industry perhaps at a bit of a crossroads at this moment. Automakers have invested big money into the launch of EVs and a number of new makes and models that are hitting the market. But there's a new study out that says maybe consumers aren't quite ready.

Mark Sanchez: Yeah, you know, there's that old mantra in talking about business, the marketplace will decide and sort things out. And here's some data. We've been seeing some headlines this year, the last several months about EV production, EV sales are slowing. The growth is not quite what it once was. And this is kind of where the industry kind of meets consumer demand. This is data that comes to us from a survey at Edmunds. Basically, as the automakers are spending, as you say, huge amounts of money to produce electric vehicles as companies are creating these battery plants. Boy, about nearly a quarter of car shoppers, 23%, say they dislike electric vehicles. That's according to Edmunds. That's up about 4 percentage points from a year earlier. And they're seeing a decline in interest. The percentage of customers who said they are very likely to consider an EV for their next car purchase was down for the fourth straight month to about 24%. The number of consumers who said they are very likely to consider an EV that rose actually to 22% from 19% a year earlier. So, we're seeing some headwinds for the electric vehicle industry and we'll see how that plays out for both the auto industry that's so key to the state and obviously here in West Michigan we've got some heavy investments in battery plants for EVs. But it's an issue that's come because folks are citing kind of a number of reasons on why they're a little skeptical about electric vehicles. They cite the cost, the selection of what they can buy at a showroom, where are they going to charge the vehicle, how long is that charge going to last? So, it is still an industry that's in somewhat of its infancy. It's still emerging, still developing and there's a headwind that the industry faces early on. Kind of get consumers to consider that this is the type of vehicle to buy. And they're costly. And ultimately the marketplace will decide whether these catch on and really become mainstream or whatever they become? But it's part of the industry. And you're definitely seeing some headwinds for electric vehicles right now.

Patrick Center: And we're seeing market competition among hospitals here in the state. Ascension Borgess and what's happening with it as it moves forward.

Mark Sanchez: Well, kind of what we're seeing from Ascension is backing away from the Michigan market. It's got a couple of transactions in Detroit involving eight hospitals that will go over to Henry Ford Health and then announced a deal here a week or two ago to sell some of its hospitals in the northeast lower peninsula to MyMichigan Health based out of Midland. That kind of begs the natural question, which is gee, what's going to happen to Ascension Borgess down in Kalamazoo? So, this is a story that Crain’s did last week, myself and my colleague over in Detroit, Dustin Walsh, kind of talked to some folks who say they won't be surprised and perhaps we could even expect someday to see a transaction involving those Borgess assets down in Kalamazoo, as well as the community hospitals in Plainwell, Dowagiac and elsewhere in Allegan. And what will we see? There's no doubt that healthcare is a consolidating industry. We've seen big health systems getting bigger. We've seen even mid-size, certainly community hospitals, but mid-size hospitals struggling financially and making the investments they need to compete. So, they're looking around and the mantra I hear is everybody's talking to everybody. So, we're certainly going to see more consolidation in healthcare. And one of the questions now is with Ascension making these moves in Michigan, what will happen to those Ascension Borgess facilities down in Kalamazoo in Southwest Michigan?

Patrick Center: Crain’s Grand Rapids Business, senior writer Mark Sanchez. Thank you so much.

Mark Sanchez: Thank you, Patrick.

Patrick joined WGVU Public Media in December, 2008 after eight years of investigative reporting at Grand Rapids' WOOD-TV8 and three years at WYTV News Channel 33 in Youngstown, Ohio. As News and Public Affairs Director, Patrick manages our daily radio news operation and public interest television programming. An award-winning reporter, Patrick has won multiple Michigan Associated Press Best Reporter/Anchor awards and is a three-time Academy of Television Arts & Sciences EMMY Award winner with 14 nominations.