DRAFT
An Analysis of
Residential Market Potential
Michigan Street Corridor Study Area
City of Grand Rapids
Kent County, Michigan
November, 2011
Conducted by
ZIMMERMAN/VOLK ASSOCIATES, INC.
P.O. Box 4907
Clinton, New Jersey 08809
On Behalf of
The City of Grand Rapids
1120 Monroe Avenue NW
Grand Rapids, Michigan 49503
ZIMMERMAN/VOLK ASSOCIATES, INC.
P.O. Box 4907
Clinton, New Jersey 08809
908 735-6336
www.ZVA.cc • info@ZVA.cc
Research & Strategic Analysis
DRAFT
STUDY CONTENTS
AN ANALYSIS OF RESIDENTIAL MARKET POTENTIAL
Market Potential
1
4
—Draw Areas and Market Potential—
Where will the potential market for housing in the City of Grand Rapids move from?
Market Potential for the Michigan Street Corridor Study Area
Where will the potential market for housing in the Michigan Street Corridor
Study Area move from?
How many households have the potential to rent or purchase new or existing dwelling
units within the Michigan Street Corridor Study Area each year over the next five years?
What are their housing preferences?
Target Market Analysis
4
4
6
6
6
6
9
Who is the potential market?
9
The Current Context
13
What are the alternatives?
—Multi-Family Rental Properties—
—Multi-Family and Single-Family Attached For-Sale Properties—
Market-Entry Rent and Price Ranges: The Michigan Street Corridor
Study Area
What is the market currently able to pay?
—Multi-Family Rental Distribution—
—Multi-Family For-Sale Distribution—
—Single-Family Attached For-Sale Distribution—
—Single-Family Detached For-Sale Distribution—
How fast would the unit lease or sell?
—Absorption Forecasts—
Study Area Building and Unit Types
13
13
14
15
16
16
17
18
19
21
21
25
—Multi-Family—
—Single-Family Attached—
—Single-Family Detached—
—Miscellaneous Building Types—
25
32
35
39
Methodology
40
Assumptions and Limitations
Rights and Study Ownership
49
50
o
ZIMMERMAN/VOLK ASSOCIATES, INC.
P.O. Box 4907
Clinton, New Jersey 08809
908 735-6336
www.ZVA.cc • info@ZVA.cc
Research & Strategic Analysis
DRAFT
AN ANALYSIS OF
RESIDENTIAL MARKET POTENTIAL
The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
The purpose of this study is to examine the market potential for newly-introduced housing units—
created both through adaptive re-use of existing non-residential buildings as well as through new
construction—that could be leased or sold in the Michigan Street Corridor Study Area over the next
five years. In general, the approximate boundaries of the Study Area are the Grand River to the
west, the East Beltline to the east, Leonard Street to the north, and Fulton Street to the south. The
Study Area encompasses most of Downtown Grand Rapids, the Miracle Mile, the neighborhoods of
Belknap Lookout and Highland Park north of Interstate 196, and the neighborhoods of Heartside,
Heritage Hill, Midtown, Fulton Heights, and Michigan Oaks south of the Interstate.
The remarkable transformation of American households (particularly the emerging predominance of
one- and two-person households) over the past decade, combined with steadily increasing traffic
congestion and rising gasoline prices, has resulted in significant changes in neighborhood and
housing preferences, with major shifts from predominantly single-family detached houses in lowerdensity suburbs to a diverse mix of higher-density apartments, townhouses, and detached houses in
downtowns and walkable, mixed-use traditional neighborhoods. This fundamental transformation
of American households is likely to continue for several decades, representing an unprecedented
demographic foundation on which cities can re-build their downtowns and in-town neighborhoods.
However, the current constrained market—characterized throughout most of the United States by
weak housing prices; higher than typical levels of unsold units, both builder inventory units as well
as foreclosed and/or abandoned houses; and high levels of mortgage delinquencies by speculators and
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AN ANALYSIS OF RESIDENTIAL MARKET POTENTIAL
The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
investors as well as homeowners—has resulted in restrictive development financing and mortgage
underwriting, taking a significant percentage of potential homebuyers out of the market and
preventing numerous developments from going forward.
These market constraints do not reduce the size of the potential market; however, depending on the
timing of market entry, the initial percentage of the potential market able to overcome the
constraints of the deep recession and restrictive mortgage underwriting could be reduced.
The extent and characteristics of the potential market for new and existing housing units within the
Study Area were therefore identified using Zimmerman/Volk Associates’ proprietary target market
methodology. This methodology was developed in response to the challenges that are inherent in
the application of conventional supply/demand analysis to urban development and redevelopment.
Supply/demand analysis ignores the potential impact of newly-introduced housing supply on
settlement patterns, which can be substantial when that new supply matches the housing preferences
and economic capabilities of the draw area households in ways that existing housing choices in the
market do not. In particular, supply/demand analysis will tend to underestimate demand for higherquality housing when, as is often the case, the supply of new housing is limited, as it is along the
Corridor.
In contrast to conventional supply/demand analysis, then—which is based on supply-side dynamics
and baseline demographic projections—target market analysis determines the depth and breadth of
the potential market derived from the housing preferences and socio-economic characteristics of
households in the defined draw areas.
Because it considers not only basic demographic
characteristics, such as income qualification and age, but also less frequently analyzed attributes such
as mobility rates, lifestyle patterns and household compatibility issues, the target market
methodology is particularly effective in defining a realistic housing potential for urban development
and redevelopment where often no directly-comparable properties exist.
American households, more than any other nation’s, have always been extraordinarily mobile.
However, because of the impact of the recession on household mobility, in 2010 less than 15 percent
of American households moved from one dwelling unit to another, a considerably lower mobility
rate than in previous years. In general, household mobility is higher in urban areas; a greater
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AN ANALYSIS OF RESIDENTIAL MARKET POTENTIAL
The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
percentage of renters move than owners; and a greater percentage of younger households move than
older households.
Based on the target market methodology, then, this study determined:
•
Where the potential renters and buyers for new and existing housing units in the
Michigan Street Corridor Study Area are likely to move from (the draw areas);
•
How many have the potential to move to the Study Area if appropriate housing units
were to be made available (depth and breadth of the market);
•
What their housing preferences are in aggregate (rental or ownership, multi-family or
single-family);
•
How quickly they will rent or purchase the new units (market capture/absorption
forecasts over the next five years);
•
Who currently lives in the draw areas and what they are like (the target markets);
•
What their alternatives are (the greater Downtown Grand Rapids market context);
and
•
What they will pay to live in the Michigan Street Corridor Study Area (market-entry
rents and prices).
The target market methodology is described in detail in the METHODOLOGY section at the end of
this study.
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AN ANALYSIS OF RESIDENTIAL MARKET POTENTIAL
The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
MARKET POTENTIAL
From the market perspective, considerable demand continues to exist for new housing, both new
construction and adaptive re-use of existing buildings, in Downtown Grand Rapids housing. The
challenge will be to extend market interest to new units located further east along the Michigan
Street Corridor Study Area.
—DRAW AREAS AND MARKET POTENTIAL—
Target market analysis determines the specific target markets for the Michigan Street Corridor Study
Area by filtering the overall market as follows:
1. Identifying the annual market potential for the City of Grand Rapids as a whole;
2. Narrowing the focus to market segments that prefer downtown, in-town, and
mixed-use neighborhoods (filtering out housing consumers who would prefer
Grand Rapids neighborhoods that are considerably more suburban or even rural
in character);
3. Identifying households seeking to live in higher-density housing (filtering out
housing consumers who would prefer to live in single-family detached houses on
large lots); and
4. Identifying those households with incomes sufficient to afford leases and
mortgages required for newly-created quality housing.
Where will the potential market for housing in the City of Grand Rapids move from?
As derived from the most recent migration and mobility data—taxpayer records compiled by the
Internal Revenue Service from 2004 through 2008 and data from the 2008-2010 American
Community Survey estimates for the City of Grand Rapids and for Kent County—the principal
draw areas for new and existing housing units located in the City of Grand Rapids include the City
itself, the balance of Kent County, and the adjacent counties of Ottawa and Allegan. This analysis
also factors in the market potential from households currently living in all other counties represented
in Kent County migration.
Based on the analyses described above, then, the draw areas for the City of Grand Rapids and the
Michigan Street Corridor Study Area have been delineated as follows:
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AN ANALYSIS OF RESIDENTIAL MARKET POTENTIAL
The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
•
The primary draw area, covering households in market groups with median incomes above
$45,000 currently living within the Grand Rapids city limits.
•
The local draw area, covering households in market groups with median incomes above
$45,000 currently living in the balance of Kent County.
•
The regional draw area, covering households in market groups with median incomes above
$45,000 that are likely to move to the City of Grand Rapids from Ottawa and Allegan
Counties.
•
The national draw area, covering households in market groups with median incomes above
$45,000 and with the potential to move to the City of Grand Rapids from all other U.S.
counties (primarily counties in Michigan, although approximately 30 percent are households
currently living outside the state).
As derived from the updated migration and mobility analyses, then, the draw area distribution of
market potential (those households with the potential to move within or to the City of Grand
Rapids) is therefore as follows:
Table 1
Market Potential by Draw Area
All Neighborhoods and Housing Types
City of Grand Rapids, Kent County, Michigan
City of Grand Rapids:
Balance of Kent County:
Regional Draw Area (Ottawa and Allegan Counties):
Balance of US:
44.2%
29.9%
5.1%
20.8%
Total:
100.0%
SOURCE: Zimmerman/Volk Associates, Inc., 2011.
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AN ANALYSIS OF RESIDENTIAL MARKET POTENTIAL
The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
MARKET POTENTIAL FOR THE MICHIGAN STREET CORRIDOR STUDY AREA
Where will the potential market for housing in the Michigan Street Corridor Study Area move
from?
The target market methodology also identifies those households with a preference for living in
downtowns, in-town and other urban or mixed-use neighborhoods, such as those that are located
along Michigan Street. After discounting for those segments of the city’s potential market that
would typically choose suburban or rural locations, the distribution of draw area market potential for
new and existing units within the Study Area is summarized as follows:
Table 2
Annual Residential Market Potential by Draw Area
MICHIGAN STREET CORRIDOR STUDY AREA
City of Grand Rapids, Kent County, Michigan
City of Grand Rapids:
Balance of Kent County:
Regional Draw Area (Ottawa and Allegan Counties):
Balance of US:
43.3%
20.6%
2.8%
33.3%
Total:
100.0%
SOURCE: Zimmerman/Volk Associates, Inc., 2011.
How many households have the potential to rent or purchase new or existing dwelling units
within the Michigan Street Corridor Study Area each year over the next five years?
As determined by the target market methodology, which accounts for household mobility within the
City of Grand Rapids and the balance of Kent County, as well as migration and mobility patterns
for households currently living in all other cities and counties, approximately 5,510 younger singles
and couples, empty nesters and retirees, and traditional and non-traditional families, in market
groups with annual incomes above $45,000, represent the potential market for new and existing
housing units within the Michigan Street Corridor Study Area each year over the next five years.
What are their housing preferences?
The housing preferences of the 5,510 draw area households that represent the annual potential
market for new and existing housing units within the Study Area—according to tenure (rental or
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AN ANALYSIS OF RESIDENTIAL MARKET POTENTIAL
The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
ownership) choices and broad financial capacity—are in line with the recent findings from other
urban studies undertaken by this firm and are outlined as follows:
Table 3
Annual Potential Market
MICHIGAN STREET CORRIDOR STUDY AREA
City of Grand Rapids, Kent County, Michigan
NUMBER OF
HOUSEHOLDS
PERCENT
OF TOTAL
Multi-family for-rent
(lofts/apartments, leaseholder)
2,585
46.9%
Multi-family for-sale
(lofts/apartments, condo/co-op ownership)
755
13.8%
Single-family attached for-sale
(townhouses/rowhouses, fee-simple/
condominium ownership)
895
16.2%
Low-range single-family detached for-sale
(houses, fee-simple ownership)
470
8.5%
Mid-range single-family detached for-sale
(houses, fee-simple ownership)
435
7.9%
High-range single-family detached for-sale
(houses, fee-simple ownership)
370
6.7%
Total
5,510
100.0%
HOUSING TYPE
SOURCE: Zimmerman/Volk Associates, Inc., 2011.
The continuing weak for-sale housing market has been the impetus for a significant shift in market
preferences from home ownership to rental dwelling units over the past three years, particularly
among younger households. This results in a higher share of consumer preference for multi-family
rentals even among relatively affluent consumers than would have been typical just three years ago.
From the perspective of draw area target market propensities and compatibility, and within the
context of the new housing marketplace in the greater Downtown Grand Rapids market area, the
potential market for new housing units within the Study Area could include the full range of
housing types, from rental multi-family to for-sale single-family detached. However, within the
Study Area, new development should concentrate for the most part on the highest-density housing
types, which support transit and urban development and redevelopment most efficiently as well as
providing the greatest fiscal, economic and social/lifestyle benefit. Exceptions would include the
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AN ANALYSIS OF RESIDENTIAL MARKET POTENTIAL
The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
construction of new detached houses on selected vacant single-family lots in the neighborhoods
adjacent to Michigan Street.
Recommended housing types therefore include:
•
Rental lofts and apartments (multi-family for-rent);
•
For-sale lofts and apartments (multi-family for-sale);
•
Townhouses, live-work (single-family attached for-sale); and
•
Urban detached houses (single-family detached for-sale on small lots).
Excluding large-lot single-family detached units, then, this analysis has determined that an annual
average of 4,660 households currently living in the defined draw areas represent the pool of potential
renters/buyers of new and existing housing units within the Study Area each year over the next five
years. As derived from the tenure and housing preferences of those draw area households, the
distribution of housing types would therefore be as follows:
Table 4
Annual Potential Market for Higher-Density Housing
MICHIGAN STREET CORRIDOR STUDY AREA
City of Grand Rapids, Kent County, Michigan
NUMBER OF
HOUSEHOLDS
PERCENT
OF TOTAL
Multi-family for-rent
(lofts/apartments, leaseholder)
2,585
55.5%
Multi-family for-sale
(lofts/apartments, condo/co-op ownership)
755
16.2%
Single-family attached for-sale
(townhouses/live-work, fee-simple/
condominium ownership)
895
19.2%
Urban single-family detached
(houses, fee-simple ownership)
425
9.1%
Total
4,660
100.0%
HOUSING TYPE
SOURCE: Zimmerman/Volk Associates, Inc., 2011.
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AN ANALYSIS OF RESIDENTIAL MARKET POTENTIAL
The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
TARGET MARKET ANALYSIS
Who is the potential market?
As noted earlier in this report, the increasing market interest in urban neighborhoods—walkable,
with a mix of uses and a variety of housing types—is the result of significant changes in American
households, the growing cost of commuting by private automobile, and the profound impact of the
Great Recession, which began in 2007, on both households and builder/developers.
The changing composition of American households may have the most lasting influence, however,
because of the changing housing preferences of the two largest generations in the history of America:
the Baby Boomers (currently estimated at 77 million), born between 1946 and 1964, and the
estimated 78 million Millennials, who were born from 1977 to 1996 and, in 2010, surpassed the
Boomers in population.
The Millennials are demonstrating a strong preference for downtowns and walkable neighborhoods,
particularly those served by transit. In contrast to the traditional family, i.e.—a married couple with
children—that comprised the typical post-war American household, Millennials are predominantly
younger singles and couples.
As determined by the target market analysis, then, and reflecting national trends, the annual
potential market, characterized by lifestage, for new and existing units within the Michigan Street
Corridor Study Area is shown on the following table:
Table 5
Housing Preferences by Household Type
MICHIGAN STREET CORRIDOR STUDY AREA
City of Grand Rapids, Kent County, Michigan
PERCENT
OF TOTAL
RENTAL
MULTI-FAM.
FOR-SALE
MULTI-FAM.
FOR-SALE
SF ATTACHED
FOR-SALE
SF DETACHED
Empty-Nesters & Retirees
18%
11%
21%
22%
49%
Traditional &
Non-Traditional Families
11%
9%
3%
15%
22%
Younger Singles & Couples
71%
80%
76%
63%
29%
Total
100%
100%
100%
100%
100%
HOUSEHOLD TYPE
SOURCE: Zimmerman/Volk Associates, Inc., 2011.
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
•
The largest general market segment continues to be younger singles and couples.
Among the principal factors in the larger share of the market held by younger singles and
couples are:
• Their higher mobility rates—young people tend to move much more
frequently than older people;
• The reduced mobility of older singles and couples because of their inability,
or reluctance, to sell their existing units in the current housing recession;
and
• The strong preference of younger households for mixed-use walkable
neighborhoods.
Approximately 40 percent of these younger households would be moving to the Study Area
from another dwelling unit in Grand Rapids, another 20 percent would be moving from
elsewhere in Kent County, four percent from the region, and the remaining 36 percent from
outside the region.
Since younger singles and couples typically choose to live in neighborhoods that contain a
diverse mix of people, housing types, and uses, places for social interaction are significantly
more important to them than they are to either families or empty nesters and retirees. This
market segment chooses neighborhoods with a “sense of place,” with outdoor public spaces
and neighborhood amenities that reflect their interests. To many of these households, the
public realm can be more important than the dwelling unit itself. The continuing challenge
in capturing this potential market is to produce new units that are attractive to young people
(lofts, not suburban-style apartments), at rents and prices that they can afford, within a
vibrant neighborhood with a varied mix of uses, services and activities.
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
•
The next largest market segment is comprised of older households (empty nesters and
retirees). Nearly a third of these households are currently living in Grand Rapids.
Empty nesters and retirees— of which the largest target groups are, in order of median
income, Urban Establishment, New Empty Nesters, No-Nest Suburbanites and MiddleAmerican Retirees—represent just 18 percent of the potential market for the Study Area, in
part, as noted above, because of their inability to sell—or reluctance to sell at a loss—their
existing housing units. However, as the national, regional, and local housing markets begin
to stabilize, and with the introduction of new units in a broad range of rents and prices, older
households are likely to become a larger share of the potential market.
•
The third, and smallest, general market segment is comprised of family-oriented
households (traditional and non-traditional families), representing just 11 percent of
the market for new housing in the Study Area.
Depending on housing type, family-oriented households, many of whom are single parents
with one or two children, make up between just three percent (for-sale multi-family) and 22
percent (for-sale single-family detached) of the market for new housing units in the
Michigan Street Corridor Study Area. Outside of New York City, very few traditional
families choose to live in multi-family dwelling units, in large part because of the lack of
private outdoor space in which their children can play unsupervised.
Over 60 percent of the traditional and non-traditional family households that represent the
potential market for new housing in the Study Area currently live in either Grand Rapids or
elsewhere in Kent County; just two percent would be moving to the Study Area from the
region, and more than 37 percent from elsewhere in the U.S.
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
The primary target groups, their median and range of incomes, and median home values, are:
Table 6
Potential Housing Market
(In Order of Median Income)
MICHIGAN STREET CORRIDOR STUDY AREA
City of Grand Rapids, Kent County, Michigan
HOUSEHOLD
TYPE
MEDIAN
INCOME
BROAD INCOME
RANGE
MEDIAN HOME
VALUE (IF OWNED)
Empty Nesters & Retirees
Old Money
Urban Establishment
Small-Town Establishment
Cosmopolitan Elite
Suburban Establishment
New Empty Nesters
Affluent Empty Nesters
Cosmopolitan Couples
Mainstream Retirees
Middle-Class Move-Downs
No-Nest Suburbanites
Middle-American Retirees
Multi-Ethnic Retirees
$157,300
$121,300
$113,600
$107,100
$98,800
$97,700
$97,700
$77,500
$71,800
$70,900
$69,100
$67,000
$55,900
$100,000–$250,000
$75,000–$175,000
$75,000–$150,000
$75,000–$150,000
$65,000–$135,000
$60,000–$140,000
$55,000–$145,000
$50,000–$100,000
$45,000–$100,000
$50,000–$95,000
$45,000–$90,000
$45,000–$85,000
$45,000–$70,000
$433,600
$299,300
$245,100
$211,600
$197,400
$161,200
$209,100
$196,800
$147,500
$120,800
$115,500
$112,200
$121,400
Traditional & Non-Traditional Families
Unibox Transferees
Full-Nest Urbanites
Multi-Ethnic Families
Multi-Cultural Families
$114,800
$75,900
$71,400
$47,900
$80,000–$165,000
$50,000–$95,000
$45,000–$95,000
$45,000–$55,000
$195,900
$188,000
$123,200
$95,400
Younger Singles & Couples
The Entrepreneurs
e-Types
Fast-Track Professionals
The VIPs
Upscale Suburban Couples
New Bohemians
Twentysomethings
Suburban Achievers
Small-City Singles
Urban Achievers
$141,900
$118,200
$101,200
$100,300
$93,500
$74,200
$69,500
$67,100
$54,500
$48,400
$75,000–$200,000
$70,000–$165,000
$55,000–$150,000
$55,000–$145,000
$50,000–$140,000
$45,000–$125,000
$45,000–$95,000
$45,000–$90,000
$45,000–$70,000
$45,000–$55,000
$325,700
$336,400
$242,500
$203,100
$160,800
$257,000
$137,700
$148,100
$103,800
$200,500
NOTE: The names and descriptions of the market groups summarize each group’s tendencies—as
determined through geo-demographic cluster analysis—rather than their absolute
composition. Hence, every group could contain “anomalous” households, such as emptynester households within a “full-nest” category.
SOURCE: Zimmerman/Volk Associates, Inc., 2011.
(Reference APPENDIX THREE, TARGET MARKET DESCRIPTIONS, for detail on each target group.)
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City of Grand Rapids, Kent County, Michigan
November, 2011
THE CURRENT CONTEXT
What are the alternatives?
—Multi-Family Rental Properties—
Rents at most of the rental properties included in the survey in 2004 and the update in 2008 have
continued to rise through 2011. Of the properties covered in all three surveys, and excluding
properties with income restrictions, rents for studios have risen from $500 a month in 2008 (from
$425 in 2004) to $695 per month in 2011, for units generally containing between 400 and 600
square feet (with a current general range of $1.13 to $2.04 per square foot, considerably higher than
in 2008).
Again excluding properties with income restrictions, rents for one-bedroom apartments now
generally start nearly $900 per month, with the highest one-bedroom rent at $1,300 per month. The
one-bedroom size range is from approximately 600 to 1,000 square feet of living space ($0.93 to
$2.07 per square foot).
Two-bedroom units now start at around $950, up from $650 per month in 2008; two-bedroom
penthouse rents are as high as $2,700 a month. In general, two-bedroom unit sizes range between
780 and 1,800 square feet (generally $1.06 to $2.04 per square foot in 2011, from $0.80 to $1.29
per square foot in 2008).
Three-bedroom apartments now rent for $1,000 to $2,500 per month, up from around $925 to
nearly $2,000 per month in 2008. Unit sizes range between 1,300 and 2,2275 square feet
(approximately $0.86 to $1.93 per square foot in 2011, from $0.80 to $0.86 per square foot in
2008).
Occupancy rates continue to be very high, ranging between 95 and 100 percent (functional full
occupancy)
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City of Grand Rapids, Kent County, Michigan
November, 2011
—Multi-Family and Single-Family Attached For-Sale Properties—
Most of the condominium housing developments, both adaptive re-use and new construction, that
were marketing units in 2008 are sold out or are nearing sell-out, or continue to lease unsold units.
Base prices for Downtown units now start at around $125,000 (Boardwalk). The remaining units at
the 39-unit Fitzgerald, the renovation of a former YMCA, are priced between $179,900 for a 754square-foot one-bedroom apartment to just under $600,000 (down from $1 million in 2008) for a
3,500-square-foot penthouse. Nine units remain to be sold, and the property has averaged the sale
of just under one unit per month.
River House, the 34-story tower located on Bridge Street, has now sold 159 of its 207 units, for an
average sales pace of 4.4 units per month. The remaining 48 units are priced between $179,995 for
a 915-square-foot one-bedroom apartment to over $767,000 for a 4,650-square-foot “white box”
penthouse. Base prices per square foot for the remaining units range between $150 and $262.
Most average sales paces are continuing to fall as fewer sales are achieved in the continuing soft
market, and many unsold units continue to be rented.
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City of Grand Rapids, Kent County, Michigan
November, 2011
MARKET-ENTRY RENT AND PRICE RANGES: THE MICHIGAN STREET CORRIDOR STUDY AREA
From the perspective of the housing consumer, the major challenges to new residential development
in the Michigan Street Corridor Study Area include:
•
High rents and prices: The high costs of land and site assembly, buildings, materials
and labor, in addition to the typically high cost of adaptive re-use, are, without
incentives or subsidies, likely to drive rents and prices beyond the reach of many
potential residents of new units within the Study Area.
•
Financing challenges: Mortgages are still difficult to obtain for many potential
buyers, and restrictive mortgage underwriting and development finance continues to
be a challenge to developers.
•
Neglected or vacant properties: Vacant properties and empty lots are a deterrent to
potential residents, as they contribute to the perception that those areas are neglected
and/or dangerous neighborhoods.
•
High traffic volumes, particularly along the western portion of Michigan Street:
Because of the noise and exhaust generated by automobiles and trucks, few
households choose to live directly on a street with significant amounts of traffic
unless there is a significant buffer between the dwelling units and the arterial.
From the perspective of the housing consumer, the assets of the Michigan Street Corridor Study
Area that make the neighborhoods within it attractive places to live include:
•
Easy access to Downtown Grand Rapids.
•
Easy access to the major medical and religious institutions located within the Study
Area.
•
Easy access to many of the cultural venues of the region, such as the Van Andel
Arena, the Civic Theatre, and the Children’s Museum.
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City of Grand Rapids, Kent County, Michigan
November, 2011
What is the market currently able to pay?
—Multi-Family Rental Distribution—
Based on the annual incomes and financial capabilities of the households that represent the target
markets for new and existing rental units in the Study Area, the distribution of annual market
potential by rent range would be summarized as follows:
Table 7
Rent Ranges Based on Incomes of Annual Potential Market
Multi-Family For-Rent Units
MICHIGAN STREET CORRIDOR STUDY AREA
City of Grand Rapids, Kent County, Michigan
MONTHLY
RENT RANGE
ANNUAL
POTENTIAL MARKET
$500–$750
$750–$1,000
$1,000–$1,250
$1,250–$1,500
$1,500–$1,750
$1,750–$2,000
$2,000 and up
Total:
PERCENTAGE
537
654
662
399
181
86
86
20.8%
25.3%
25.6%
15.4%
7.0%
3.3%
2.6%
2,585
100.0%
SOURCE: Zimmerman/Volk Associates, Inc., 2011.
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
—Multi-Family For-Sale Distribution—
Based on the annual incomes and financial capabilities of the households that represent the target
markets for new and existing for-sale multi-family units (condominiums) in the Study Area, the
distribution of annual market potential by price range would be summarized as follows:
Table 8
Price Ranges Based on Incomes of Annual Potential Market
Multi-Family For-Sale Units
MICHIGAN STREET CORRIDOR STUDY AREA
City of Grand Rapids, Kent County, Michigan
MONTHLY
RENT RANGE
ANNUAL
POTENTIAL MARKET
$100,000–$150,000
$150,000–$200,000
$200,000–$250,000
$250,000–$300,000
$300,000–$350,000
$350,000–$400,000
$400,000–$450,000
$450,000 and up
Total:
PERCENTAGE
75
251
238
92
56
20
13
20
9.9%
33.3%
31.5%
12.2%
7.4%
2.7%
1.7%
1.3%
755
100.0%
SOURCE: Zimmerman/Volk Associates, Inc., 2011.
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
—Single-Family Attached For-Sale Distribution—
Based on the annual incomes and financial capabilities of the households that represent the target
markets for new and existing for-sale single-family attached units (townhouses) in the Study Area,
the distribution of annual market potential by price range would be summarized as follows:
Table 9
Price Ranges Based on Incomes of Annual Potential Market
Single-Family Attached For-Sale Units
MICHIGAN STREET CORRIDOR STUDY AREA
City of Grand Rapids, Kent County, Michigan
MONTHLY
RENT RANGE
ANNUAL
POTENTIAL MARKET
$100,000–$150,000
$150,000–$200,000
$200,000–$250,000
$250,000–$300,000
$300,000–$350,000
$350,000–$400,000
$400,000–$450,000
$450,000 and up
Total:
PERCENTAGE
80
219
264
142
106
38
23
23
8.9%
24.5%
29.5%
15.9%
11.8%
4.2%
2.6%
2.6%
895
100.0%
SOURCE: Zimmerman/Volk Associates, Inc., 2011.
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
—Single-Family Detached For-Sale Distribution—
Based on the annual incomes and financial capabilities of the households that represent the target
markets for new and existing for-sale urban single-family detached units (houses) in the Study Area,
the distribution of annual market potential by price range would be summarized as follows:
Table 10
Price Ranges Based on Incomes of Annual Potential Market
Urban Single-Family Detached For-Sale Units
MICHIGAN STREET CORRIDOR STUDY AREA
City of Grand Rapids, Kent County, Michigan
MONTHLY
RENT RANGE
ANNUAL
POTENTIAL MARKET
$100,000–$150,000
$150,000–$200,000
$200,000–$250,000
$250,000–$300,000
$300,000–$350,000
$350,000–$400,000
$400,000–$450,000
$450,000 and up
Total:
PERCENTAGE
15
78
100
68
63
55
24
22
3.5%
18.4%
23.5%
16.0%
14.8%
11.9%
5.7%
5.2%
425
100.0%
SOURCE: Zimmerman/Volk Associates, Inc., 2011.
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
Based on the tenure preferences of draw area households and their income and financial capabilities,
then, the general range of rents and prices for newly-developed residential units within the Michigan
Street Corridor Study Area that could currently be sustained by the market is as follows:
Table 11
General Rent, Price and Size Ranges
Newly-Created Housing (Adaptive Re-Use and New Construction)
MICHIGAN STREET CORRIDOR STUDY AREA
City of Grand Rapids, Kent County, Michigan
RENT/PRICE
RANGE
SIZE
RANGE
Open Lofts *
$625–$1,200/month
500–1,000 sf
$1.20–$1.25 psf
Soft Lofts †
$750–$1,600/month
550–1,200 sf
$1.33–$1.36 psf
$1,150–$2,100/month
750–1,400 sf
$1.50–$1.53 psf
HOUSING TYPE
RENT/PRICE
PER SQ. FT.
FOR-RENT (MULTI-FAMILY)—
Luxury Apartments
FOR-SALE (MULTI-FAMILY)—
Open Lofts *
$110,000–$195,000
750–1,400 sf
$139–$147 psf
Soft Lofts †
$145,000–$265,000
850–1,600 sf
$166–$171 psf
$225,000–$435,000
950–1,800 sf
$237–$242 psf
Luxury Condominiums
FOR-SALE (SINGLE-FAMILY ATTACHED)—
Rowhouses
$175,000–$245,000
1,100–1,600 sf
$153–$159 psf
Live-Work
$235,000–$285,000
1,500–1,750 sf
$157–$163 psf
1,000–1,800 sf
$164–$165 psf
FOR-SALE (SINGLE-FAMILY DETACHED)—
Urban Houses
$165,000–$295,000
* Unit interiors of “open lofts” typically have high ceilings and commercial windows and are either
minimally finished, limited to architectural elements such as columns and fin walls, or unfinished,
with no interior partitions except those for bathrooms.
† Unit interiors of “soft lofts” may or may not have high ceilings and are fully finished, with the
interiors partitioned into separate rooms.
SOURCE: Zimmerman/Volk Associates, Inc., 2011.
The aforementioned rents and prices are in year 2011 dollars, are exclusive of consumer options and
upgrades, or floor or location premiums, and cover a broad range of rents and prices for newlydeveloped units currently sustainable by the market in the Study Area. With the exception of singlefamily units, parking is not included in the rents or prices; single-family prices include a one-car
garage. For the most part (and depending on location), these rents and prices cannot be achieved by
the development of one or two infill units, but require that projects be of sufficient size to achieve
development efficiency and to support a high-impact marketing campaign. Location will also have a
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
significant impact on rents and prices; projects situated within a short walking distance of high-value
amenities, such as restaurants, theaters, shops, or transit will likely command rents and prices at the
upper end of values. Those projects that are located on the outer edges of the Study Area are likely
to command rent and prices at the lower end of values.
How fast would the units lease or sell?
—ABSORPTION FORECASTS—
As noted in the Introduction to this study, the current constrained market is characterized in many
locations by reduced housing prices, high levels of unsold units, high levels of mortgage
delinquencies and foreclosures, and restrictive mortgage underwriting and development finance.
Also, as noted previously, these market constraints do not reduce the size of the potential market,
but, depending on the timing of market entry, they do reduce the initial percentage of the potential
market able to overcome those constraints.
After more than two decades’ experience in various markets across the country, and given current
economic conditions, which are not likely to improve significantly over the near term,
Zimmerman/Volk Associates has determined that for new construction, an annual capture of up to
8.5 percent of the potential market for each for-sale housing type could be achievable. (Nationally,
prior to the housing collapse in 2008, newly-constructed dwelling units represented 15 percent of all
units sold; in the first quarter of 2011, newly-constructed dwelling units represented just 8.5 percent
of all units sold.)
For new multi-family rentals, an annual capture of up to 10 percent of the potential market is likely
to be achievable.
Based on those capture rates, the Michigan Street Corridor Study Area should be able to support
435 new units (new construction or adaptive re-use of existing buildings) per year over the next five
years, as outlined on the following page.
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
Table 12
Annual Market Capture
New Construction
MICHIGAN STREET CORRIDOR STUDY AREA
City of Grand Rapids, Kent County, Michigan
NUMBER OF
HOUSEHOLDS
HOUSING TYPE
Rental Multi-Family
(lofts/apartments, leaseholder)
2,585
For-Sale Multi-Family
(lofts/apartments, condo/co-op ownership)
CAPTURE
RATE
NUMBER OF
NEW UNITS
10%
259
755
8.5%
64
For-Sale Single-Family Attached
(townhouses/rowhouses, fee-simple ownership)
895
8.5%
76
For-Sale Urban Single-Family Detached
(houses, fee-simple ownership)
425
8.5%
36
Total
4,660
435
SOURCE: Zimmerman/Volk Associates, Inc., 2011.
NOTE: Target market capture rates are a unique and highly-refined measure of feasibility.
Target market capture rates are not equivalent to—and should not be confused with—
penetration rates or traffic conversion rates.
The target market capture rate is derived by dividing the annual forecast absorption—in
aggregate and by housing type—by the number of households that have the potential to
purchase or rent new housing within a specified area in a given year.
The penetration rate is derived by dividing the total number of dwelling units planned for a
property by the total number of draw area households, sometimes qualified by income.
The traffic conversion rate is derived by dividing the total number of buyers or renters by
the total number of prospects that have visited a site.
Because the prospective market for a location is more precisely defined, target market capture
rates are higher than the more grossly-derived penetration rates. However, the resulting
higher capture rates are well within the range of prudent feasibility.
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
In general, redevelopment locations within the Michigan Street Corridor Study Area should be
evaluated relative to the following criteria for successful urban housing initiatives:
(a) Advantageous adjacency. It is critical to “build on strength,” not only to provide
maximum support for any proposed housing initiatives, but also, conversely, so that
housing initiatives will reinforce existing or proposed adjacent developments
(commercial, retail, or residential).
(b) Building and/or land availability. At present, several buildings or parcels within the
Study Area are underutilized or vacant. Under-used surface parking lots are better
utilized as sites for new infill mixed-use development, not only to enhance the city’s
tax base, but also to provide a more inviting and interesting pedestrian experience for
residents and visitors.
(c) Potential for expansion. Each housing initiative should be located in a location
where, at the successful completion of the initial project, adjacent or nearby buildings
and/or land appropriate for the continuation or extension of the redevelopment,
either through new construction or adaptive re-use would potentially be available.
Each housing initiative should be viewed not as a “stand-alone” project, but rather as
a potential catalyst for additional residential development in surrounding areas.
(d) Anchors/linkage. Each housing initiative must be seen as part of an overall urban
strategy to build a critical mass of both housing and related non-residential uses
along Michigan Street and within the Study Area. “Anchor” locations establish the
potential for economic activity in an underutilized area; “linkage” locations build on
the strength of two or more established, but disconnected assets.
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
Since the Study Area is largely built out, with little undeveloped land remaining for development,
vacant lots, vacant and/or dilapidated buildings, and large open parking lots, particularly if owned by
a public entity, represent the best opportunities for new housing or mixed-used buildings within the
Study Area. If feasible from the development perspective, examples of potential redevelopment
locations could include the Eastern Elementary School in Highland Park; the vacant and
underutilized parcels in the vicinity of Bradford and Lafayette Streets in the Belknap Lookout
neighborhood; the open parking lot on Plymouth Avenue which is currently used as off-site
parking for the hospital; and the vacant industrial building on Leffingwell Avenue close to Michigan
Street.
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
STUDY AREA BUILDING AND UNIT TYPES
Building and unit types most appropriate for the Michigan Street Corridor Study Area include:
—MULTI-FAMILY—
•
Loft Building: Either adaptive re-use of older warehouse or manufacturing buildings or a
new-construction building type inspired by those buildings. The new-construction version
usually has double-loaded corridors.
Loft building
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
•
Open Loft: Unit interiors typically have high ceilings and commercial windows and are
minimally finished (with minimal room delineations such as columns and fin walls), or
unfinished (with no interior partitions except those for bathrooms).
Open Loft
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
•
Soft Loft: Unit interiors typically have high ceilings, are fully finished and partitioned into
individual rooms. Units may also contain architectural elements reminiscent of “hard lofts,”
such as exposed ceiling beams and ductwork, concrete floors and industrial finishes,
particularly if the building is an adaptive re-use of an existing industrial structure.
Soft Loft
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
•
Luxury Apartment:
A more conventionally-finished apartment unit, typically with
completely-partitioned rooms.—trim, interior doors, kitchens and baths are fitted out with
higher-end finishes and fixtures.
Luxury Apartment
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
•
Liner Building: An apartment building with apartments and/or lofts lining two to four sides
of a multi-story parking structure. Units are typically served from a single-loaded corridor
that often includes access to parking. Ground floors typically include a traditional apartment
lobby and can also include maisonette apartments, retail or some combination of the two.
Liner buildings
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
•
Maisonette Apartment Building: A three- or four-story building with an elevation that
resembles a row of townhouses; the interior, however, combines single-level and two-level
apartments. Each unit has its own street entrance and attached garage, accessed from the
rear of the building.
Maisonette apartment buildings
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
•
Mixed-Use Building: A pedestrian-oriented building, either attached or free-standing, with
apartments and/or offices over flexible ground floor uses that can range from retail to office
to residential.
Mixed-use buildings
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
—SINGLE-FAMILY ATTACHED—
•
Rowhouse: Similar in form to a conventional suburban townhouse except that the garage—
either attached or detached—is located to the rear of the unit and accessed from an alley or
auto court. Unlike conventional townhouses, urban townhouses conform to the pattern of
streets, typically with shallow front-yard setbacks.
Rowhouses
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
•
Duplex: A two-unit rowhouse with the garage—either attached or detached—located to the
rear of the unit and accessed from an alley or auto court. Like the rowhouse, urban duplexes
conform to the pattern of streets, typically with shallow front-yard setbacks. In a corner
location, the units can each front a different street.
Corner duplex
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
•
Live-work: A unit or building type that accommodates non-residential uses in addition to,
or combined with living quarters. The typical live-work unit is a building, either attached or
detached, with a principal dwelling unit that includes flexible space that can be used as office,
retail, or studio space, or as an accessory dwelling unit.
Live-work units
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
—SINGLE-FAMILY DETACHED—
•
Bungalow Court Houses:
Relatively small, one- or one-and-a-half-story single-family
detached houses—each with its own small yard—arranged in a U-shape enfronting a small
common or green. The bungalows are separated from the common area only by a sidewalk,
path or other non-vehicular way. Parking is from rear lanes, alleys or in a common, rear- or
side-loaded lot. A bungalow almost always includes a large porch.
Bungalow court
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
•
Cottage: A small one-, one-and-a-half- or two-story single-family detached house on a small
lot, usually with alley-loaded parking.
Cottage
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
•
Village House: A one-and-a-half- or two-story single-family detached house on a small lot,
often with alley-loaded parking with attached, detached, or open parking—whether alleyloaded or not—set well back from the front façade; in many instances, the garage is framed
by a porte-cochère.
Village house with porte-cochère carport
Village house with porte-cochère and garage
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
•
Neighborhood House: A two- or three-story single-family detached house relatively close to
the street with attached, detached, or open parking—whether alley-loaded or not—set well
back from the front façade; in many instances, the garage is framed by a porte-cochère.
Neighborhood house with porte-cochère and garage
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
—MISCELLANEOUS BUILDING TYPES—
•
Accessory Unit: A secondary dwelling unit associated with a principal residence on a single
lot. An accessory unit is typically located over the garage, attached or detached, of a
rowhouse or detached house. Also known as “garage apartment,” “ancillary apartment,”
“accessory apartment,” “granny flat,” “outbuilding” when detached, and “backbuilding”
when attached to the principal residence.
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
METHODOLOGY
The technical analysis of market potential for the Michigan Street Corridor Study Area included
confirmation of the draw areas—based on the most recent migration data for Kent County, and
incorporating additional data from the 2009 American Community Survey for the City of Grand
Rapids—as well as compilation of current residential rental and for-sale activity in the greater
Downtown area.
The evaluation of the city’s market potential was derived from the updated target market analysis of
households in the draw areas, and yielded:
•
The depth and breadth of the potential housing market by tenure (rental and
ownership) and by type (apartments, attached and detached houses); and
•
The composition of the potential housing market (empty-nesters/retirees, traditional
and non-traditional families, younger singles/couples).
NOTE: The Appendix Tables referenced here are provided in a separate document.
DELINEATION OF THE DRAW AREAS (MIGRATION ANALYSIS)—
Taxpayer migration data provide the framework for the delineation of the draw areas—the principal
counties of origin for households that are likely to move to the City of Grand Rapids. These data
are maintained at the county and “county equivalent” level by the Internal Revenue Service and
provide a clear representation of mobility patterns. The migration data for the city has been
supplemented by mobility data from the 2009 American Community Survey.
Appendix One, Table 1.
Migration Trends
Analysis of the most recent Kent County migration and mobility data available from the Internal
Revenue Service—from 2004 through 2008—shows that the county continues to experience net
migration losses, with net out-migration ranging from a loss of 1,050 households in 2004 to a loss of
nearly 1,800 households in 2007. In 2008, the county’s net loss dropped to 1,045 households. (See
Appendix One, Table 1.)
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
Annual in-migration into Kent County ranged from 10,690 households in 2006, (the lowest inmigrating total over the study period) to 10,900 households in 2005 (the highest in-migrating total).
Between 16 and 17 percent of the county’s in-migration is from Ottawa County, the adjacent
county to the west, with another four to five percent from Allegan County to the southwest. Annual
out-migration from Kent County ranged between the low of 11,885 households in 2004 to the high
of nearly 12,700 households in 2007. Approximately 16 to 18 percent of the out-migration is also
to Ottawa County; collectively, the majority of out-migration is to other Michigan counties.
However, even though net migration provides insights into a city or county’s historic ability to
attract or retain households compared to other locations, it is those households likely to move into
an area (gross in-migration) that represent that area’s external market potential.
Based on the updated migration data, then, the draw areas for the City of Grand Rapids have been
confirmed as follows:
•
The local draw area, covering households in market groups with median incomes above
$45,000 currently living within the Grand Rapids city limits and the balance of Kent
County. In 2010, the mobility rate for households moving within the city was just under
eight percent. For households moving from the balance of the county to the city, the
mobility rate was 4.4 percent.
•
The regional draw area, covering households in market groups with median incomes above
$45,000 and with the potential to move to the City of Grand Rapids from Ottawa and
Allegan Counties. As noted above, households moving from Ottawa County now comprise
more than 17 percent of total Kent County in-migration. Households moving from Allegan
County continue to represent just under five percent of total Kent County in-migration.
•
The national draw area, covering households in market groups with median incomes above
$45,000 and with the potential to move to the City of Grand Rapids from all other U.S.
counties (primarily counties in Michigan).
Anecdotal information obtained from real estate brokers, sales persons, leasing agents, and other
knowledgeable sources corresponded to the migration data.
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The Michigan Street Corridor Study Area
City of Grand Rapids, Kent County, Michigan
November, 2011
Migration Methodology:
County-to-county migration is based on the year-to-year changes in the addresses shown on the
population of returns from the Internal Revenue Service Individual Master File system. Data on
migration patterns by county, or county equivalent, for the entire United States, include inflows and
outflows. The data include the number of returns (which can be used to approximate the number of
households), and the median and average incomes reported on the returns.
TARGET MARKET CLASSIFICATION OF CITY AND COUNTY HOUSEHOLDS—
Geo-demographic data obtained from Nielsen Claritas, Inc. provide the framework for the
categorization of households, not only by demographic characteristics, but also by lifestyle
preferences and socio-economic factors. For purposes of this study, only those household groups
with median incomes above $45,000 are included in the tables. An appendix containing detailed
descriptions of each of these target market groups is provided along with the study.
Appendix One, Tables 2 and 3.
Target Market Classifications
Of the estimated 72,125 households living in the City of Grand Rapids in 2011 (Nielsen Claritas’
estimates), over 71 percent, or 51,365 households, are in target market groups with median incomes
above $45,000. (Reference Appendix One, Table 2.) Nearly 57 percent of these households can be
classified as traditional and non-traditional families (up from just over half in 2007), another 27.8
percent are empty nesters and retirees (up from 22.5 percent), and 15.6 percent are younger singles
and couples (down from 27.2 percent).
Approximately 72 percent, or 164,000 households, of the 227,725 households estimated to be living
in Kent County in 2011 (again, Nielsen Claritas’ estimates) are in target market groups with median
incomes above $45,000. (Reference Appendix One, Table 3.) Just over 48 percent of Kent County’s
“market-rate” households are classified as traditional and non-traditional families (up from 45
percent in 2007), another 33.6 percent are empty nesters and retirees (up from 27.1 percent), and
the remaining 18.2 percent are younger singles and couples (down from 27.8 percent).
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Target Market Methodology:
The proprietary target market methodology developed by Zimmerman/Volk Associates is an
analytical technique, using the PRIZM
NE
household clustering system, that establishes the optimum
market position for residential development of any property—from a specific site to an entire
political jurisdiction—through cluster analysis of households living within designated draw areas. In
contrast to classical supply/demand analysis—which is based on supply-side dynamics and baseline
demographic projections—target market analysis establishes the optimum market position derived
from the housing and lifestyle preferences of households in the draw area and within the framework
of the local housing market context, even in locations where no close comparables exist.
Clusters of households (usually between 10 and 15) are grouped according to a variety of significant
“predictor variables,” ranging from basic demographic characteristics, such as income qualification
and age, to less-frequently considered attributes known as “behaviors,” such as mobility rates and
lifestyle choices. Zimmerman/Volk Associates has refined the analysis of these household clusters
through the correlation of more than 500 data points related to housing preferences and consumer
and lifestyle characteristics.
As a result of this process, Zimmerman/Volk Associates has identified 41 target market groups with
median incomes that enable most of the households within each group to qualify for market-rate
housing, and an additional 25 groups with median incomes in which a much smaller number of
households is able to qualify for market-rate housing. The most affluent of the 66 groups can afford
the most expensive new ownership units; the least prosperous are candidates for the least expensive
existing rental apartments.
Once the draw areas for a property have been defined, then—through field investigation, analysis of
historic migration and development trends, and employment and commutation patterns—the
households within those areas are quantified using the target market methodology. The potential
market for new market-rate units is then determined by the correlation of a number of factors—
including, but not limited to: household mobility rates; median incomes; lifestyle characteristics and
housing preferences; the location of the site; and the competitive environment.
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November, 2011
The end result of this series of filters is the optimum market position—by tenure, building
configuration and household type, including specific recommendations for unit sizes, rents and/or
prices—and projections of absorption within the local housing context.
DETERMINATION
ANALYSIS)—
OF THE
POTENTIAL MARKET
FOR THE
CITY
OF
GRAND RAPIDS (MOBILITY
The mobility tables, individually and in summaries, indicate the number and type of households that
have the potential to move within or to the City of Grand Rapids each year over the next five years.
The total number from each city/county is derived from historic migration trends; the number of
households from each group is based on each group’s mobility rate.
Appendix One, Table 4.
Internal Mobility (Households Moving Within the City of Grand Rapids)—
Zimmerman/Volk Associates uses U.S. Bureau of the Census data, combined with Nielsen Claritas
data, to determine the number of households in each target market group that will move from one
residence to another within a specific jurisdiction in a given year (internal mobility).
Using these data, Zimmerman/Volk Associates has determined that up to 7,240 households in
market groups with median incomes above $45,000 living in the City of Grand Rapids have the
potential to move from one residence to another within the city each year over the next five years.
Over 45 percent of these households are likely to be younger singles and couples (as characterized
within eight Zimmerman/Volk Associates’ target market groups); another 44 percent are likely to be
traditional and non-traditional families (in 10 market groups); and the remaining 10.9 percent are
likely to be empty nesters and retirees (in 12 market groups).
Appendix One, Table 5.
Internal Mobility (Households Moving To the City of Grand Rapids from the Balance of Kent
County)—
The same sources of data are used to determine the number of households in each target market
group that will move from one area to another within the same county. Using these data, up to
4,910 households, in market groups with median incomes above $45,000 and currently living in the
balance of Kent County, have the potential to move from a residence in the county to a residence in
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the City of Grand Rapids each year over the next five years. Up to 45.7 percent of these households
are likely to be traditional and non-traditional families (in 11 market groups); 36.8 percent are likely
to be younger singles and couples (in seven groups); and the remaining 17.5 percent are likely to be
empty nesters and retirees (in 14 groups).
Appendix One, Tables 6 and 7.
External Mobility (Households Moving To the City of Grand Rapids from Outside Kent
County)—
These tables determine the number of households in each target market group living in each draw
area county that are likely to move to the City of Grand Rapids each year over the next five years
(through a correlation of Nielsen Claritas data, U.S. Bureau of the Census data, and the Internal
Revenue Service migration data).
Appendix One, Table 8.
Market Potential for the City of Grand Rapids—
Appendix One, Table 8 summarizes Appendix One, Tables 4 through 7. The numbers in the Total
column on page one of these tables indicate the depth and breadth of the potential market for new
and existing dwelling units in the City of Grand Rapids each year over the next five years originating
from households currently living in the draw areas. Up to 16,395 households in target market
groups with median incomes over $45,000 have the potential to move within or to the City of
Grand Rapids each year over the next five years. Younger singles and couples are likely to account
for 42.9 percent of these households (in 12 market groups); another 41.3 percent are likely to be
traditional and non-traditional families (in 13 groups); and 15.7 percent are likely to be empty
nesters and retirees (in 16 groups)..
The distribution of the draw areas as a percentage of the potential market for the City of Grand
Rapids is as follows:
Market Potential by Draw Area
City of Grand Rapids, Kent County, Michigan
City of Grand Rapids (Local Draw Area):
Balance of Kent County (Local Draw Area):
Ottawa and Allegan Counties(Regional Draw Area):
Balance of US (National Draw Area):
44.2%
29.9%
5.1%
20.8%
Total:
100.0%
SOURCE: Zimmerman/Volk Associates, Inc., 2011.
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City of Grand Rapids, Kent County, Michigan
November, 2011
DETERMINATION
AREA—
OF THE
POTENTIAL MARKET
FOR
THE MICHIGAN STREET CORRIDOR STUDY
The total potential market for the new and existing housing units within the Michigan Street
Corridor Study Area also includes the local, regional, and national draw areas. Zimmerman/Volk
Associates uses U.S. Bureau of the Census data, combined with Nielsen Claritas data, to determine
which target market groups, as well as how many households within each group, are likely to move
to the Study Area in a given year.
Appendix One, Tables 9 through 11.
Market Potential for the Michigan Street Corridor Study Area—
As derived by the target market methodology, over 5,500 households have the potential to move to
the Michigan Street Corridor Study Area each year for the next five years. (Reference Appendix One,
Table 9.) Over 64 percent of these households are likely to be younger singles and couples (in 10
market groups); another 23.3 percent are likely to be empty nesters and retirees (in 13 groups); and
12.3 percent are likely to be traditional and non-traditional family households (in four groups).
The distribution of the draw areas as a percentage of the market for the Michigan Street Corridor
Study Area is shown on the following page:
Market Potential by Draw Area
MICHIGAN STREET CORRIDOR STUDY AREA
City of Grand Rapids, Kent County, Michigan
City of Grand Rapids (Local Draw Area):
Balance of Kent County (Local Draw Area):
Ottawa and Allegan Counties(Regional Draw Area):
Balance of US (National Draw Area):
43.3%
20.6%
2.8%
33.3%
Total:
100.0%
SOURCE: Zimmerman/Volk Associates, Inc., 2011.
The 5,510 draw area households that have the potential to move within or to the Study Area have
been categorized by tenure propensities to determine renter/owner ratios. Nearly 47 percent of these
households (or 2,585 households) comprise the potential market for new market-rate rentals. The
remaining 53.1 percent (or 2,925 households) comprise the market for new market-rate for-sale
(ownership) housing units. (Reference Appendix One, Table 10.)
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Of these 2,925 households, 25.8 percent (or 755 households) comprise the market for multi-family
for-sale units (condominium apartments and lofts); this is a smaller percentage of the market than in
2007. Another 30.6 percent (895 households) comprise the market for attached single-family
(townhouse or duplex) units. The remaining 43.6 percent (or 1,275 households) comprise the
market for all ranges and densities of single-family detached houses. (Reference Appendix One, Table
11.)
—Target Market Data—
Target market data are based on the Nielsen Claritas PRIZM geo-demographic system, modified and
augmented by Zimmerman/Volk Associates as the basis for its proprietary target market
methodology. Target market data provides number of households by cluster aggregated into the
three main demographic categories—empty nesters and retirees; traditional and non-traditional
families; and younger singles and couples.
Zimmerman/Volk Associates’ target market classifications are updated periodically to reflect the
slow, but relentless change in the composition of American households. Because of the nature of
geo-demographic segmentation, a change in household classification is directly correlated with a
change in geography, i.e.—a move from one neighborhood condition to another. However, these
changes of classification can also reflect an alteration in one of three additional basic characteristics:
•
Age;
•
Household composition; or
•
Economic status.
Age, of course, is the most predictable, and easily-defined of these changes. Household composition
has also been relatively easy to define; recently, with the growth of non-traditional households,
however, definitions of a family have had to be expanded and parsed into more highly-refined
segments.
Economic status remains clearly defined through measures of annual income and
household wealth.
A change in classification is rarely induced by a change in just one of the four basic characteristics.
This is one reason that the target household categories are so highly refined: they take in multiple
characteristics. Even so, there are some rough equivalents in household types as they move from one
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City of Grand Rapids, Kent County, Michigan
November, 2011
neighborhood condition to another.
There is, for example, a strong correlation between the
Suburban Achievers and the Urban Achievers; a move by the Suburban Achievers to the urban core can
make them Urban Achievers, if the move is accompanied by an upward move in socio-economic
status. In contrast, Suburban Achievers who move up socio-economically, but remain within the
metropolitan suburbs may become Fast-Track Professionals or The VIPs.
Household Classification Methodology:
Household classifications were originally based on the Nielsen Claritas
PRIZM
segmentation system that was established in 1974 and then replaced by
PRIZM NE
revised household classifications are based on
PRIZM NE
geo-demographic
in 2005. The
which was developed through unique
classification and regression trees delineating 66 specific clusters of American households. The
system is now accurate to the individual household level, adding self-reported and list-based
household data to geo-demographic information. The process applies hundreds of demographic
variables to nearly 10,000 “behaviors.”
Over the past 23 years, Zimmerman/Volk Associates has augmented the
PRIZM
cluster systems for
use within the company’s proprietary target market methodology specific to housing and
neighborhood preferences, with additional algorithms, correlation with geo-coded consumer data,
aggregation of clusters by broad household definition, and unique cluster names. For purposes of
this study, only those household groups with median incomes with median incomes above $45,000
are included in the tables.
o
ZIMMERMAN/VOLK ASSOCIATES, INC.
ZIMMERMAN/VOLK ASSOCIATES, INC.
P.O. Box 4907
Clinton, New Jersey 08809
908-735-6336
info@ZVA.cc • www.ZVA.cc
Research & Strategic Analysis
ASSUMPTIONS AND LIMITATIONS—
Every effort has been made to insure the accuracy of the data contained within this analysis.
Demographic and economic estimates and projections have been obtained from government
agencies at the national, state, and county levels. Market information has been obtained from
sources presumed to be reliable, including developers, owners, and/or sales agents. However,
this information cannot be warranted by Zimmerman/Volk Associates, Inc.
While the
methodology employed in this analysis allows for a margin of error in base data, it is assumed
that the market data and government estimates and projections are substantially accurate.
Absorption scenarios are based upon the assumption that a normal economic environment will
prevail in a relatively steady state during development of the subject property. Absorption
paces are likely to be slower during recessionary periods and faster during periods of recovery
and high growth. Absorption scenarios are also predicated on the assumption that the product
recommendations will be implemented generally as outlined in this report and that the
developer will apply high-caliber design, construction, marketing, and management techniques
to the development of the property.
Recommendations are subject to compliance with all applicable regulations.
accounting, tax, and legal matters should be substantiated by appropriate counsel.
o
Relevant
ZIMMERMAN/VOLK ASSOCIATES, INC.
P.O. Box 4907
Clinton, New Jersey 08809
908 735-6336
www.ZVA.cc • info@ZVA.cc
Research & Strategic Analysis
RIGHTS AND STUDY O WNERSHIP—
Zimmerman/Volk Associates, Inc. retains all rights, title and interest in the methodology and
target market descriptions contained within this study. The specific findings of the analysis are
the property of the client and can be distributed at the client’s discretion.
o
ZIMMERMAN/VOLK ASSOCIATES, INC., 2011