Commercial Spotlight: Great Lakes Region

Aside from artistic inspiration, the five lakes have long served the Midwest as a major shipping thoroughfare. And the waters connect the Great Lakes Region states of Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin.

Each of these states have felt the impact of the COVID-19 pandemic, but case numbers and vaccination rates as of this past May were generally in the middle of the pack among all U.S. states, according to data from The New York Times. Economically, each state has struggled with job losses, long-term unemployment and decreases in gross domestic product (GDP). But along with the global recovery, each of the Great Lakes states saw strong growth in fourth-quarter 2021.

Wisconsin had the region’s strongest annualized GDP growth in Q4 2021 at 6.1%, followed by Michigan at 5.8%. The economies of Indiana and Ohio each grew by 5.5% while Illinois and Wisconsin were at 5.1% and 5%, respectively. U.S. GDP growth at this time was 6.9%, led by Texas at 10.1%. Although the Great Lakes underperformed compared to the rest of the nation, the region showed vast improvement from the prior quarter. National GDP growth in Q3 2021 was only 2.3% and all of the Great Lakes states were below this average.

Unemployment rates in the Great Lakes have fallen steadily as the region has recovered. In April 2022, all six states recorded their lowest unemployment rates since the pandemic began. Commercial real estate development activity has returned to the Great Lakes, too, as dozens of major projects have started there recently. Unsurprisingly, Chicago is a hotspot for these types of developments, including the $6 billion Lincoln Yards project on the North Side and “The 78,” a $7 billion project near the South Side. Each are massive mixed-use developments that will revitalize stretches of Chicago’s riverfront.

In Indianapolis, the $540 million 16 Tech Innovation District has been partially finished. With an estimated completion date of 2030, this new 60-acre district will include offices, research laboratories, housing, retail and green spaces. In Detroit, the Ford Mobility Innovation District is a similarly ambitious project with plans to transform 30 acres into a walkable community. The mixed-use development is slated for completion in 2023, and several components should wrap up this year, including an adaptive-reuse effort to transform Michigan Central Station into a retail, restaurant and office hub.

In New Albany, Ohio, tech giant Intel is investing $20 billion to construct the world’s largest semiconductor plant. The facility will create an estimated 3,000 jobs at Intel and thousands of additional jobs in construction. According to the city of New Albany, the project is the single-largest private-sector investment in Ohio’s history. ●

Chicago’s downtown office market is recovering well, with leasing activity in first-quarter 2022 representing a 40% year-over-year increase, according to Cushman & Wakefield. Chicago’s central business district (CBD) posted 1.3 million square feet of new leases in Q1 2022, including an 81,000-square-foot deal at the Merchandise Mart, one of the world’s largest commercial buildings. Although the CBD core is still recording overall negative absorption, the trend is decelerating, and Cushman & Wakefield’s 12-month forecast is positive.

New construction is going strong in Chicago’s office market. Across the active construction pipeline, 90.7% of space is preleased, according to Cushman & Wakefield. Four new buildings totaling 2.1 million square feet opened in Q1 2022. The city’s most anticipated new skyscraper, the $800 million Salesforce Tower, is fully preleased and is expected to be delivered in first-quarter 2023.

Overall asking rents have stayed relatively stable but softened slightly at the start of this year, dropping 4 cents from the prior quarter to reach $41.64 per square foot. Class A and B asking rents decreased at this time, but Class C rents increased to $29.89 per square foot. Cushman & Wakefield reported that top-tier assets are outperforming — and will continue to outperform — the rest of the market as commercial tenants prioritize high-quality office space.

The Great Lakes Region is the heart of America’s manufacturing industry, with all six states ranking in the top 11 for so-called “production occupations,” according to 2019 U.S. Bureau of Labor Statistics data. Indiana was the top manufacturing state as its employment share in production occupations was double the national average.

The manufacturing industry across the Midwest, including the Great Lakes Region, has shrunk significantly in the past three decades. From 1990 through 2019, 1.1 million manufacturing jobs were lost in the Midwest, representing a 21.2% decline. But the industry has entered a period of growth as it bounces back from the effects of the pandemic.

Deloitte’s 2022 manufacturing industry outlook report was cautiously optimistic, citing strong increases in new orders as well as production numbers that are surpassing pre-pandemic levels. A report from the Institute for Supply Management also predicted economic growth, with an estimated 6.5% revenue gain for the U.S. manufacturing industry in 2022.

“Indianapolis has always benefited from its low barrier of entry into the market with an abundance of flat farmland. Even with the recent spike in land prices, the overall land values compared to the national average are low. Being known as the ‘Crossroads of America,’ Indianapolis is strategically located to reach most of the U.S. population within a one-day drive, and the state of Indiana frequently appears in the top percentile of key economic and business-climate metrics. Having the second-largest FedEx hub in our backyard is also highly attractive to both developers and tenants.”

Executive vice president

Avison Young

Grand Rapids is the second-largest city in Michigan with a metro-area population topping 1 million. The city is an important cultural hub that includes the Frederik Meijer Gardens and Sculpture Park, Grand Valley State University, and a popular food and beverage scene. Locals call Grand Rapids “Beer City,” a moniker earned due to the prevalence of craft breweries in the area. Major employers include grocery chain Meijer, Spectrum Health, and furniture manufacturers Herman Miller and Steelcase.

Set along the shore of Lake Erie is Cleveland, the heart of Ohio’s third-largest metro area. The combined statistical area of Cleveland and its neighbor Akron has 2.8 million residents. Home to the Rock and Roll Hall of Fame, Cleveland is packed with museums such as the Great Lakes Science Center, the International Women’s Air and Space Museum, and the USS Cod Submarine Memorial. Major enterprises headquartered in Cleveland include Progressive Group and Sherwin-Williams Co.

On the western shore of Lake Michigan is Milwaukee, Wisconsin’s largest city with a metro-area population of 1.5 million. Milwaukee has experienced a construction boom over the past several years, with billions of dollars being invested in apartment buildings, office towers, sports arenas, a convention-center expansion and infrastructure projects such as The Hop streetcar system. Milwaukee’s major employers include Harley-Davidson, Kohl’s department stores and Northwestern Mutual.