Tight housing market in downtown Grand Rapids continues to expand

The diversified and growing West Michigan economy has benefited Grand Rapids residents and communities in the past several years, making this area a desirable place to live and work. This has lead to a tightening market for housing downtown, however. Not only are condos and apartments difficult to find in Grand Rapids, they’re also getting more expensive for those who can locate them.

Triad Real Estate Partners released a December report which found that, for the 50 apartment complexes surveyed, 98% of units are currently occupied by tenants. Many factors are at work in the city’s renaissance, but solid city planning, a growing number of jobs in the educational, healthcare, and manufacturing sectors, and a low cost of living are luring new people to the area to stay and settle in the city Forbes Magazine ranked as #1 in the country for raising a family. In fact, the unemployment rate in the area dropped to 3.1%, making it one of the lowest in the country.

Currently, the average rate for a one-bedroom apartment in the Grand Rapids area is $728 a month. Rates on all types of apartments increased an average of 5% in 2015, but analysts do not expect this trend of inflation to continue unchecked. More and more developers have been feeling out the West Michigan market, and construction is already well in process in many places around the city.

Just this week the Woda Group, an Ohio-based developer announced plans to build a $12 million dollar affordable housing development on Front Avenue NW. The project, to be named Grand View Place after its location on the Grand River, will have 68 units and consist of both apartments and townhouses. Construction will begin this coming summer.

Also this week the Grand Rapids Area Community Foundation announced a $500,000 grant to Habitat for Humanity of Kent County for renovation and revitalization of housing on the city’s West Side. This money should allow 120 homeowners to achieve affordable housing for themselves and their families.

Other projects, such as the Clancy Lofts overlooking Division and the Medical Mile are expected to be completed this year and will offer further variety for downtown renters seeking a place to live. Whether the planning and construction of these projects will continue apace with burgeoning demand is something that remains to be seen, but for now area renters can expect to have to search and pay more than they’ve had to in the past.

General Motors announces new investment in Wyoming plant

General Motors announced yesterday that it would be investing $43.35 million into its Wyoming plant at 2100 Burlingame Ave. SW. This investment should, by General Motors’ calculations, result in the retention of 15 jobs and the creation of 55 more.

In the past decades, the strength of automobile manufacturing has declined significantly and General Motors closed their 2-million-square-foot stamping plant on 36th St. in 2009. This structure was built in 1935, and the employment it ensured built Wyoming and sustained it through jobs and taxes, but the last 1,500 positions were terminated six years ago, and the building was subsequently demolished. The City of Wyoming has been trying to woo businesses to this property (named Site 36) for a number of years with personal property tax abatements and TIF redevelopment dollars and has had some success as manufacturing in general in West Michigan is now on the rise.

The Grand Rapids Operations plant on Burlingame now employs 530 men and women and manufactures a range of precision-machined components for Buick, Chevrolet, GMC, and Cadillac automobiles. These include lash adjusters, roller hydraulic valve lifters, cylinder deactivation lifters, continuously variable cam phasers, and other metal stampings. The planned expansion will add powertrain components to this list.

In a press release Grand Rapids Operations plant manager Rick Demuynck said, "This commitment not only reflects confidence in the Grand Rapids team, along with the leadership of the UAW, but also showcases the sense of ownership and pride our employees have in the products they build."

This is General Motors’ second announcement of planned investment in West Michigan operations this year. In June they announced that they would reactivate a portion of it’s Wyoming plant with a $119 million investment that would result in 300 new jobs.

Since the Michigan economy and the very infrastructure in most Michigan cities was built in large part to be dependent on the automobile, and many of our jobs in this state depend on the Big Three, whether through direct employment, work in related industries like auto shop jobs, or jobs funded by the taxes generated from auto manufacturing, any increase in this type of employment is welcome news. The necessary diversification of Michigan manufacturing has made this state better able to weather future economic problems, but auto jobs built our middle class, and gave opportunities to generations of people in this state they would not otherwise have had.

The State of Automotive Manufacturing in West Michigan

With all its woes, Detroit remains the center of automotive manufacturing, yet Grand Rapids is a far more manufacturing-dependent city overall.  So says a Brookings Institute report that measures how specialized a metro economy is in manufacturing. Although known as The Furniture City, Grand Rapids continues to play a very important part in the automotive parts industry.

While thousands of automotive parts can be found in any one car, including rearview mirrors, seatbelts made from narrow fabrics, and panel instruments, supplying any one part to a heavy-volume global car manufacturer can be a lucrative business. As global trade changes the playing field, market changes are afoot. This is especially true within the Grand Rapids area where new developments reveal both the industry’s continuing expansion, consolidation, and global reach.

For instance, Monroe LLC, a precision plastic molding company owned by the Huizenga Group, recently expanded its operations by relocating to an 85,000 square feet facility within the AeroTech Industrial Park near the Gerald R. Ford Airport.

In March, local welding and assembly company Gill Industries acquired Grand Rapids Spring & Stamping. The transaction “strengthens Gill's position as a full-service supplier of engineered, mechanical assemblies to the automotive, furniture and multi-use vehicle markets."

In May, Grand Rapids-based ADAC Automotive, a manufacturer of exterior and interior door-handles, announced its acquisition of India-based Minda-Valeo Security Systems. The deal is part of a joint venture with Witte Automotive of Germany. The partnership with Minda allows ADAC to “gain access to strategic markets in India and the surrounding regions."

And last month an Italian plastics fabrication company named HRSflow opened a 40,000-square-foot plant in Byron Center. The company specializes in creating spoilers, fenders, and parts for instrument and door panels. They have plans to more than double both employees and plant space in the next few years. Why? “We realized that only with local production facilities could we achieve the short delivery and response times and the overall flexibility that are needed, for example, in the automotive industry,” said Maurizio Bazzo, the company's founder.

Even Tesla got into the act. The electric-vehicle manufacturer acquired its supplier of stamped parts, Grand Rapids-based Riviera Tool. The acquisition is a first for Tesla, a company that now has its footprint in the Big Three’s backyard. The plant is now “working overtime to secure sufficient production capacity” for Tesla.

At present, the vast majority of automotive suppliers are either looking to either expand or move into a new facility. This desire to expand capacity is being driven by growing production volume within North America, and many automotive suppliers expect to see a growing number of  new vehicle launches in the next three years. Competitive positioning and global trade continues to drive robust production capacity within the local automotive parts industry.

The good that came out of a fruit crop gone bad

Aside from the automotive industry, Michigan is also famous for growing an abundance of fruit crops. The state boasts 36,000 acres of tart cherry trees, with roughly the same acreage involved in apple production. Both crops are primarily grown on small farms located near Lake Michigan. The region keeps cool in the spring until it’s likely no frost will occur. Indeed, the most abundant fruit-growing region is known as the Fruit Ridge and is located a few miles northwest of Grand Rapids. Being 800 feet in elevation, the ridge protects fruit blossoms and buds from the colder air that creates late frosts.

However, in March of 2012, cherry crops in West Michigan were heavily damaged by a spring frost. Two months later another spring frost wiped out 90% of the apple crops (Michigan produces about 18 million bushels of apples each year). The frost affected food processors who relied upon the state’s apple production for creating pie filling, butter, jellies, applesauce, vinegar, and apple juice/apple cider. Consequently, hundreds of millions of dollars in income were lost by fruit growers, packers, and processors.

Given the devastating economic impact of the frost, the Michigan Legislature created an emergency loan package available to farmers who qualified. Secured by collateral, these low-interest loans allowed farmers to borrow up to $400,000 to cover actual losses, minus any insurance payments. For growers who did not buy available crop insurance, the loan amount was reduced (tart cherry growers don’t generally have insurance available).

The state authorized $15 million to pay lenders for administrative costs and loan origination fees. In all, the loans helped the state’s fruit growing processing industry meet $300 million in economic need.

In the aftermath of the crisis, many packers and fruit growers made improvements to their marketing and branding efforts. Both also upgraded their production facilities to become more efficient. For instance, many farmers began installing high-speed doors to maintain constant production facility temperature. Several others incorporated high-speed internet into their operations.

More importantly, the state’s loan interest loans are helping farmers combat a growing labor shortage. Fortunately, by focusing on labor-saving technology, growers were able to minimize labor shortages in the field. With the extra time not used harvesting crops, farmers allocated additional loan funds to upgrade housing for migrant workers.

Becoming better prepared to handle such weather calamities is a silver lining that came out of the 2012 crop devastation. Fortunately, the State of Michigan worked with willing lenders to help facilitate this process.

Michigan manufacturing rebounds, but strong dollar may impede

The news for Michigan’s manufacturing sector keeps on getting brighter. Since the Great Recession, approximately 40 percent of the jobs Michigan lost in manufacturing have returned. That’s old news, though. Nationally, Michigan ranked number one in growth in manufacturing in 2014, and West Michigan counties Kent, Ottawa, and Macomb all ranked in the top ten counties nationwide for manufacturing growth.

Practically, this means for 2014, 22,064 more people were employed in the manufacturing sector. Two-thousand-four-hundred-ninety-two of those new jobs were created in Kent County. While West Michigan’s economy is diverse with jobs in education, healthcare, agribusiness, and information technology, manufacturing jobs tend to add an extra layer of employment beyond jobs just for technical workers or those with special training.

Two factors which may have an impact on this trend in the future are: regulation and the strength of the U.S. dollar. Over the past several years Governor Rick Snyder’s administration has made it a priority to create policy that would invite business to Michigan. Both the personal property tax and the Michigan Business Tax were eliminated and the regulatory system has been examined and reformed to create incentives for entrepreneurship. Key to this was the removal of unnecessary state forms and an increase in responsiveness from customer service representative at the state level.

Chuck Hadden, President and CEO of the Michigan Manufacturers Association, believes that manufacturers in Michigan have noticed, and Rob Fowler, President and CEO of the Small Business Association, agrees. Recent surveys have revealed increased trust and optimism among businessmen about the future of business in the state.

Complicating matters, however, is the strength of the dollar relative to other foreign currencies. A more valuable dollar acts as a disincentive for foreign companies or governments to buy U.S. made exports, at least in the short run. Guy Berger, a U.S. economist at RBS Securities Inc. recently said, “If the dollar remains this strong, we’re going to have headwinds for manufacturing for a while.”

Still whether manufacturing in Michigan continues on the path of growth that it has been enjoying or takes a bit of a hit because of outside forces beyond its control, the jobs it has created has been a boon for state residents. Michigan has for too long seen its students and creative class leave the state in search of better job opportunities. A rebounded manufacturing sector will result in seeing some of our native Michiganders return home.

The aftereffects of Michigan's largest Ponzi scheme

You may have been aware that last year David McQueen was sentenced to 30 years in prison as a result of his part in one of  Michigan's largest Ponzi schemes. This huge fraud, which affected 800 families and involved 46.5 million dollars in losses, has resulted in misery across the area for people who invested up to hundreds of thousands of dollars in savings as a way of accumulating money for retirement and now must live only on Social Security benefits.

McQueen's company, Accelerated Income Growth, or AIG, did not start out as a Ponzi scheme. He himself invested in a company called Multiple Return Transactions, or MRT, which was itself a Ponzi scheme. MRT paid out and then went under, leaving McQueen with the responsibility of telling his own investors that he'd lost their funds. Instead, McQueen chose to gamble with the remaining money in various speculative ventures while sending out statements showing growth of the investors' original funds. In August of 2009, both the IRS and the FBI obtained search warrants and the full breadth of the AIG's fraud came to light.

McQueen's co-conspirator, Trent Francke, testified against him in return for a plea deal. He received a 7-year sentence. Another man, Jason Juberg, is serving a 5-year sentence. The federal investigation continues.

Recently, the case received more coverage because of attempts to recover funds lost to investors. Last November, the Resurrection Life Church in Grandville received an email from Assistant U.S. Attorney Matthew Borgula requesting that they return the $300,000 Mr. McQueen donated to them. In April MLive reported that Resurrection Life's Board of Elders had rejected the request, saying that part of the money was donated 9 years ago and the church used it for their building program and cannot return it. Bernard Blaukamp, the church's pastor, stated that he believed the church had been unfairly targeted by the FBI in a way that other business and charity recipients of the money had not.

Then this month a Lansing woman is fighting claims to a coin collection made by Trent Francke's father, Edward Francke. The assets in question included 15 American Eagle silver coins, 20 one-ounce American Eagle gold coins, as well as silver bars and silver rounds. The woman believes that Edward Francke is holding this collection for his son and will return it to him when he has served his prison sentence. Edward Francke says he wired the funds used to purchase this collection to his son and is entitled to keep it. Their hearing is set for June 30.

This case has a number of unfortunate aspects to it: the number of people who were conned out of their savings, the retirement age of those people and their inability to make up the loss, the enormous amount of money that is just - poof! - gone, and the way that money crisscrossed through the community leaving any number of potential conflicts between those who were victimized and those who benefited from this crime, all unknowingly. Expect more of this mess to be revealed as the FBI works their way through the files.

Kent County tops list for most job gains in the state

Recent Bureau of Labor Statistics data paints a rosier picture of the current Grand Rapids economy, certainly one that is recovering from its low point during the Great Recession. The real estate market has bounced back, businesses are selling, unemployment is down statewide, but particularly in West Michigan. Approximately half of the almost 156,000 jobs the state lost during the last downturn have returned, but the Grand Rapids area has claimed a much larger percentage of that number than other counties.

Of the top 10 counties in Michigan with the largest job growth, Kent County and Ottawa County have added more jobs than the next 8 counties combined. Since 2005, approximately 54,000 jobs have been added - 24,000 of them just within the first three quarters of 2014. Southeast Michigan, the area of the state with the strongest economic performance for decades has been slow to regain jobs partly because the automotive industry is still considerably weakened, and so many businesses there were directly related to car manufacturing.

In West Michigan, manufacturing is coming back stronger because of its greater diversification and more adaptable population. If the strong union climate in the Detroit Metro Area is a disincentive to would be employers, West Michigan, by contrast, looks appealing. The furniture sector is back on track, and a number of manufacturing companies, including Dicastal North America and Plasan Carbon Composites, have announced plans to relocate to West Michigan. Grand Rapids also has strong healthcare, research, and education sectors as well as many opportunities in agribusiness.

Unfortunately, as with many of the jobs created after the recession, current wages do not match those of the jobs lost. Union jobs left, and part-time or lower wage jobs have replaced them. And despite the economic wounds inflicted on Southeast Michigan, the economy of just Oakland County is still three times as large as Kent County’s, and wages there are still higher.

Additionally, while jobs are coming back to the area, in manufacturing and other high tech fields, economists are worried that the lack of skilled workers will leave many positions unfilled and will cost industries and the economy in terms of unrealized growth and profit. This is hardly a local problem. Young people today are overlooking manufacturing as a potential employer and failing to pursue training in S.T.E.M. fields where many of the most lucrative positions will be.

Still, both industry and the State of Michigan have been motivated lately to create incentives to lure knowledge workers here, and the growth and diversification of the economy can only be seen as very positive developments for the people living here who wish to stay here and prosper.