2021 economic forecast: when will western Michigan rebound?


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GRAND RAPIDS, Mich. (WOOD) – Most of the western Michigan economy could return to pre-pandemic levels by 2022, but it will likely take longer for restaurants, bars, places of art and entertainment, according to an economist.

Professor Paul Isely, Ph.D., of Seidman College of Business at Grand Valley State University, released his economic forecast on Thursday. He said before a rebound can take place we need to “eliminate the fear of the virus,” which he says we might have a chance at by the summer.

While 2020 has been full of surprises, a good one has come from the federal government.

“They’ve really given a ton of fiscal stimulus,” Isely said.

He said people had about double the income they normally have in their accounts at the end of the year. With all this money flowing, Isely said the risk of rising prices and interest rates by 2022 is high.

THE ACCOMMODATION REMAINS WARM

A sector relatively spared by the pandemic is residential real estate. Isely said home sales have remained strong even in Grand Rapids zip code 49503.

“People weren’t running from downtown… they were buying,” he said.

Colliers International real estate experts say the shift to working from home and the lack of downtown events and amenities may spur a “micro-migration” from the heart of Grand Rapids, but any exodus from the growing city will be probably lower than the national rate.

OFFICE UNCERTAINTY AFFECTS THE FURNITURE INDUSTRY

Manufacturing also resumed after the industry was allowed to restart. Isely said the industry has largely come out of the hole, with orders coming in as soon as the shutdown ends in May.

Colliers said e-commerce, trucking, cleaning and last mile delivery businesses have performed well throughout the pandemic.

An exception is the furniture industry, which has slowed down further. Isely said the drop in demand has a lot to do with the uncertainty about how offices will look in the years to come.

Scott Morgan of Colliers International said vacancies in downtown Grand Rapids are currently below 10%, which is the best rate in recent history.

He said that as the pandemic accelerates the trend towards working from home, many business owners he works with value workplace culture and “strive” to bring their workforce together.

Colliers International says that while feared nationwide subleasing has not been an issue in Grand Rapids so far, a few national companies are taking a “wait-and-see” approach, extending their existing leases by one year instead of renew them for five years.

Morgan said a silver lining to the pandemic’s office reshuffle is that businesses are likely to back down by creating high-density offices without enough parking, elevators, restrooms or ventilation.

“I think a lot of things put an end to this ridiculousness and now I think it’s going to be more normal with people more apart,” he said.

Colliers expects those looking for office space to focus on low-density areas with spacious buildings with updated airflow systems.

DRECONSTRUCTION OF STAURANT AND COMMERCE

Most Colliers team members expect restaurants to bounce before offices. However, Isely said it could be two to four years before demand for bars, restaurants, arts and entertainment can make up for losses suffered during the pandemic.

Chris Prins of Colliers said national chains appear to have found creative solutions to survive, but the backbone is difficult for local businesses that don’t have drive-thru.

“You don’t go to a fancy restaurant just to have a meal and take it home. You go for the vibe, ”he explained.

Prins thinks 15-20% of restaurants in Grand Rapids could close, in part because of their addiction to downtown events.

“I don’t think we have enough downtown residential (customers) to support retail in our city,” he said.

The shift to online shopping has also accelerated, threatening demand for physical retail spaces.
In the third quarter, the retail vacancy rate in Grand Rapids was just under 5%. If businesses can’t get a break on rental rates or get more financing, Colliers expects the empty retail space rate to drop to 8% in the first or second quarter of this year.

Isely said companies that could get there this summer will have less competition and higher market margins.

“It comes down to this survival of the fittest,” he added.

The roaring 1920s revisited?

When the Spanish flu pandemic ended, business exploded. Colliers hopes history will repeat itself this year.

“We think this summer is going to be a very robust tourist season (for the shores of the lake),” said Drew Durham of Colliers.

While air travel is still drastically down, residents of Illinois, Indiana and Ohio are heading to the Michigan coast.

Isely expects a strong second half and a good time for business opening before interest rates and prices rise.

“If you have the capital to do it, the means to do it, now is the time,” he said.

One of the challenges that growing businesses will face is finding workers. Isely said unemployment is below 4% in Kent and Ottawa counties because an entire class of workers have left the market.

“Retirees say ‘I’m done. Why should I stay? ‘ “, He explained.

The workforce has also shrunk, as closed daycares and virtual learning have pushed more parents out of the workforce and into stay-at-home caregivers.

Isely expects the nation to lose around 2 million workers by the end of this year. He predicts that it will take another year to fill the positions.

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