GRAND RAPIDS — The developers behind a 120-unit apartment building on Leonard Street NW cite a recent zoning change allowing more ground-floor residential units for helping the project get off the ground.
Several housing developments, including Victory Development Group LLC’s Victory on Leonard project, have taken advantage of the added ground-floor flexibility since it went into effect in March 2021.
Brad Laackman, a partner at Victory Development Group, said having the ability to add first-floor residential units by right helped the project’s pro-forma because it adds density to the mixed-use development and removes the hurdle of finding and retaining commercial tenants.
“It was an issue even before COVID to get tenants to fill up (commercial space) in these projects,” said Laackman, president and CEO of Grand Rapids-based Honor Construction Inc. “These corridors we’re looking at, which are adjacent to a lot of residential, they just don’t need that much retail.”
The Victory on Leonard project is about 65 percent finished. The developers also recently secured a retail tenant, Bagel Kitchen, for the property. The coffee and bagel shop will serve the neighborhood and residents from a storefront on the development’s first floor, but is the only commercial tenant anticipated for the project, Laackman said.
Under the new zoning changes, Victory Development added approximately 20 residential units on the first floor of the project.
“Housing is the most direct need, and it’s reflected in the project,” Laackman said.
The city expanded where first-floor residential is allowed for a variety of reasons, but in part because the pandemic exacerbated issues commercial businesses already faced, said Grand Rapids Planning Director Kristin Turkelson. The change also reflected a desire to facilitate the construction of much needed housing units, Turkelson added.
“We’ve seen a lot of positive support for the ordinance change,” said Ryan Kilpatrick, lead consultant for Housing Next, a regional coalition of local governments, developers and nonprofits that addresses barriers to housing. “The idea of having to build more ground-floor retail space was really putting off developers who were otherwise interested in putting housing downtown. This should make it easier for a lot more projects to happen.”
The city’s previous zoning did not permit first-floor residential units in zoned traditional business areas (TBA) unless the project had a level of affordability for its tenants. The change to the ordinance now permits first-floor residential by right in those areas.
Additionally, local regulations did not allow first-floor residential in commercial districts unless it was affordable or fronted specific streets. The city now allows first-floor residential in commercial districts without those stipulations.
“It all boils down to the cost of the space,” said Thomas Ralston, an affordable housing developer in Grand Rapids. “The demand for commercial space I think is there, but with the cost of construction being incredibly high, the development needs to get a big amount (of rent) for a commercial space for it to work.”
Ralston and his development partner, Nick Lovelace, are behind several apartment projects that all offer a high amount of affordability to renters. None of the partners’ current projects include commercial space, which can be even harder to fill in developments that offer any level of affordable housing, Ralston added. However, they are planning to include a ground-floor restaurant in a future project.
“We do have plans for our next project to have a restaurant and live-work spaces, but we’ve been talking about the marketability of commercial space and it’s pretty tough to get those spaces leased out,” Ralston said. “We’re trying to strike that balance where we give folks opportunities to have their small business in a live-work environment, but we’re scaling our numbers so we’re not putting ourselves at risk for vacancies or negative pro-forma by having too much commercial space.”
In the absence of commercial space, the developers have opted for communal gathering areas for tenants on the ground floor.
“Architects and planning departments have gotten creative when it comes to allowing main floor residential,” Ralston said. “You can mix units in with storefront glass in a way that works very well and it’s attractive.”
Several communities around West Michigan are starting to explore expanding first-floor residential uses, and some are taking a hybrid approach by allowing first-floor residential as long as it isn’t fronting a major street, said Housing Next’s Kilpatrick.
“I think this is a good midway solution,” he said. “Some of our suburban community corridors would be good opportunities to eliminate the ground-floor retail requirement entirely. We’ve encouraged our suburban communities to think about where the centers of activity are and where they want to have growth, and to only require retail in those specific locations but not everywhere.”
Kilpatrick noted that municipalities often hope to see first-floor retail space occupied by startup businesses, but the market dynamics generally make that a tough proposition given the cost of space in newly constructed projects. He advocates for a different approach.
“We should be asking how to preserve and hold on to older storefronts that might make great places for a startup,” Kilpatrick said. “We prefer to not put the burden of commercial uses on the residential, which means the renters are subsidizing commercial uses.”