1. Detroit, Michigan
The Detroit market met its share of challenges in 2008. Medical
expansion continued to drive office demand and the automotive
sector appeared to settle from much of the volatility it experienced
in 2006 and 2007. Retail, formerly the most resilient commercial
real estate sector, encountered many setbacks and obstacles.
The office market has largely been buoyed by the medical sector
growth, but this segment is expected to slow as major projects
wind down. The automotive and service sectors continued the
process of shuffle and retain with tenants still on the offense
seeking heavily incentivized deals from landlords. These favorable
tenant packages are expected to level off in 2009 with the market
remaining tenant friendly into 2010.
Speculative industrial development is down from 2007 and will
likely remain down until the economy begins to see steady
growth over three to four consecutive quarters. Existing speculative
Contact developments have increased market pressure by offering
NAI Farbman aggressive rates on new first generation product. The Airport
+1 248 353 0500 District is likely to be the most active sector in 2009 with
regional officials pushing the Aerotropolis vision between Ann
Arbor and Detroit. Additional private sector buy-in combined with
abundant low cost land provides this submarket the potential to
be Detroit’s industrial strength for the next five to eight years.
Power Centers continued to lure inline tenants from neighborhood
centers giving a modest gain in occupancy where neighborhood
centers suffered. This trend is expected to continue as inline
prices decrease and tenants upgrade for prime space at competitive
Metropolitan Area rates. This will put increased pressure on neighborhood centers
Economic Overview where inline leasing prices will continue to slip. In addition
to these challenges, vacancy is expected to increase as
2008
restaurants fight saturation and decreased volume, as people
Population 4,489,048
continue to tighten their purse strings. New retail developments
2013 Estimated have also slowed and current projects are experiencing delays.
Population 4,540,294
The investment market has slowed considerably in the past year
Employment with increased lender scrutiny and limited debt available to buyers.
Population 2,205,526 Transactions with quality, non-recourse assumable debt have
been highly attractive and should continue to be throughout
Household
2009. Increased available debt is anticipated in 2009, but higher
Average Income $70,183
equity and recourse requirements will continue to push cap rates
Median up, keeping this a buyer’s market for the next 12-18 months.
Household Income $62,952
With little new tenant expansion, even in retail, the market focus
Total Population has been on tenant retention and luring tenants from lesser
Median Age 38 properties. Although incentive packages have likely reached
their maximum, retention pressure will continue its spill into
renewals as the fight between landlords continues in all markets.
Detroit At A Glance
(Rent/SF/YR) Low High Effective Avg. Vacancy
DOWNTOWN OFFICE
New Construction (AAA) N/A N/A N/A N/A
Class A (Prime) $ 19.75 $ 33.00 $ 23.25 15.0%
Class B (Secondary) $ 9.00 $ 18.00 $ 14.50 22.0%
SUBURBAN OFFICE
New Construction (AAA) $ 20.00 $ 30.00 $ 25.50 N/A
Class A (Prime) $ 15.00 $ 36.00 $ 23.50 14.0%
Class B (Secondary) $ 9.00 $ 32.00 $ 19.25 20.0%
INDUSTRIAL
Bulk Warehouse $ 2.00 $ 11.00 $ 4.25 16.0%
Manufacturing $ 1.00 $ 5.50 $ 3.25 18.0%
High Tech/R&D $ 2.00 $ 22.00 $ 9.25 19.0%
RETAIL
Downtown $ 12.00 $ 40.00 $ 18.00 N/A
Neighborhood Service Centers $ 9.00 $ 30.00 $ 13.25 15.0%
Community Power Center $ 12.00 $ 40.00 $ 21.25 4.0%
Regional Malls $ 18.00 $ 90.00 $ 26.00 14.0%
DEVELOPMENT LAND Low High
Office in CBD (per buildable SF) $ 20.00 $ 60.00
Land in Office Parks (per acre) $ 75,000.00 $ 225,000.00
Land in Industrial Parks (per acre) $ 50,000.00 $ 225,000.00
Office/Industrial Land - Non-park (per acre) $ 50,000.00 $ 300,000.00
Retail/Commercial Land (per acre) $ 75,000.00 $ 800,000.00
Residential (per acre) $ 5,000.00 $ 100,000.00