"Detroit Renaissance" is a term that has been used in previous decades to describe growth in the city that never quite happened, or at least not as much as predicted. Is the current Detroit Renaissance going to be any better?
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Detroit's growth has some economic mojo this time. The post-recession resurgence of the auto industry has spurred the regional economy, while millennials' new interest in urban living has investors and entrepreneurs looking to Detroit as a lower-cost place to live and work.
The central business district office market is a reflection of that renewed interest. As of Q2, the Downtown office vacancy rate was down to 9%, Colliers International reports, 190 basis points lower than the overall market.
Many Downtown buildings are 100% occupied or nearly full, as companies want to be in the market. For instance, Adient, the nation’s largest automotive seat supplier, is moving into the 10-story, 164K SF Marquette Building at 243 West Congress St.
In New Center, the 634K SF Max M. Fisher building and the 290K SF Albert Kahn building will soon undergo renovations. Also, Bedrock Detroit has proposed a 600K SF office development just east of One Campus Martius, and plans to redevelop the J.L. Hudson site on Woodward.
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The activity is spurred by a change in Detroit's reputation.
"More than a decade ago, Farbman Group began to expand its presence throughout the Midwest, and as I traveled to these other Midwest markets, the response I received when I mentioned I was from Michigan or Detroit was usually negative," Farbman Group President and Chief Financial Officer Andy Gutman said.
"Fast forward to today and Detroit is booming. When I go to these other markets, I hear enthusiasm from tenants, investors, lenders, contractors. They want to be part of its renaissance and they're investing," Gutman said. "Detroit isn't without its challenges, but no major city is. While no longer a place for investors looking for a deal in the CBD, there are still great opportunities throughout the city."
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"I'm cautiously optimistic about the future of Detroit," Friedman Manager of Acquisitions and Opportunities Jared Friedman said. "The city has tremendous potential based on our history, amenities and the urbanism trend we see across the country."
Friedman said his caution stems from the need for new development. He believes there is not enough ground-up construction, but it takes time and capital to get projects off the ground.
"The only way we'll get over that hump is attracting national investors and developers, which we haven't seen in our market yet. We have great local players, but to take it to the next level requires institutional liquidity," Friedman said.
Find out more about the future of Detroit at Bisnow's first-ever Detroit State of the Market event on Sept. 21 at the Fisher Music Center. Gutman and Friedman will both be speakers at the event.
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