Detroit's economic recovery is getting a lot of play these days, but is it exaggerated?
Avison Young principal and Managing Director James Becker, in the Detroit office, said no — but more importantly, this recovery is different from prior "Detroit renaissances" as companies are interested in moving to the city.
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This time, Becker said, office, residential and retail are all growing in Detroit. Office in particular is benefiting from investment by companies like Microsoft, Adient, Discovery Network and Ally, which are following the lead of Quicken Loans, Blue Cross, GM and others in moving Downtown to capitalize on a younger and more diverse workforce there.
According to Avison Young data, Detroit’s office market continued to trend positively in the first half of 2017. Downtown office vacancy dropped to 10.5% at midyear 2017 from 12.3% a year earlier, which is anticipated to continue as more companies relocate Downtown from the suburbs.
Becker is cautious, however.
"The caution comes with the relatively narrow corporate participation in the market, compared with truly diversified economies in the Midwest, such as Chicago or Toronto," Becker said. "In Detroit, activity is measured relative to historic stops and starts, but this recovery feels sustainable."
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"Small to mid-cap investors are keenly interested in participating in the Detroit recovery, but the activities of Bedrock Real Estate, with the acquisition of 92 or more properties, has curbed some of the national enthusiasm because of the fear that Bedrock will always get a last look," Becker said.
Also, large-cap institutional owners are still licking their wounds from the last downturn, which was severe, he said.
Still, Becker is optimistic about the future of Detroit.
"Major stakeholders like Quicken, GM, Henry Ford Hospital, Wayne State and others are making their continued investment in Detroit a priority, and not just a perfunctory obligation. This investment will eventually translate into greater community investment in neighborhoods where the economic resurgence has been slower to arrive."
Hear more about the health of Detroit at Bisnow's first-ever Detroit State of the Market event on Sept. 21 at 8:30 a.m. at the Max M. & Marjorie S. Fisher Music Center.
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