Browse Tag: detroit

Motor City Starts Up Again: Detroit Industrial Vacancy Falls To 6%

Detroit’s industrial real estate past is a story of too many eggs in one economic basket.  When the over-concentration of auto industry capital fled Detroit, the communities that capital once sustained vanished, and the rest is rust belt history.

But the fact is the auto industry didn’t vanish entirely. Today, strong demand in auto sales pushes Detroit and its suburbs toward an industrial output that represents a giant step toward long-missing sustainability.  Robert Carr’s piece in NREI:

“You can’t find a lower vacancy rate in Detroit in the past 20 years,” [notes John DeGroot, research manager at real estate services firm NGKF]. “A big part of it is auto sales. The average yearly sales mark for the Big Three was around 16 million since 2002. During the recession we saw it dip to 10 million, but now we’re hitting 17.5 million per year.” Auto experts predict that figure will continue in 2016.

Typically, the suburbs around Detroit have fared better with industrial leasing and construction, with I-75/Auburn Hills, Macomb county and Western/Southern Wayne county being the preferred locations for new, modern facilities. However, though Detroit proper has many obsolete or dilapidated industrial buildings, the city is now a major draw for new construction as well, DeGroot says. Since 2015, the city has seen more than 765,000 sq. ft. of new construction completed, according to a second quarter NGKF report.

More from NGKF on the specific projects and locations in Detroit’s long path to industrial recovery:

Increased industrial demand in the city of Detroit continues to drive new construction of modern [facilities]. Much of the city’s existing inventory suffers from a form of functional obsolescence and/or physical deterioration and difficult to find users to absorb. Since 2015, the city has seen over 765,000 square feet of new construction completed. Auto supplier Flex-N-Gate is the latest company to make a significant investment in the city. The company recently announced plans to build a 500,000-square-foot production and sequencing facility on a 30-acre site in the industrial park located near Interstate 75 and I-94. Meanwhile, Lear Corporation is in the planning stages of building a new manufacturing plant in the I-94 Industrial Park. These planned upcoming developments follow the 904,000 square feet that is currently under construction, which include: Crown Enterprises’ 500,000-square-foot distribution facility for its Universal Truckload Services; YFS Automotive Systems Inc.’s 150,000-square-foot manufacturing facility; and Sakthi Automotive’s 540,000-square-foot expansion on Fort Street.

Detroit Shifts Gears To Technology

A pair of articles today explain a new renaissance in Motor City commercial property and infrastructure centered on technology business expansion. Together they point out how this isn’t the economic and cultural stretch one might think for the town that so famously put its industrial eggs into one auto-making basket – and saw globalization and capital flight devastate its fabric when that industry chose foreign labor.

In Dan Rafter’s piece at REJournals.com Detroit A Tech Hub? You Bet the report mentions the recent Jones Lang Lasalle’s US Technology Office Outlook report that ranks Detroit among the top 30 in the US for total leases to the technology business.

You might be surprised to learn that Detroit has become a top target for tech start-ups. JLL in its U.S. Technology Office Outlook report ranked the city as among the top 30 in the nation for total tech leasing. What makes Detroit so appealing for tech firms? JLL pointed to low real estate costs, an affordable cost of living and a competitive pool of talented employees.

These factors are inspiring technology start-ups to open their doors in the Motor City. According to JLL’s research, the Detroit market is now supporting 50,796 tech jobs. JLL says, too, that Detroit’s high-tech employment rate is growing 4.3 percent each year.

The Detroit market has been home to some significant tech lease transactions. Griffels recently renewed its lease of 67,934 square feet in the Mars Corporate Center in Southfield, while Logicalis took out a 40,500-square-foot lease at 2600 Telegraph Road in Bloomfield Hills. Lochbridge recently took out a 29,000-square-foot lease at 150 W. Jefferson Avenue in Detroit’s CBD.

Electric Cars And A Fiber Freeway

Adding to the resurgence is more technology, both in infrastructure and in manufacturing target. Ford Motors has recently decided to invest $4.5 billion in the manufacture of electric and hybrid cars by 2020, which adds to the tech resurgence.  As reported in GlobeSt. by Brian Rogal:

“One of the things that people don’t realize about Detroit is that the auto industry is heavily dependent on the high-tech sector,” Dave MacDonald, an executive vice president ofJLL, tells GlobeSt.com. And the recent decision by Ford to invest billions in electric vehicles will further boost the need for tech workers.

Another big factor bolstering technology companies here is the presence of Quicken Loans and its family of companies, which have bought up more than 80 downtown properties, many of them 75 to 100 years old, the type of structure most favored by tech-savvy millennials. “Quicken is really a tech company,” MacDonald says, and it has filled these buildings with about 13,000 workers, helping to send the CBD’s vacancy rate into a historic plunge.

And last month Rocket Fiber, a Detroit-based fiber-optic provider that is part of Quicken’s family of companies, has just activated an internet fiber ring for the city’s downtown that at an affordable price offers connections 1,000 times faster, MacDonald says. In its latest report on the US technolgy sector, US Technology Office Outlook, JLL compares it to “the Google Fiber model that spurred business and startup activity when it deployed in Kansas City.”

Affordable commercial property options and 21st century infrastructure in a great American central business district is the kind of news Detroit – and office tenants eyeing it – can surely use.