FARMINGTON HILLS, MI-With office vacancy at more than 25%, many in Detroit feel that the market has hit bottom. However, the recent profit-making of the automotive industry, coupled with the return of the primary markets on the coasts, are signs that local brokers hope point to the return of the Motor City.
David Friedman, CEO of locally based Friedman Integrated Real Estate Solutions, tells me that though he sees renewed activity in the Southeast Michigan submarkets, there’s still a long climb back up. Crushed values have made it extremely difficult for all product types to gain financing, and absorption of empty space will take awhile, he says.
“I don’t see how prices for buildings can go any lower, there’s some offices selling for $15 per square foot here. It’s so low that people need to be careful, just because it’s cheap doesn’t mean it’s a good investment,” Friedman says.
However, there has been renewed activity, Friedman says. His office is doing a lot more than two years ago, he says, including four new leases at the three-building Laurel Office Park in Livonia, a property leased by Friedman. Kennedy Home Health, IPswitch, Harvey Industries and ARConcepts have recently signed for more than 16,000 square feet.
“There’s no question that Detroit will turn around,” Friedman says. “I think in the long term we’re going to look back on this as another cycle. There’s still jobs with good incomes here, and things are starting to happen again for the region.”
In a twist of the former norm before the recession, more companies are starting to consider locating in the city of Detroit, which is suffering under more than 31% vacancy. Just in the fourth quarter, companies signed into Detroit, such as GalaxE Solutions Inc. at 1001 Woodward Ave. and Sigma Associates Inc. at 1900 Saint Antoine St. The Quicken move into the downtown last year, General Motor’s massive investment in the Renaissance Center as their headquarters and the recent announcement that Blue Cross Blue Shield will move 3,000 workers from Southfield to Detroit this year continues this trend, as well as the continued work to bring light-rail back along Woodward Avenue connecting the suburbs and downtown.
“When I started 25 years ago, we used to schlep tenants from downtown to the suburbs,” Friedman tells GlobeSt.com. “Now we’re seeing more momentum from Detroit. The demographics from the younger generation show that they want to live in an urban environment, and they don’t really have any memories or connections to the problems from the 1960s.”
By Robert Carr, Globe St.