Office Resurgence Continues in Detroit
- Nov 07, 2018
Detroit’s office market continues its fulminant recovery, bolstered by a diversifying economy and an influx of companies including mobility and tech. The revitalization of the downtown area, started eight years ago by Quicken Loans’ real estate arm Bedrock, has attracted corporate tenants that include LinkedIn, Google, Microsoft and Tata Motors to the Central Business District. Ford Motor’s investment in the blighted Michigan Central Station with the intention of creating a technology campus is also a strong indicator for the market’s recovery. While not as high profile, suburban submarkets are managing to find replacements for tenants moving to the urban core.
The economy is holding up and job growth in general is strong, although office job growth has been slowing down for the past eight quarters. Only 22,000 jobs were added during the 12 months ending in June, and the largest employment sector, professional and business services, has lost more than 3,000 jobs due to layoffs by auto companies, the majority of which were concentrated in Warren. Detroit’s economy is diversifying, but the auto industry remains the backbone, so the metro has to deal with slowing auto sales and the potential impact of new tariffs. The information sector decreased by 800 jobs but is expected to grow.
The office vacancy rate in the metro was 18.4 percent as of June, and is even higher in surburban areas and Class B properties. Deliveries have been slow, although that is about to pick up, as more than 1.1 million square feet was under construction in June, the most in the last decade.