By Tony Avendt, Cushman & Wakefield
At first glance, Detroit’s industrial real estate market appears to be entering a period of moderation. Vacancy has crept upward, new supply continues to trickle online and recent quarters have posted negative absorption. Yet beneath these headline indicators lies a more complex — and arguably more resilient — story. The numbers alone do not fully capture how tenant behavior, shifting supply dynamics and a growing pool of “shadow space” are reshaping the market in subtle but meaningful ways.
As of the first quarter of 2026, metro Detroit’s industrial vacancy rate stood at 4.1 percent, marking the 11th consecutive quarterly increase and the highest level since 2015. Even so, the market remains significantly tighter than the national average of approximately 7 percent, reinforcing Detroit’s position as one of the more supply-constrained industrial markets in the U.S.
Rental performance tells a similarly stable story. Net average asking rents reached $7.40 per square foot in the first quarter — a 2.1 percent year-over-year increase and the highest level since late 2023. While rent growth has moderated from earlier peaks, landlords have largely maintained pricing power, particularly for well-located, modern distribution facilities.
Still, the market is recalibrating after a period of extraordinary expansion. Net absorption totaled negative 829,000 square feet in the first quarter, marking the second consecutive quarter of contraction. Submarkets including Oakland Southwest and the City of Detroit accounted for a significant portion of this decline. On its surface, this contraction may suggest weakening fundamentals, but Detroit is coming off three years of exceptionally strong absorption, making the current slowdown feel more pronounced than it actually is.
Leasing activity reinforces this perspective. New leasing totaled 2.3 million square feet in the first quarter — a nearly 58 percent increase year-over-year and a sharp jump from 2024 levels. Because leasing activity is a leading indicator, this surge suggests that tenant demand remains intact, even as absorption temporarily lags.
Shadow space
A key factor complicating the overall picture is the presence of “shadow space” — industrial buildings that are technically leased but sit partially or entirely unoccupied. While not new, shadow space has become more visible in Detroit due to its ties to the automotive sector, which generally accounts for 30 to 40 percent of the region’s industrial footprint.
Much of this underutilized inventory is tied to electric vehicle initiatives that have been delayed or scaled back. In several cases, facilities were leased or built to support anticipated production that has yet to materialize. Some buildings remain idle, while others operate below capacity, sometimes at 60 to 70 percent utilization.
Crucially, this space is not reflected in official vacancy statistics. Even when quantified — roughly 2 million square feet within a 500 million-square-foot market — it would only increase vacancy into the mid-4 percent range. In other words, even when accounting for shadow space, Detroit remains well below national vacancy levels.
However, perception plays an outsized role. The presence of underutilized space can temper market sentiment, particularly among developers evaluating new projects. Since much of this inventory is not actively marketed — tenants often retain space in anticipation of future production or ongoing negotiations — it creates a sense of “hidden supply” not truly accessible to the broader market.
This dynamic is contributing to a slowdown in new development. Approximately 765,000 square feet delivered in first-quarter 2026 — nearly matching all of 2025 — but the forward pipeline remains limited. Roughly 1.6 million square feet is under construction, with 1.1 million expected to deliver by year-end, and only modest speculative development planned beyond that.
Old versus new
Despite this caution, underlying fundamentals continue to point to a need for new, high-quality space. A pronounced “flight to quality” is reshaping demand, as tenants prioritize modern, energy-efficient buildings, or those typically built within the last 20 years with Class A amenities, such as a clear height of 32 feet and early suppression fast response (ESFR) systems.
Legacy properties, or those typically built more than 20 years ago, with Class B and C amenities such as 18- to 28-foot clear heights, ordinary fire suppression and less energy-efficient design, make up a large proportion of the region’s industrial supply.
As of mid-2025, approximately 84.5 percent of vacant space in Detroit was in buildings constructed before 2005, while just 15.5 percent was in newer product. This divide is even more apparent in lease size. The average leased space for modern properties is approximately 72,000 square feet, compared with just 21,000 square feet for legacy buildings. Larger users are driving demand for modern product, widening the gap between asset classes.
Absorption trends reinforce this shift. From 2020 through 2025, modern industrial space consistently posted positive net absorption, peaking at 6.5 million square feet in 2022. In contrast, traditional space has struggled, including losses of nearly 4 million square feet in 2024 and close to 2 million square feet in 2025.
As a result, available inventory today is heavily concentrated in legacy properties, so for tenants seeking large, modern facilities, options are limited. There are virtually no available spaces exceeding 500,000 square feet, and even mid-sized Class A blocks are scarce. This imbalance continues to support rent growth and underscores the need for new development — even as developers remain cautious.
Regionally, Western Wayne County stands out as the most active submarket, benefiting from its proximity to Detroit Metropolitan Airport and ongoing warehouse development. Vacancy there remains particularly tight at approximately 2.7 percent, reflecting sustained demand for logistics-oriented space.
Looking ahead, emerging demand drivers could provide additional momentum. One notable trend is increased interest from Canadian companies — particularly in the agricultural sector — seeking to establish processing and distribution facilities in Michigan.
Ultimately, Detroit’s industrial market is evolving. Rising vacancy and negative absorption reflect a period of normalization following an unprecedented growth cycle, not a fundamental downturn. Low vacancy, stable rent growth, constrained supply and continued demand for modern product all point to a market that remains fundamentally sound.
The real story lies in the gap between perception and reality. Shadow space, shifting tenant strategies and legacy inventory challenges may cloud the narrative, but it does not diminish Detroit’s position as one of the tighter industrial markets in the country.
The numbers tell part of the story. The rest — and perhaps the most important part — lies in the shadows.
Tony Avendt is an executive director with Cushman & Wakefield. This article originally appeared in the July 2026 issue of Heartland Real Estate Business magazine.