What a difference a year can make. At this time last year, the Detroit and Southeastern Michigan multifamily housing markets were experiencing some of their worst economic times since the early 1970s. But with recent announcements from Ford and General Motors concerning first quarter profits, there appears to be hope for the troubled region.
Because the region has been so challenged during the past 18 months, there has been very little new development planned for 2010. But in 2011, nearly 2,800 apartment units are planned in the metro region, representing a potential 1.3 percent increase in the current inventory. One recent success story within the city is Garden View Estates, a mixed-use development with affordable housing, including rental units, senior co-ops and single-family homes. Bloomfield Hills, Michigan-based Windham Development is the principal in the residential portion of the project, which celebrated its grand opening in September 2009. These types of developments are going to play a key role in re-growth within the city because of joint efforts between private developers, the U.S. Department of Housing and Urban Development, the Detroit Housing Commission and the City of Detroit.
We can anticipate new development in Ann Arbor and downtown Detroit. Ann Arbor has been buffered from the recent automobile industry woes, and with the possibility of a new hockey arena and Quicken Loans headquarters in the Ilitch Corridor in Detroit, new multifamily growth should follow. There is also discussion of a 10-story housing complex in the Midtown area near Wayne State University’s main campus, which would replace several smaller, older individual apartment communities. Off-campus student housing in both Ann Arbor and Detroit appear to be the most stable communities and the largest opportunities for growth. Other growing markets in need of additional multifamily development include the northern submarkets of Brighton, Clarkston and Lake Orion. All have been affected by the recent residential foreclosure crisis but do not have a substantial Class-A level inventory.
Asking rents are stabilizing in some of the submarkets, but may continue to slip within Detroit. Some areas like the Ann Arbor market and Class B-level communities may even have a slight increase in asking rents in 2010. Average asking rents across the Southeast Michigan region are at an estimated $803 per month, with effective rents averaging around $723 per month. Vacancy, despite the decrease in new construction in the region, will increase to an average of 8 percent for the entire region. This ranges from Royal Oak at approximately 5.3 percent and Ann Arbor at 7.0 percent to Pontiac at 9.4 percent and even higher in Detroit proper.
Metro Detroit, although diversifying by going green and with new technology-savvy industries like Techtown, is still dominated by the automotive industry. As we start to see a glimpse of a turnaround in this industry, we will see the multifamily market follow.
— Ted Verner is vice president of The Habitat Company’s Michigan regional office in Detroit.