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 …
Michigan
Although much of the country may think Michigan’s economic outlook is bleak, Grand Rapids is still holding on strong through the economic downturn. The city is faring better than Southeast Michigan and currently is looking toward the future. With more than 1 billion square feet in proposed construction, the area is getting a head start on the rebound, especially in the medical office sector. Absorption in the traditional office market is slow, causing there to be less speculative development in the pipeline. That being said, Grand Rapids is experiencing an influx in medical office and healthcare development, especially in the central business district (CBD), where Michigan State is currently developing a new medical school. Even with medical office development proposed and under way, there is a perception that companies need to wait and see what everyone else decides to do before making any decisions for themselves. This pause is fueling a vicious cycle in the market that is making it difficult to get deals across the finish line. Like many markets across the nation, the leasing sector of Grand Rapids is seeing a great deal of concessions and incentives pass from landlords to tenants. Some owners are making bare-bone deals …
Few parts of the country have been harder hit than Detroit in the current recession. While it appears at first glance that the industrial sector has had it worse, the office sector has felt the pinch as well. Vacancies and downsizing are seen at the office buildings occupied by third-party vendors, advertisers, lawyers and accountants related to the auto industry. “There is a large trickle-down effect in just about every segment of the office market,” says Fred Klugman, president of Detroit-based Klugman Commercial. Office vacancies continue to creep up in the Detroit office market, but new leases are hard to come by. “There just have not been that many tenants in the market to fill up all the vacant space that is available,” Klugman says. “What’s happening is there are not many new tenants in the market, and most of the existing tenants’ landlords are able to retain them by offering aggressive deals. So, you’re not seeing a bunch of movement.” Landlords have not given up, though. As a way to persuade tenants to sign at their properties, many landlords are offering bigger and bigger concessions in the form of lower rental rates and increasing amounts of free rent. This …
When it comes to the metro Detroit area, perception may not equal reality. The once-and-future motor city is meeting the challenges of a downsizing auto industry and a national economic slow down head on. The changing dynamics have altered the names of expanding retailers, but this shift has managed to present an opportunity to many local entrepreneurs and market savvy retailers. Similar to the rest of the country, the metro Detroit retail sector has been impacted by consumer pull back, national big box closures and the reduction in new store openings. Store closures from Mervyns, Circuit City, Cost Plus, Linens N Things, La-Z-Boy and Office Depot have increased the overall vacancy rate to 9.9 percent, and left landlord’s seeking replacement retailers and/or new uses for empty space. Increasing vacancy is pressuring the market, slowing demand for new development in greenfield growth markets and creating better opportunities for new locations in dense, established markets. Aside from Taubman Center’s Mall at Partridge Creek, metro Detroit did not get caught up in the over development of lifestyle centers in recent years. Instead, Michigan developers focused on smaller, traditional grocery centers or Walmart, Meijer or Target-anchored endeavors. A number of these projects have recently …
While a rapidly deteriorating local economy is weighing on apartment operations in Detroit, weakness is expected to be mitigated by residents remaining hesitant to transition away from rental units. The Detroit metro area has one of the most affordable housing markets in the country, as overbuilding and a declining population have resulted in a significant supply/demand imbalance. Nonetheless, many local inhabitants are exhibiting caution when considering a move into a home due to still-falling prices and the high-risk employment market. The weak national economy is limiting options for job seekers outside of the metro area, which could stem the tide of out-migration in the short term, boosting demand for area apartments. On the supply side, development activity is minimal again this year, as construction costs continue to outweigh attainable rents. Competition is emerging from fractured condominium projects, however, some of which are offering units for lease until demand rebounds. Early estimates indicate that employers decreased payrolls by 6.8 percent, or 130,700 jobs, in the year ending in the first quarter. As auto-related companies restructure, 102,000 area positions have been eliminated in the last 6 months. While vacancy does not fluctuate significantly in Detroit, mounting job losses will force some local …
What area is your expertise? West Michigan — Traverse City to Benton Harbor. What type of retail product is doing well in your area? Grocery and gas. What retailers are new to your area? Sonic and Johnny’s Lunch. Who are the active retail developers in your area? Several wish they were active, however, the lack of retailers coupled with the lack of financing has prevented several deals from moving forward. Please name one or two significant retail developments in your area. What impact will these projects have on the market? The Corner Shops, southeast corner of East Beltline and 28th Street SE, Jared’s and other inline retailers. Minimal impact on the market in general. Evergreen Properties proposed Lifestyle Center at the NE corner of Knapp and East Beltline avenues. They’ve secured D&W Grocery Store and have tentative agreements with several other retailers. It will be interesting to see what happens with the Aikens proposed development, which is less than one mile north of this site. Acquisition of the former Rogers Department store by Israel’s fine furniture on 28th Street SE will clearly have a dramatic impact on the southwest section of 28th Street. Where is the majority of development taking …
What area is your expertise? Greater Grand Rapids, Michigan. What trends do you see presently in multifamily development in your area? From 2002 to 2007, we had a tremendous amount of condo construction. Those projects are finishing up and a few new projects are being announced. Several condo projects that were announced have been pulled due to insufficient sales. Apartment construction has been moderate over the past few years. A few new projects have broken ground this year. Student driven markets like Allendale (Grand Valley University) have seen consistent deliveries of new units the past several years — and more units will be added to the market in 2008. Condo conversion projects started in 2006 are still selling out. Who are the active multifamily developers in your area? Condos: Second Story Properties, Parkland Properties, McKay Tower Partners LLC, Moch International, Kegle Construction, Robert Grooters Development, Eastbrook Homes, Redstone, and Epcon Communities. Apartments: Miller Valentine Group, Hof Investment Group, IPA, Copper Beech, and Fusion Properties. Please name one or two significant multifamily developments in your area. What impact will these projects have on the market? River House Condominiums — Robert Grooters Development: 207 units, Downtown. Under construction, estimated completion date 4/2009. …
What area is your expertise? Mid-Michigan, primarily the greater Lansing area. What trends do you see presently in industrial development in your area? Very soft. Some activity from small businesses and companies doing defense work for U.S. government. What type of industrial product is doing well in your area? 10,000 square feet and smaller Who are the active industrial developers in your area? Wieland-Davco and Dart Where is the majority of development taking place? Why is this area doing well? Delta Township due to the newer General Motors plant. What area do you expect to be the next big industrial development market? Why? Expansion of newer Delta Plant. If present car models sell well, they have plans to expand. Please describe the industrial leasing activity in your area. Some smaller and short-term leases. Please describe the industrial sales activity in your area. Very little and what there is, are prices below market. What impact do current interest rates have on the industrial market? What predictions do you have for interest rates and their effect on the industrial market in the next year? Lower interest rates help, but that alone will not be enough. What industries do you expect to expand …
What area is your expertise? West Michigan Industrial What trends do you see presently in industrial development in your area? Very little speculative building, some absorption of previous manufacturing into multi-tenant redevelopment. What type of industrial product is doing well in your area? Stand alone 35,000 square feet to 75,000 square feet owner occupied. Who are the active industrial developers in your area? First Companies – Built-to-Suit Please name one or two significant industrial developments in your area. What impact will these projects have on the market? Ashley Capital redevelopment of the former Steelcase campus. Former large manufacturing buildings that are redeveloped into multi-tenant — 50,000 to 300,000-square-foot users. Where is the majority of development taking place? Why is this area doing well? Very little, along the M-6 Caledonia, available land for build to suit users. What area do you expect to be the next big industrial development market? Why? Airport area — typical area for growth in most markets. Please describe the industrial leasing activity in your area. Lease rates are flat with incentives, one month of free rent for each year of term. Too much inventory. Please describe the industrial sales activity in your area. Very little activity …
What area is your expertise? Retail leasing, sales, and development in Michigan. What trends do you see presently in retail development in your area? Retail development is stagnant at this time. However, there are several planned developments that will certainly become more viable when the local economy improves. What type of retail product is doing well in your area? Neighborhood Strip Centers. What retailers are new to your area? Tim Horton’s and several independent restaurants. Since the earlier part of the decade, we haven’t had much in the way of “new” traditional retail to the market. Who are the active retail developers in your area? Mostly local developers. The Gillespie Group, Strathmore Development and The Eyde Company. Please name one or two significant retail developments in your area. What impact will these projects have on the market? East Village near the MSU Campus in East Lansing. Currently in planning stages only and no tenants named at this point. Will encompass 250,000 square feet of retail, with a movie theater, a hotel, 100,000 square feet of office and both for lease and for sale residential units. Encompasses over 20 acres. Numerous planned projects around the Eastwood Towne Center but nothing definite …