Among the biggest stories in the latest news cycle was the announcement of the city of Detroit’s intention to file for bankruptcy. While that move can be viewed as possibly spelling doom for the city’s market for commercial real estate companies, the reality on the ground indicates the opposite. In fact, the corporate real estate magazine Site Selection recognized Detroit’s Wayne County Economic Development Growth Engine (EDGE) as a driving force in making the city, “one of the top-performing communities in the nation last year as it secured 10,582 new jobs and $2.2 billion in capital investment.”
Shrinking vacancy rates in downtown Detroit
Vacancy rates, one of the leading indicators of vibrancy in the commercial real estate sector, have beenslowly declining since 2011. With major companies like Blue Cross Blue Shield, Chrysler, Quicken Loans and PricewaterhouseCoopers all moving operations into the city, that trend appears poised to continue.
All of that new business means that the vacancy rate in Detroit’s Central Business District (CBD) could decrease to 25 percent by the end of 2013, a number not seen since 2002, according to New York City-based commercial real estate advisory firm, Newmark Grubb Knight Frank. And with the price per square foot in the CBD at a relatively low $23 for Class A space, and $20 for Class B space, there should be a strong market going forward.
Investors see opportunity
Among the many investors making large moves in Detroit is Dan Gilbert, owner of Quicken Loans. Rock Ventures, the umbrella company for Quicken Loans, now owns about 7.5 million square feet of real estate downtown in more than 30 buildings, according to a company fact sheet. And in those spaces, Rock Ventures accommodates approximately 9,200 of its 15,000 nationwide employees.
Noting that Detroit was having a “skyscraper sale” when he began his buying spree three years ago, Gilbert’s interest in buying downtown property doesn’t appear to be waning, as Rock Ventures recently purchased two buildings in the City’s famed Woodward Avenue corridor, which he hopes to develop for use in developing the area into a hub for tech-related firms.
The deteriorating 3.5 million-square-foot Packard plant, also located within the city limits, is another building that is ripe for redevelopment, and Evanston, Ill.-based developer Bill Hults is leading an effort to turn the plant into a commercial, housing and entertainment complex.
With so much action in its commercial real estate sector, Detroit is showing that despite likely bankruptcy proceedings it has the resiliency to provide an avenue for commercial real estate companies and commercial tenants to find a home for their businesses.
