Detroit’s development deals kept booming in 2016

Posted on January 16, 2017

Detroit — At least 110 development deals, including an estimated 32 new restaurants and bars, were unveiled in “greater downtown” throughout 2016, highlighting another boom year in Detroit and setting up bigger ambitions for this year.

Many 2016 projects — including those already finished, still under construction or in the pipeline — were bigger in size than in previous years, according to officials at five city institutions that track development announcements and agreements. The announced deals covered the 7.2 square miles of Detroit from the New Center area to downtown to Lafayette Park to Corktown.

The development plans represent hundreds of millions of dollars of investment, according to the Detroit Economic Development Corp., the quasi-public agency that promotes city development.
The 100-plus deals ranged from the Detroit Pistons’ planned move downtown in the fall to play in the Little Caesars Arena to a Brush Park plan that is one of largest housing developments in decades to one group’s pledge of a $100 million investment in New Center.

“We are starting to run on all cylinders,” said Roderick Miller, president and CEO of the Detroit Economic Growth Corp.

Outside experts agree. Detroit development had a “very good year,” said Steve Morris, the managing principal of Axis Advisors LLC, a commercial real estate service firm in Farmington Hills.

“Office vacancy is low, rents continue to climb, housing demand remains strong even as more units come online,” Morris said. “Detroit was strong in many sectors.”

The development plan totals were assembled by The Detroit News from the office of Detroit Mayor Mike Duggan; the Detroit Economic Growth Corp.; Midtown Detroit Inc., the nonprofit that plays a role in a variety of deals; Invest Detroit, which helps finance many projects; and the Downtown Detroit Partnership, a private-public consortium that, among other things, tracks development in the central business district.

Development data for the entire city was not available. That’s telling, some analysts said, because many believe the recent data show the greater downtown area remains on a separate growth track compared with the rest of the city.

“The 7.2 square miles has hit a critical mass, it’s not a bubble. It’s the other 132 square miles of Detroit that is still a question,” said Doug Kelbaugh, a University Michigan professor of architecture and urban design, who follows Detroit development.

Greater downtown has seen enough development in the past few years that even an economic slowdown, while slowing momentum, would not mean the return of dozens of empty buildings, experts including Kelbaugh said. Recent reports show housing demand remains competitive, the office vacancy rate is at a low not seen in at least a decade, and more retail and other businesses are considering moving to the area.

But Detroit still has an abundance of empty land and buildings.

“The city will never return to its 1.9 million peak population,” Kelbaugh said. “There will be substantial reforestation” of parts of the city.

Where the growth is

Various parts of the city are improving. Kelbaugh and others credit private-public efforts targeting such neighborhoods as North Corktown, the Livernois-McNichols Corridor on the northwest side, the Villages on the east side and Mexicantown in the southwest. The efforts include the city’s assembling land and pitching the property as one prime development opportunity.

Detroit’s downtown development momentum began in 2010, when The News counted 48 big, empty buildings in downtown and Dan Gilbert moved his online mortgage lender Quicken Loans, related companies and their 1,700 workers from the suburbs to the Compuware Building in the city’s core.

Since 2011, entities linked to Gilbert have spent $451 million to buy 62 properties in downtown Detroit, according to a Detroit News analysis of public records.

For 2016, the Detroit economic development agency provided a “rough draft” list of deals that amounted to around $1 billion worth of investment.

Some of the agency’s listed projects were not part of the greater downtown, such as the estimated $178 million investment planned by two auto suppliers, Arcelor Mittal Manufacturing and Flex-N-Gate. They plan to build new plants in the area known as the I-94 Industrial Park, creating a projected 510 jobs over the next five years.
The Midtown area — bounded by I-375, the Lodge Freeway, I-94 and I-75 — continued to grow. The area saw at least 10 finished developments last year, adding a total of 645 new residential units and 20,000 square feet of commercial space, while another 10 projects, adding 445 units and 36,000 square feet of commercial space, are under construction now, said Susan Mosey, executive director of Midtown Detroit Inc.

“The scale of the projects grew” last year, Mosey said.

In past years, residential developments commonly included around 30 units in the area, she said, noting the number of units in Midtown’s 2016 projects ranged from 60 to 300 units.

One example was the announcement called The Vernor, a $95 million mixed-use development planned for a surface parking lot at Cass and Canfield. The project includes a new 120-room hotel by the retailer West Elm and 19,000 square feet of commercial space, with 300 units of residential above.

Another 15 projects are in the pipeline, Mosey said.

Arena-related development

Ambitions are running high for the area south of Midtown, where the Ilitch family, owner of the Detroit Red Wings, hopes the construction of the Little Caesars Arena will spark nearby development. The scheduled fall opening of the new home for the Red Wings and Pistons is expected to be the driver for 50 blocks of development, including hundreds of new residences, offices and retail.

But much of that ancillary development has yet to happen.

Ilitch-owned Olympia Development and The Palace of Auburn Hills, owned by Pistons owner Tom Gores, are still negotiating the details of the arena-sharing agreement and a merger of their entertainment ventures.

The Pistons organization has pledged to move its corporate offices to the city and build a separate “community center/practice facility” that might cost an estimated $32 million to $55 million at a location that has yet to be decided.

Down side of new ventures

Another development that is building optimism is the scheduled opening later this year of the QLine streetcar, which will travel on Woodward for 3.3 miles between downtown and New Center. Boosters say it will be a game-changer that will spark even more development in the area as the Motor City embraces public transit.

But city boosters made similar claims about the People Mover, the elevated, closed-loop light rail system in downtown that opened in 1987 but resulted in little related development along its 2.9-mile route.

The downtown growth has also resulted in lower sales for some existing businesses and closure for others.

While consumers may welcome the steady supply of new places to eat and drink, many existing restaurants and bars say their business has slowed as more competition has cropped up. In Corktown, the longtime Casey’s Pub on Michigan Avenue shut down as the strip went more upscale.

“People don’t come here looking for a dive bar like they used to or a blue-collar place full of regulars,” said Andrea Relkin, the previous owner. The bar was founded in 1983 by her father, a Detroit firefighter. “Back in the prime days we couldn’t find enough seats for everyone, but over the past few years, for many factors the business has declined to a level that is no longer able to keep us afloat.”

The space didn’t stay unused for long. It’s now a new bar, operating under another name with new ownership.