Real estate wave signals healthier city: Momentum flows from office to retail
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It started with two large office deals, then a few midsize and small office deals. Apartments started filling up, and retail projects are being planned.
The momentum for real estate deals in Detroit has been hard to miss during the first half of 2011, with close to 1 million square feet of office space in the process of being occupied.
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The firm's research report shows 112,000 square feet of positive absorption this year -- a real estate metric that shows how much new space is being used, minus the space that has been vacated.
The Blue Cross deal has not been recorded because the health insurer has yet to move all its people into the space, and the Quicken lease in the Compuware Building was not recorded because it was a single-tenant building. Likewise, the additional space Quicken is going to use for its employees in the Chase Tower has not yet been recorded.
"While we have yet to see the real impact on paper, there's almost a million square feet of space either occupied or accounted for that was vacant 12 months ago," Weiner said. "This much absorption is positively changing the competitive landscape in the CBD and, as a result, is limiting the uncertainty of the market, block-by-block, and that's making for stronger fundamentals in what has historically been one of the regions most challenged real estate environments."
Related to the office deals, many of the city's apartment buildings are near or at full capacity, with some reporting waiting lists.
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It's all part of the cycle a city goes through as it comes back to life, said Robert Gibbs, managing principal of Birmingham-based Gibbs Planning Group and instructor of an urban retail course at Harvard University.
"Employment, housing, then retail is the pattern that occurs in every city," he said.
Retail development is sure to come after new office deals, he said, citing a national study which shows an average office worker spends $157 per week on food, clothing, gifts and shoes.
"Publicly traded retailers need to show growth," Gibbs said. "Across the country they are no longer going to the edge of suburban areas to wait for farms to become subdivisions. They're going into the cities and opening smaller stores in historic buildings."
Detroit is following the exact same patterns as other cities on the upswing, Gibbs said. Providence, Rhode Island; Charleston, South Carolina and Seattle all went into decline, bottomed out and started a cycle of new investment.
"It's always the same thing. When the cities are at their low, everybody says "there is no way it's going to change, it's always going to be the worst,' " he said. "And then when it's done, they say "Wow that was easy. Why didn't it happen sooner?' "
For now, many commercial real estate brokers have clients interested in being in Detroit.
Lynne Drake, president of Troy-based Compass Commercial, has done two small Detroit office deals this year, moving the Michigan Women's Foundation into 3,500 square feet at 333 W. Fort St. and finding a 1,000-square-foot office for Auburn Hills-based Brownrigg Cos.
Drake said she has had more requests to show Detroit office space than any other time in her career.
"You can get space outside the city for less money," she said. "But there's just a momentum in the city that people want to be part of."
http://www.crainsdetroit.com/article...ws-from-office
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