The majority of new construction is taking place in the Troy and Southfield submarkets, which have been traditionally known as the largest office markets in Detroit.

"Still, the million-plus sf of sublease space that has entered the market over the past year is now in direct competition with new development, and many builders are putting construction plans on hold until this sublease space gets absorbed and the leasing environment brightens," Carter says.

Further into 2002, he predicts developers will start increasing construction slightly in an attempt to complete projects in time for the economic turnaround expected sometime late this year or early 2003.

"Completions are forecast to reach the 871,000-sf mark during 2002. In comparison, 726,000-sf were completed in 2001 and almost 1.9 million in 2000," Carter says.

He says new construction will be affected by stricter lending requirements that call for higher pre-leasing rates for new buildings. The majority of new construction is taking place in the suburban areas, specifically the Troy, Southfield and Farmington submarkets, which have historically housed the largest concentration of office buildings in Detroit.

The median price per square foot rose in 2001 to $102.50 as a result of several high-profile buildings changing hands, Carter says.

The Butterfield Office Center sold in January 2001 for $14 million, or $128.38 per sf. Also, the Victor Park West building in Livonia sold for more than $13 million, or $156.31 per sf.

"To date, there have been two sales conducted, pushing the average price up to $122.11 per sf," Carter says.