The asking rate for Class A space, on average, around the market is $26.32. In the CBD, the asking rate is $26.52. The Class B average asking rate is $23.32. "The caveat is that while the improved economic conditions are benefiting the industrial sector, they will only create a slow trickle-down effect on demand for office space in the near future for Metro Detroit," the report says.
In Detroit's principal industry—automotive—more tenants related to the industry's vacated space, the Grubb & Ellis report says of the fourth quarter. "The semi-good news for landlords is that many tenants are responding to market conditions and leasing space at reduced rates. With demand growing slightly, the significant supply of office space on the market will continue to hold asking rates at reduced levels," the report went on to say.
The Grubb & Ellis report says activity picked up in Troy in the past quarter. "Reduced asking rates and high vacancy rates in Troy have caught the eye of several tenants who took advantage of market conditions and leased space," according to the Grubb & Ellis report.
The vacancy rate in Troy dropped 70 basis points to 21.5% from the previous quarter as 85,000 sf was absorbed. Demand for Class B office space increased in the fourth quarter as large-block tenants such as Northwestern Mutual and Citizens Insurance leased roughly 50,000 sf. Future Class B vacancy increases from EDS and GM migration downtown will mostly be offset by Lear's scheduled 150,000 sf lease in the Troy Officenter in the coming quarters. With over 200,000 sf of projected absorption, the Troy office market vacancy rate should drop below 20%, the Grubb & Ellis report predicts.
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