"Modest construction levels, a slowing in the flight to homeownership and the likely increase in leasing traffic toward the end of the year underpin this outlook," Chaben adds. "We expect rents to stabilize with slight upward pressure on effective rents going into 2005."
The reports says that while construction will be concentrated in the Westland, Novi/Livonia and Macomb County submarkets, developers have been drawn to Detroit's CBD as optimism is being spurred by the significant capital investments that are changing the face of Downtown. The overall market vacancy rate has stabilized and is expected to end 2004 at 6.9%, equivalent to the year-end 2003 figure, Marcus & Millichap says.
Double-digit vacancies continue to be recorded in the upper tiers of the market. The Oak Park/Royal Oak and Macomb County submarkets currently record the lowest vacancies at 4.8% and 6.0%, respectively.
The average asking rent will remain stable throughout the year, at $790 per month, though a slight increase of 0.5% in the average effective rent is expected. The report predicts cap rates will remain lowest in Auburn Hills, Farmington Hills and Ann Arbor.
Over the past 12 months, nearly $170 million in transaction volume has been recorded, with many owners are disposing of older assets, and many institutions are liquidating assets in non-core markets, which will result in more investment options this year.
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