DETROIT—Many observers thought that Detroit's recent declaration of bankruptcy would spell doom for Motown. But the downtown office market keeps chugging along, attracting tenants from the suburban submarkets, posting impressive gains in occupancy rates and seeing positive absorption, according to a recent study on the second quarter by Newmark Grubb Knight Frank.
“Most of the metro area submarkets posted minimal absorption figures with the exception of the Detroit CBD and Troy submarkets which respectively posted just over 52,000 and-120,000-square-feet of positive absorption during the quarter,” Newmark researchers found. And “the CBD's vacancy rate fell 40 bps to 27.1% during the quarter.” In the first half of the year alone, the CBD has seen 194,064-square-feet of positive absorption.
Newmark attributes much of the improvement to the continuing migration of corporate headquarters from the surrounding submarkets into the CBD. The researchers said the movement began in 2011 when Blue Cross Blue Shield, DTE Energy and Quicken Loans took over a combined 750,000-square-feet of downtown space. And this trend continued in 2012, as Title Source Inc., Chrysler, PricewaterhouseCoopers, Metro-West Appraisal Co. and Agency 720 leased almost 500,000-square-feet.
Title Source Inc. moved 1,500 employees downtown in 2012 and in 2013 another 500 moved into the First National Building. Furthermore, The Professional Group then left suburban Southfield and rented 12,000-square-feet in the Chrysler House, and 60 employees of the Southfield architectural firm Rossetti began occupying 13,000-square-feet in the former Federal Reserve Building.
"Despite the city's bankruptcy,” Newmark researchers noted, “the energy in Detroit's CBD continues to grow as major companies continue the migration downtown.” Campbell-Ewald, a national marketing agency, plans to move about 600 employees out of suburban Warren by early 2014 and take roughly 120,000-square-feet of space in the Ford Field Office Complex. “The CBD could see a vacancy rate of 25% in 2014,” Newmark concluded, “a rate not seen since 2002.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
