DETROIT—Although the revival of Detroit's downtown office market has attracted a lot of notice lately, it's the regional industrial market that is really setting records. Newmark Grubb Knight Frank released its third quarter report on the sector this week and found that the vacancy level fell to a 20-year low and developers have more projects underway than at any time since 2003.

“In many ways this was not a surprise,” John DeGroot, vice president of research, NGKF, tells GlobeSt.com. “The market bottomed out right at the end of 2010 when the vacancy rate hit about 16%. There was 51 million square feet of space available. But once the auto companies began to revive, the Detroit industrial market just took off and the overall vacancy went from 16% to 6%.”

“By 2014, the rate had dropped to the point that companies looking to expand really had nowhere to go,” he adds. “We began to see build-to-suits breaking ground here and there,” but this year "new construction has gone up exponentially."

Active projects now total 23 with over 3.3 million square feet. By mid-2016, developers will have added more than one million square feet of new inventory to the market. Furthermore, overall vacancy fell 50 bps to 6.7% as more than 2.5 million square feet were absorbed.

Another thing that did not surprise DeGroot was that builders have launched many new projects inside Detroit rather than the suburbs. The city had 800,000 square feet of new construction activity in the third quarter, up from 300,000 square feet in the second.

Most of the region has been built-up over the years, “and there is no reason to go further out,” he says. Furthermore, the city's central location remains appealing, but most users looking for space there demand modern space, which considering the age of Detroit's buildings, means new construction is frequently the only option.

Crown Enterprises is building one of the largest new facilities, a 500,000 square foot distribution facility on the city's east side for Universal Truckload Services. And Stuart Frankel Development Co. is putting up a 300,000 square foot facility at 12600 Oakland Park Blvd. Android will occupy half of this facility. 

“We're also seeing new development across the board in terms of size, location and building type,” DeGroot says. Near the airport, for example, developers have concentrated on building bulk warehouses, but in the Troy area a host of buildings dedicated to manufacturing and light industrial uses predominate, mostly for tenants that need less than 150,000 square feet.

And DeGroot says developers broke ground on three or four new buildings that were still in the planning stages when NGKF put the finishing touches on the latest report. That's a sign that this wave of new development will “continue to at least 2017.”