DETROIT—Office tenants in the Detroit metro area continue to absorb impressive amounts of space, and the coming year promises to be historic. In the fourth quarter, the market recorded 643,693 square feet of positive absorption, mostly attributed to class A properties, according to CBRE's Office MarketView. And Dan Gilbert's Bedrock broke ground on what will be the city's tallest skyscraper, a symbol of the downtown's amazing progress over the past few years.
The new project will rise on the site of the former home of Hudson's Department Store, and total about one million square feet, with hundreds of apartments and 100,000 square feet of retail. Perhaps most notably, it will also include 240,000 square feet of new office space.
“We haven't seen speculative office construction in the downtown for decades,” Brendan George, senior vice president at CBRE, tells GlobeSt.com, and leasing it up would be an important milestone.
Gilbert, the founder of Quicken Loans, has through Bedrock renovated and filled a score of office buildings in the CBD. Those moves helped spark a downtown revival, which has included a robust expansion of the multifamily market and the proliferation of new retail.
But this latest project is on another scale. It will reach 800 feet, about 70 feet taller than General Motors' 40-year-old Renaissance Center, an illustration of the CBD's transformation from auto industry hub into more of a hybrid that combines high tech office, thousands of apartments, and amenities such as sports stadiums that draw visitors from across the region.
George points out that even though Bedrock has justifiably attracted the most notice, “one company can't do it all. There are a lot of secondary players active in the downtown. We're seeing many service companies taking space, as well as law and accounting firms.”
Overall, vacancy dropped to 15.5% for the metro market, CBRE finds. Year-over-year vacancy in downtown Detroit decreased by 113 bps, while suburban vacancy decreased by 114 bps.
And this progress was just the continuation of a long-term trend. In the past three years, tenants in the Detroit market have absorbed nearly 5.1 million square feet. Since the city emerged from bankruptcy in the fourth quarter of 2014, vacancy in class A properties has declined more than 420 bps to 11.9%.
George adds that additional speculative construction is unlikely in the short-term. “We still have a fair amount of potential adaptive reuse projects,” for both residential and office. “We may see more build-to-suit activity whenever a user can't find enough space downtown.”
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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.
