Detroit Industrial Market Keeps Rising
A market once highly dependent on the auto industry has seen the proliferation of bulk warehouses devoted to e-commerce, logistical facilities, and medical supply buildings.
DETROIT—The Metro Detroit industrial market suffered more than most during the Great Recession, but in the past few years it has soared. And 2018 is shaping up to be another great year. New construction starts jumped 30.0% to 5.9 million square feet during the first quarter, according to Newmark Knight Frank. And the addition of so much new space meant vacancy held steady at 5.1%, although tenants absorbed just over 565,000 square feet.
“It’s still a very active market, largely due to increased diversity,” John DeGroot, vice president, research, tells GlobeSt.com. A market once highly dependent on the auto industry has seen the proliferation of bulk warehouses devoted to e-commerce, logistical facilities, and medical supply buildings.
“Amazon just started building its third one million square foot distribution center in metro Detroit,” he says. The vacancy rate for such distribution buildings has sunk to a historic low of around 2%, and Amazon isn’t the only major user launching new projects. Kentucky Trailer and Berkshire’s E-Supply, for example, are also constructing major facilities. Meanwhile, developers have found success with speculative developments. Of the 1.5 million square feet of speculative development under construction, more than one million square feet is already pre-leased, according to NKF.
In fact, the company just 100% pre-leased Livonia Corporate Center, Phase II, on behalf of the developer, Ashley Capital. Located at 28101-28201 Schoolcraft Rd. in Livonia, MI, the speculative development has two buildings and 915,000 square feet.
Dan Labes, executive managing director, and Tom Oldham, senior managing director, completed a 590,000-square-foot lease to Penske Logistics, a 185,000-square-foot lease to Experi-Metal Inc., an 80,000-square-foot lease to Orora Fresh, and a 60,000-square-foot lease to Safelite Autoglass. The firms will occupy their new spaces by the end of May.
Even the modest slowdown in auto sales has not impacted the rate of construction in that sector. “We thought it would correlate with the slowdown,” DeGroot says. But “a lot of the companies need more modern space,” especially facilities for high-tech manufacturing and research and development.
Marimba Automotive is developing a 107,000-square-foot building on Van Born Rd. in Canton, MI. Other projects in this western portion of Wayne County include: Tenneco’s 100,000-square-foot facility on Technology Dr. in Northville, MI; and Oerlikon’s 80,000-square-foot building on Concept Dr. in Plymouth, MI. Western Wayne County’s overall industrial vacancy rate fell 10 bps to just 3.4% during the first quarter.
“I think we’re going to see even more construction in the coming quarters,” says DeGroot.