DETROIT—In the face of municipal bankruptcy and population loss, the Detroit office market, especially in the CBD, has shown surprising strength. Even the suburbs have started to emerge from recessionary doldrums. But one aspect of this revival that could play an even bigger role in the future is the expansion of local high-tech firms.
“Automobiles are fast becoming high-tech pieces of equipment,” AJ Weiner, executive vice president of JLL in the Detroit metro area, tells GlobeSt.com. Modern cars need far more powerful computers than even in the recent past, and amenities such as GPS satellite tracking are becoming standard. Therefore, as the auto industry continues to recover from its own financial crisis, the Big Three automakers and their suppliers have been beefing up the tech sector.
According to a recent JLL study “the top 10 tech companies in Detroit recorded average revenue growth of 11.1% year-over-year in 2013, giving reason to forecast even greater employment gains and space needs over the coming year.” The top tech firms include Compuware, Syntel, Tata Technologies and Netech.
The auto industry's recovery has helped bring the metro area's economy back from the brink. JLL recently published an update on employment in the metro area and found that its employers added 14,500 net jobs over the 12 months ending in December 2013. Meanwhile, the unemployment rate decreased 2.2% over the same time period to 8.0%, higher than the national average of 6.7%, but less than half the rate recorded in July of 2009 when it spiked at 16.9%.
The area's tech expansion goes far beyond the companies that directly serve the car companies. For example, tech giants as Google, Twitter and Amazon have all recently established a presence in Detroit. And as reported in GlobeSt.com, Quicken Loans, the online lender, has in many ways led the resurgence of downtown Detroit, renovating many buildings and filling them with thousands of its own employees. Furthermore, Compuware has its headquarters in the CBD. The 1-million-square-foot building was constructed in 2003.
“These companies tend to congregate around where younger people want to work and live,” Weiner adds, and today, that place is downtown Detroit. In recent years, the neighborhood that encompasses the downtown has filled up with residences to serve the new workers. The multifamily properties are virtually 100% occupied, giving developers a very strong incentive to continue building. Even companies creating tech jobs in the suburbs consider the CBD a gravitational center since their employees will also “want to live in or spend time downtown.”
One potential obstacle to continuing the tech boom, Weiner says, is that, unlike hot Chicago neighborhoods like River West and the West Loop, Detroit does not have enough industrial buildings that developers can renovate into the type of big, open offices favored by creative firms. However, the need of the auto companies to expand their high-tech capabilities should create demand for years to come, and “if the demand is there we will find a way to accommodate those needs.”
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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.
