DETROIT—Downtown Detroit has attracted a great deal of attention lately as companies like Quicken Loans buy up historic but underused structures and pack them with their employees. But the suburbs, which took a big hit when the economy crashed and nearly took down the US auto industry, have also started to show signs of life.
New York-based 601W Cos., for example, recently decided to take a chance on the area and plunked down $177.5 million for the Southfield Town Center in Southfield, MI, perhaps the most visible property outside the city. As reported in GlobeSt.com, the company plans to spend around $40 or $50 million on upgrades to the property, and has retained Transwestern to lease and manage the 2.2-million-square-foot, five-building office complex.
“Not so long ago, most people would have said that investing in suburban Detroit was pretty risky,” Mike Watts, Transwestern’s Midwest president, tells GlobeSt.com. But a big buy from a top investor such as 601W Cos. shows that a change has occurred. “Is the recovery going up on a 45 degree angle? I wouldn’t say we’re seeing that, but there is a lot of positive momentum.”
Above all, the revival of the US auto industry has not only got factories in the region humming, but the whole universe of smaller companies that provide business services such as accounting and IT to the Big Three have reported significant boosts in activity.
And suburban developments such as Southfield should reap the benefits. Its office towers sit between the headquarters of all the major auto companies, and already host marquee tenants such as Microsoft and Bloomberg.
“A lot of suburban companies in the Detroit area have become quite healthy and are now expanding,” Watts says. In fact, according to Colliers latest national office report, in the first quarter the class A suburban office market in the Detroit area saw about 850,000-square-feet in positive absorption, in stark contrast to Chicago, where similar properties saw about 850K in negative absorption due to the migration of many companies into the CBD.
The recovery of the auto industry is not the only factor in this regional revival. The bankruptcy of Detroit may have been painful and worrisome at first, but Watts credits state and city officials for addressing the challenge head-on and restructuring municipal finances. “The fact that they decided to not take a kick-the-can down-the-road approach is a very meaningful symbol.”
“This assignment is a monumental win for Transwestern,” Watts adds. “Our existing team in Detroit has laid a solid foundation, and this assignment will allow us to expand and enhance that team.”
Transwestern has recruited two professionals to lead the leasing team – Clarence Gleeson II, senior vice president and Jason Dutcher, associate – both of whom joined the firm from CBRE, and plans to hire one additional broker. Transwestern has also retained the existing property management group and added a construction management specialist.
The new owner plans to upgrade the elevators, lobbies, parking and building connectors. The complex amenities include a Westin hotel, fitness center, building conference centers, on-site banking, garden atriums, connectors between all buildings in the complex and multiple retailers and restaurants, including the Skyline Club.
Although the occupancy rate currently stands at 68%, Watts does not seem fazed. “We tend to like the projects where there is a lot of heavy lifting, but also a lot of positive momentum.”